We have generated a few wins in the last 2 years in our Transition tax and GILTI tax battle, but nothing like this! And at a time when the Corona virus has been devastating to everyone.
As a result of last-minute advocacy, including our own, Congress revised the final version of the law so to allow the vast majority to Americans abroad to receive relief as well. Yes. According to the final version which became law a few days ago, American citizens & Green Card holders living outside the U.S. are entitled to $1200 each ($2400 for a married couple), plus $500 for each dependent, even if you do not owe a single dollar in U.S. taxes.
Details of the Coronavirus Relief Bill (CARES):
There are a few important issues to note, as well as terms and conditions to receiving the funds, such as:
- The cash available under the law is NOT an advance. It need not be repaid. Rather, the taxpayer is considered to have made a tax payment in the amount due him/her, and this fictitious payment is refunded to him. So if you owe no U.S. taxes in 2019, you get a “refund” for the money that you are considered to have paid. If you owe U.S. taxes, you get a tax credit in the amount of the cash due you under the stimulus law.
- Timeline for distributions. The Treasury/IRS shall allow no refund or credit after December 31, 2020.
- Is filing a tax return required to receive the monetary relief? To receive relief, the person must have filed a 2018 or 2019 return The law requires Treasury/IRS to send relief to taxpayers who have filed a 2019 return. The law states that Treasury/IRS "may" look at 2018 returns if no 2019 is on file, but it is not required to do so.
- Delivery of payments. Treasury will distribute the “refund” to an existing authorized bank account or mailing address provided by the taxpayer on its 2018 or 2019 tax return.
- Social security number. To receive relief, the person must have a social security number
- Benefit phase out. The relief is gradually phased out for individuals with high levels of income.
It is recommended to contact a U.S. tax professional to discuss these matters.
Deadlines for filing and paying taxes
The IRS postponed the deadlines to file and pay taxes from April 15 till July 15. Does this apply to Americans Abroad? If you usually file a return by June 15, the answer is generally yes.
The July 15 deadline also applies to Transition tax installment payments, if you file your return by July 15 and do not seek additional filing extensions. The IRS announced as follows: “For any taxpayer whose Federal income tax return filing due date has been postponed from April 15 to July 15, 2020, the due date of that taxpayer’s section 965 installment payment has also been postponed to July 15, 2020."
What follows is a more detailed analysis, more suitable for tax professionals or people who love reading tax stuff.
The Treasury Coronavirus Relief
On March 18, 2020, the Treasury/IRS issued Notice 2020-17 which stated that Treasury has determined that any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency (Affected Taxpayer)
The term “person” was defined to include an individual, a trust, estate, partnership, association, company or corporation, as provided in section 7701(a)(1) of the Code.
For an Affected Taxpayer, the due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020.
No extension is provided in this notice for the payment or deposit of any other type of Federal tax, or for the filing of any Federal information return.
The period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the Federal income tax returns or to pay the Federal income taxes postponed by this notice.
The filing date of Americans living abroad
IRS Publication 54, the “Tax Guide for U.S. Citizens and Resident Aliens Abroad” 2019 states as follows:
When to File and Pay
If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. (Pub 54 page 3)
Extensions
You are allowed an automatic 2-month extension to file your return if you are a U.S. citizen, and on the regular due date of your return you are living outside the U.S. and your main place of business is outside the United States.
If you use a calendar year, the regular due date of your return is April 15. (Pub 54, Page 4).
How to get the extension. To use this automatic 2-month extension, you must attach a statement to your return explaining which of the situations qualify you for the extension.
Analysis
Given the above language, it appears that regardless of one's residence, the tax returns of a U.S. citizen who is a calendar year taxpayer are normally due on April 15 of the year. While Americans abroad may elect to receive an automatic 2-month extension, such election is optional and requires compliance with documented formalities. Thus, if one does not elect to seek a 2-month extension for the tax year of 2019, the Coronavirus relief may indeed apply.
Thus for ordinary taxpayers who file by June 15, this year you can file by July 15. Just tell your CPA to state in the return that you did not seek the 2 month extension.
As for expats who usually get additional extensions and plan to file in October 2020, the July extension is not for you.
Nothing herein is legal advice nor can it be relied upon. You may wish to discuss this matter with your tax professional.
Monte Silver, AARO Tax Committee Chairman
