The most important item to note for American expats is that being abroad will not disqualify you from eligibility for the Coronavirus Aid, Relief, and Economic Security (CARES) Act, should you meet the requirements.
Americans who filed taxes abroad in 2019 (or if those have not yet been filed yet, 2018) are eligible for the tax credit. For those that earn under $75,000 in adjusted gross income for singles and $150,000 for married filers, they will receive direct payments from the government in the amount of $1,200 (single) or $2,400 (married).This will be sent via direct deposit for those that have set up ACH with the IRS, and a check can be sent to those that do not have that established. There is a phaseout for those earning above $75k/$150k, ending at $99k for single filers and $198k married.
There are a couple of other lesser known provisions in the bill that may impact Americans abroad and we’re happy to discuss for how these changes may apply to your situation:
Required Minimum Distributions
For 2020, Required Minimum Distributions (RMDs) have been waived for all retirement accounts, including IRA, 401(k), 403(b), and 457 plans. This includes beneficiary IRAs as well. If you were in the category where you were required to take two RMDs in one year due to delaying your first RMD, you happen to be in luck – no RMD is required.
No 10% Penalty For Early Retirees
For early retirees that qualify for “coronavirus-related distributions” (an intentionally broad definition), if you took out money prior to age 59 ½ or 55 depending on the type of retirement account, you were potentially subject to a 10% penalty. For 2020 you may now take up to $100k out of your pre-tax retirement accounts without penalty. You are still subject to reporting your distributions as income, though you are allowed to stretch the recognition of this income over three years.
Additional Resources
As noted by our friends at American Expat Finance, a number of groups have hosted webinars discussing the various ways to apply or tax considerations involved in these “checks” from the US government. Perhaps the most universally applicable is one hosted by the American Citizens Abroad, or ACA. As part of their newly announced Tax Cast series, President Mary Louise Serrato speaks with accountant Glen Frost to discuss the specifics of these benefits for Americans abroad from a tax perspective. The AARO (Association of Americans Resident Overseas) also hosted a webinar for its members.
Keith Poniewaz