Due to the pandemic and the effect on many people’s personal finances, the US is providing a payment of $1200 for all American citizens.
How to claim the Economic Impact Payment
The stimulus check is a one-off tax free payment of $1,200 per person and also $500 for each child – even if you are living overseas.
You need to have your 2018 and 2019 US tax returns filed – the US has extended the filing deadline for the 2019 return to July 15, 2020.
There is a threshold to claim the payment, based on total income on line 8b of the 2019 federal tax return.
If your total income is under $75,000 you will receive the full payment of $1200.
You will still receive a partial payment if your total income is $75,000 to $99,000.
Making the payment for the Stimulus Check
It is important to include your US bank details on your 2019 tax return, form 1040, and the IRS will use these to make a payment direct to your bank account.
If you have not included your bank details, if the IRS does not hold your bank details from recent returns, they will send out the stimulus payments in the post.
US expats behind on their tax returns
Many US expats move overseas and don’t realize they still need to report their worldwide income back to the US each year and they are required to file a US tax returns and foreign bank account report (FBAR) each year.
If you just have foreign source income and have paid foreign income tax on that income, you will be able to claim the foreign tax credit showing the amount of foreign taxes.
If there is still tax to pay, you can also use the foreign earned income exclusion to stop or reduce any US tax.
If you haven’t filed a tax return in the United States for more than 3 years, you can use the streamlined filing procedure to catch up without any penalties – they you will be able to claim the stimulus check for $1,200.
The streamlined filing compliance procedures allow you to file from your new tax home, only filing the last 3 US tax returns – all returns before that are waived. You report the required information returns including FBARs for 6 years.
You submit all required information to the IRS and US Treasury and there are no penalties for using the streamlined foreign offshore procedures. It allows you to catch up and have a clean slate with the IRS.
In the future as a bona fide resident of a foreign country you will still report all income, pay any taxes in your home country but you will also report back to the US each year.