The problems with stimulus payments, answered.
The Recovery Rebate Credit has been added to 2020 US tax returns, for those who didn’t get any Economic Impact Payments (commonly known as stimulus payments) or received only a partial amount.
If you have received your full stimulus payments, then there is no claiming again under the Recovery Rebate.
Didn’t get the payment or the full amount?
The first stimulus payment amount was:
- $1,200 for individuals
- $2,400 for married filing jointly
Individuals with an AGI at $75,000 or below and married couples with an AGI of $150,000 or below, qualified for the full first stimulus payment.
The second stimulus payment amount was:
- $600 for individuals
- $1,200 for married filing jointly
Individuals with an AGI at $77,000 or below and married couples with an AGI of $154,000 or below, qualified for the full first stimulus payment.
How do I claim for the Rebate Recovery Credit?
Claim by filing your 2020 US federal income tax return, even if you don’t normally file.
The usual tax return deadlines apply:
- 15 April 2021, or;
- Request an extension and file by 15 October 2021.
Book an extension and you will have plenty of time. With an income of $72,000 USD or less, you can file your US tax return electronically for free through the IRS Free File Programme.
For the first stimulus payment, you should have received IRS Notice 1444, and Notice 1444-B for the second. You will need to know the amounts of any stimulus payments you have received as found on these and use the Recovery Rebate Credit Worksheet to calculate your credit.
How to get the stimulus payment if you’re earning over $75K?
In many cases, a lot of people are eligible to receive the payments despite earning over $75,000 USD. If filing alone, in order to receive the first stimulus payment your annual income had to be below $75,000. However, this is not your ‘total income’ but your AGI (adjusted gross income). Your adjusted gross income is the sum of all of your income for the year, adjusted against deductions made on your tax returns. These deductions that expats claim include the FEIE and FHE. So, your AGI is the income left over after claiming exclusions.
Someone could earn $200,000 a year, but by the time they’ve deducted the qualifying exclusions, they could be well under the $75,000 threshold and become fully eligible to claim the whole stimulus payment.
This threshold was raised slightly to $77,000 for the second stimulus payment.
What is the stimulus payment threshold for married filing jointly?
For both the first and second stimulus payments, the threshold is doubled for those who are married filing jointly:
- $150,000 for stimulus 1
- $154,000 for stimulus 2
How do I claim the Recovery Rebate Credit if I’m retired?
Retired abroad, only income is US social security, many received to bank accounts. If they got missed out, the only way for them to get it is file 2020 tax return, even with no income to declare/ report.
What if I’m way behind on my U.S. tax returns?
There is a special IRS program to help you catch up on your U.S. taxes safely, without fines and penalties
It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties. If you have children, we can backdate your Child Tax Credit Refund for 3 years.
Get a quote here.
Who might claim for the Recovery Rebate Credit?
Didn’t receive the stimulus payment because your spouse was a non-US citizen?
If you claimed for the first stimulus payment as married filing jointly, you may not have received the payment because your spouse was a non-US citizen with an ITIN (Individual Taxpayer Identification Number). As a result, you and your children may have been left out.
The rules have now changed with the second stimulus payment, and only one spouse is required to have a US Social Security Number. You will now be able to receive the Recovery Rebate Credit through your 2020 US tax return.
No payment received for your children?
If you did not receive any payment for your qualifying child, even if you received your portion, you are able to recover this money. If the child meets the eligibility criteria, you will be able to claim Recovery Rebate Credit for the child on your 2020 tax return. This child would need to be claimed as a dependent.
- The criteria for the dependent child is the same as the usual:
- US citizen with valid Social Security Number;
- The child has lived with the parents for more than half of the year;
- Parents financially supported the child for more than half of the year;
- The child must be under the age of 17 by December 31, 2020.
A new addition to the family?
You will also be able to claim Recovery Rebate Credit if you have had or adopted a child in 2020, or just have not got around to registering a child. Claim this child as a dependent on your 2020 US tax return and the Recovery Rebate Credit will be available for them. Ensure you have registered the birth abroad and gained US citizenship and a Social Security Number for the child.
You were a dependent when the stimulus payments were given but no longer are:
If you claimed as a dependent in 2018 or 2019, you wouldn’t have been eligible to receive this credit. However, if you no longer qualify as a dependent, you may be eligible to receive this credit if you file your own 2020 US tax return.
How will I receive the Recovery Rebate Credit?
The IRS will only send the Rebate Recovery Credit to a US bank account. If you don’t have one, it’s possible to open one directly with a US bank, virtually from abroad.
However, there are also other absent payment mechanisms. To open a US currency account, you don’t necessarily have to be in the US. A lot of International banks, such as HSBC in the UK, can open US dollar account for you.
You have had an income reduction:
If your AGI was above the threshold in 2018 and 2019, but you experienced an income reduction in 2020 that lowered your AGI to below the threshold, you may be eligible to claim the Recovery Rebate Credit.
Will I still receive Rebate Recovery Credit if I file my US tax return with no US bank account on it?
A check would be mailed in traditional manner to the address listed on the label of your US tax returns. If a tax professional is completing your return, the check would be sent to the correspondence address rather than official address.
What if I’m not able to bank US checks abroad?
If you are not able to bank a US check, you should contact IRS and get them to cancel the checks and credit your account again. You will then need to again file your 2020 US tax return and claim under the Rebate Recovery Credit. Make sure you open a US bank account prior to this and put it on the tax return, to avoid the situation repeated.
How should I prepare for a possible third stimulus payment?
The possibility of a third stimulus payment is looming. Make sure you have a US bank account set up and include it on your 2020 US tax return, to ensure the IRS has this information. As and when this stimulus payment comes through, you can receive it directly into your bank account without any problems.
Can you claim for the Recovery Rebate Credit if you’re using the Streamlined Amnesty Program?
The Streamlined Amnesty Program is open for the tax years 2017, 2018 and 2019, and will hopefully become available for tax years 2018, 2019 and 2020. If you file through the Streamlined Amnesty Program, you are still able to claim for the Rebate Recovery Credit on your 2020 US tax return, despite it being the third return of the amnesty series.