Recovery Rebate Credit and Stimulus Payments
Table of Contents
How to Get It?
For those who did not receive stimulus payments (or, ‘Economic Impact Payments’), or only received a partial amount, you may be eligible to claim for the Recovery Rebate Credit on your 2020 US tax return.
How to claim for the Recovery Rebate Credit on your tax return:
You will need to file a tax return in order to claim, even if you usually don’t file. For example, if you are retired you will still need to file, even with no income to report.
You will need to file your Recovery Rebate Worksheet with your 2020 US federal tax return. IRS Notice 1444 (referring to stimulus 1) and Notice 1444-B (referring to stimulus 2) will tell you what amounts you received and what to enter into the worksheet to calculate your credit.
The usual tax return deadlines apply:
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- 15 April 2021, or;
- Request an extension and file by 15 October 2021.
Was I eligible for the stimulus payments?
You would have qualified for stimulus 1 if you were:
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- An individual with an AGI at $75,000 or below
- A married couple with a joint AGI of $150,000 or below
The first stimulus payment was $1,200 for individuals or $2,400 for married couples filing jointly.
You would have qualified for stimulus 2 if you were:
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- An individual with an AGI at $77,000 or below
- A married couple with a joint AGI of $154,000 or below
The second stimulus payment was $600 for individuals or $1,200 for married couples filing jointly.
If you received full stimulus payments, you will not be able to claim under the Recovery Rebate.
Can I get the stimulus payment if I’m earning over $75K?
The income threshold for receiving the stimulus payments 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.
Even if you’re earning $200,000 annually, deducting the qualifying exclusions could bring this to well under the threshold, and you will become fully eligible to claim the whole stimulus payment through the Recovery Rebate Credit. A lot of people are eligible to receive the payments despite earning over the thresholds.
Can I claim for the Recovery Rebate Credit if 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.
How will the Recovery Rebate Credit payment be sent to me?
The IRS will only send the Rebate Recovery Credit to a US bank account. If you don’t have a US bank account, it’s possible to open one directly with a US bank, virtually from abroad. Or, you could choose another absent payment mechanism. 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 a US dollar account for you.
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.
Help me get my Stimulus Payment
Can I receive the credit if I’m not able to bank any US checks?
If you are not able to bank a US check abroad, contact IRS and get them to cancel the checks and credit your account again. File 2020 US tax return again 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.
Will there be a third stimulus payment?
There will possibly be a third stimulus payment distributed. To prepare, make sure you have a US bank account set up and include it on your 2020 US tax return. As and when this stimulus payment comes through, you can receive it directly into your bank account without any problems.
Reductions in income and Recovery Rebate Credit:
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.
Didn’t receive stimulus payments because your spouse is a non-US citizen:
If you claimed as married filing jointly and your spouse is a non-US citizen with an ITIN (Individual Taxpayer Identification Number), you and your children were likely left out of receiving the first stimulus payment.
Things have changed with the second stimulus payment. Only one spouse is required to have a US Social Security Number, and you will be able to receive Recovery Rebate Credit.
Claiming Recovery Rebate Credit for a child:
Qualifying children were eligible for $500 from the first stimulus and $600 from the second stimulus payment. In order to receive Recovery Rebate credit for your child, you will need to claim them as a dependent on your 2020 tax return.
The usual criteria for a dependent child apply:
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- 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.
Claiming Recovery Rebate Credit for a new child:
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. You will first have to register the birth abroad and gained US citizenship and a Social Security Number for the child.
Can I claim Recovery Rebate Credit if I was a dependent when the stimulus payments were distributed but no longer am?
If your parents claimed you as a dependent on their 2018 and 2019 tax returns, you were not eligible to receive the stimulus payments yourself. 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.
So, who isn’t eligible to receive the Recovery Rebate Credit?
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- If someone else has claimed you as a dependent on their 2020 tax return.
- If you have received the full stimulus payments.
- If you are not a US citizen or resident alien.
Contact us at Expat US Tax to have an initial free 20-minute consultation regarding your Recovery Rebate Credit and Stimulus Payments. We are also able to file tax returns on your behalf should you need them under a pre-agreed fee that won’t be adjusted through the process.
