olivier Wagner

04 Aug 2023

Tax Intelligence Report Introduces: Expatriate Tax Professional Olivier Wagner

This interview is part of TaxConnections Tax Intelligence Report Series as we profile our tax professional members. This week we present Olivier Wagner who has written many helpful articles read by tens of thousands of our readers interested in expatriate taxes. Olivier Wagner, Tax Managing Director, 1040 Abroad, Toronto, Canada is highly knowledgeable and educates taxpayers on expatriate tax matters. This interview provides many valuable links to his writing during this special interview. If you are an expatriate taxpayer you will want to read this interview and access these valuable and educational links.

Kat Jennings: Can You Tell Me How You Got Started Doing Expatriate Tax Returns?
Olivier Wagner: Funny story. I always had the “foreign on my mind”, as I dreamt of leaving France. I was working at Moody’s, the credit rating agency in New York when the 2008 hit, while my position was safe, and I wasn’t concerned about losing my job, the work conditions did get noticeably worse.
I started to dream of working for myself and have a location independent business.

In 2011, I moved to Canada, and I was a US citizen at that point. Given my skill set, I figured that preparing tax returns for US citizens who live outside the US was a good fit. In addition, I figure that my clients would be spread out geographically, which would serve me well in having a location independent business.
In the coming months became an Enrolled Agent, I subsequently became a CPA (New Hampshire) and became fully nomadic from 2016-2018. I am based in Toronto, Canada but I still regularly hit the road.

Kat Jennings:Can You Tell Us About The New IRS Program That Enables Former U.S. Citizens To Become Compliant With U.S. Tax Law Without Risking Any Penalties?
Olivier Wagner: Yes, absolutely. By way of background, people were renouncing without having filed the prior 5 years of tax returns which, wither due to ignorance or defiance. It would by itself make them covered expatriate, subject to the exit tax.
The IRS found it somewhat unfair, for people who are no longer US citizen, have not and possibly never regarded themselves as US citizens.
The requirement is that:
– They are not otherwise covered expatriates
– They never filed US tax returns (hence my comment above)

https://www.taxconnections.com/taxblog/irs-releases-a-new-program-tax-relief-procedures-for-certain-former-united-states-citizens-without-risking-any-penalties/

Written by Olivier Wagner | Posted in Expatriate Taxes

09 Apr 2024

Foreign Self-Employment Income: A US Expat’s Guide

Navigating the intricate world of expat taxes presents unique challenges and reporting obligations for self-employed U.S. citizens living abroad. Understanding the nuances of foreign income, tax treaties, and self-employment taxes is crucial for maintaining compliance with the IRS while optimizing financial health.

WHAT CONSTITUTES FOREIGN SELF-EMPLOYMENT INCOME?

Foreign self-employment income refers to the income earned by self-employed individuals who work outside of the United States. The IRS defines self-employment income as any income earned through a trade or business when you are a sole proprietor or a member of a partnership, and it includes income earned from side gigs or part-time businesses. Self-employment income is subject to self-employment taxes, which include Social Security and Medicare taxes, and self-employed individuals are required to pay quarterly estimated taxes in addition to filing an annual return.

WHAT IS THE THRESHOLD FOR REPORTING FOREIGN SELF-EMPLOYMENT INCOME?

If your net earnings from self-employment exceed $400, you are required to report this income on a US tax return. This income threshold applies to all self-employed individuals, including those working abroad, and encompasses your worldwide income.

WHAT IS THE U.S. SELF-EMPLOYMENT TAX RATE?

For the tax year 2023, US expats who are self-employed need to be aware of the self-employment tax rate that applies to their net earnings. The Internal Revenue Service (IRS) outlines that the total self-employment tax rate is composed of two parts: a 12.4% contribution towards Social Security and an additional 2.9% that goes towards Medicare. Collectively, this brings the self-employment tax rate to approximately 15.3% of your net profit.

Written by Olivier Wagner | Posted in TaxConnections

21 Mar 2024

United States Expatriates: Tips For Mailing Your Tax Return From Abroad

For US expatriates, navigating the process of submitting their annual income tax return to the Internal Revenue Service (IRS) can present unique challenges. While the convenience of electronic filing (e-filing) offers an efficient way to submit your federal tax return, certain conditions may require you to submit a paper tax return by mail. Understanding when and how to accurately mail your personal income tax return is crucial to ensure compliance with the IRS and avoid unnecessary processing delays.

WHY E-FILING SHOULD BE YOUR FIRST CHOICE FOR TAXES?

Before delving into the specifics of mailing your federal tax return, let’s first highlight the significant benefits of e-filing your personal tax return. The IRS encourages all taxpayers, including those residing abroad with foreign income, to file electronically due to several compelling advantages:

Quicker Processing and Refunds: E-filed income tax returns are processed more rapidly than paper filings, which means faster refunds. For expats anticipating a refund, this method significantly shortens the waiting period.
Enhanced Security: Submitting your federal return electronically provides a higher level of security than traditional mail, minimizing the risk of lost or intercepted sensitive information.
Immediate Confirmation: Upon successful submission of your e-filed return, the IRS provides immediate confirmation. This immediate feedback offers peace of mind, confirming that your tax obligations have been fulfilled on time.
Global Convenience: E-filing allows you to submit your federal tax return from anywhere in the world, requiring only an internet connection. This feature is especially beneficial for expats living in remote locations or those who frequently relocate.

However, despite these benefits, certain tax situations necessitate mailing a paper income tax return. Whether it’s due to specific IRS requirements for certain deductions or the need to provide supplementary documentation, understanding when you must mail your return is critical for US expats.

WHEN YOU NEED TO MAIL YOUR TAX RETURN?

Written by Olivier Wagner | Posted in TaxConnections

12 Mar 2024

Form 8854: The Final Step In Leaving U.S. Tax System

For US expats ready to renounce their citizenship, understanding the final legal and tax steps is essential. Form 8854, the Initial and Annual Expatriation Statement, marks the conclusive stage in breaking ties with the U.S. tax system. At 1040 Abroad, we specialize in navigating the complexities of Form 8854, offering the insights needed to finalize your departure from U.S. tax obligations confidently. This article is your definitive guide to completing Form 8854, the ultimate step in your expatriation journey.

WHAT IS FORM 8854?

Form 8854 is a tax form used by long-term residents relinquishing their Green Card and U.S. citizens renouncing their citizenship. Until you file it, you will remain a U.S. person for tax purposes. The form declares expatriation and compliance with IRS requirements, marking your official departure from U.S. tax obligations.

Note: A long-term resident, for the purposes of Form 8854, is an individual who has held a green card in at least 8 of the last 15-tax-year period before the year of expatriation.

WHAT IS THE PURPOSE OF FORM 8854?

Form 8854 has several key purposes:

To notify the IRS of your expatriation or termination of long-term residency.
To certify that you have complied with all U.S. federal tax obligations for the five years preceding the year of your expatriation.
To determine if an individual is a “covered expatriate” under U.S. tax law, which has implications for their tax liabilities.
To calculate the exit tax, if applicable, under sections 877 and 877A of the Internal Revenue Code.

Importantly, for U.S. citizens who have renounced their citizenship, filing Form 8854 is necessary to formally cease being considered a U.S. person for income tax purposes. This step is essential to ensure compliance with U.S. tax laws and avoid continuing U.S. tax obligations.

WHO IS CONSIDERED A COVERED EXPATRIATE?

Written by TaxConnections Admin | Posted in Renouncing US Citizenship

14 Feb 2024

IRS Form 8621: Understanding PFIC Taxation

Navigating the complexities of US tax obligations can be a daunting task, especially for Americans living abroad. Among the myriad of forms and regulations, Form 8621 and the concept of Passive Foreign Investment Companies (PFICs) stand out as particularly challenging for US expats. This guide aims to demystify PFICs and the requirements surrounding Form 8621, ensuring you stay compliant while maximizing your financial strategy overseas.

WHAT IS A PFIC?

A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets either the income or asset test specified by the IRS. Specifically, if 75% or more of the corporation’s gross income is passive income, or if at least 50% of the corporation’s assets produce or are held to produce passive income, it is considered a PFIC. Passive income includes dividends, interest, rents, royalties, and certain other types of income.

Here’s a concise summary of the essential definitions and rules:

Income Test: A foreign corporation qualifies as a PFIC if 75% or more of its gross income for the tax year is considered passive income, as defined in section 1297(b) of the tax code.
Asset Test: Alternatively, a foreign corporation meets the PFIC criteria if at least 50% of its average percentage of assets, determined under section 1297(e), are either producing passive income or are held for the purpose of producing passive income during the tax year.
Basis for Measuring Assets: For the asset test, a foreign corporation can use the adjusted basis to determine PFIC status if it is not publicly traded during the tax year, and either qualifies as a controlled foreign corporation (CFC) under section 957 or opts to use the adjusted basis. Publicly traded corporations must use the fair market value for this determination.
Look-thru Rule: In assessing whether a foreign corporation is a PFIC, it is considered to directly own its proportional share of the assets and directly receive its proportional share of the income of any corporation where it owns at least 25% of the stock by value.
CFC Overlap Rule: U.S. shareholders owning 10% or more of a CFC that is also a PFIC, and who include in their income their pro rata share of subpart F income, are generally not subject to PFIC regulations for the same stock during the qualified portion of their holding period. This exception does not extend to option holders. Further details are provided in section 1297(d).

It’s important to note that even if a foreign corporation is not considered a PFIC with respect to a shareholder under section 1297(d), the attribution rules of section 1298(a)(2)(B) still apply.

Common examples of investments that might be classified as PFICs include, but are not limited to:

Written by TaxConnections Admin | Posted in PFIC

08 Feb 2024

Foreign Earned Income Exclusion For US Expats

Even if you’ve moved abroad for a brighter future, you still might have obligations towards the IRS. What happens if you earn income from sources outside the United States? If you live abroad, you might qualify for the foreign earned income exclusion (FEIE). This article explains what FEIE is and how it works, and provides some examples of situations where you might benefit from claiming it.

The U.S. retains its right to tax citizens and Green Card holders who live abroad and they must file their taxes even if they’re not physically present in the country. The foreign earned income exclusion (FEIE) allows U.S. taxpayers to exclude from their taxable income certain amounts they earn outside the United States. The FEIE was created in 1954 to relive American Citizens from the burden of double taxation when they move overseas.

WHAT IS THE FOREIGN EARNED INCOME EXCLUSION?

The Foreign Earned Income Exclusion is an IRS exclusion that American expats can use to reduce their taxable income (or in some cases completely eliminate) i.e. their U.S. tax owing. It is the most common and the most widely used tool to reduce US expat tax owing that the IRS offers.

You don’t automatically receive the benefit of FEIE by just living abroad — you must meet specific qualifications which we will discuss later and submit the Form 2555.

HOW MUCH FOREIGN EARNED INCOME CAN YOU EXCLUDE?

U.S. citizens and resident aliens who meet certain requirements to exclude up to $120,000 of foreign-earned income in 2023 (The FEIE is adjusted every year for inflation). If used correctly, the FEIE can help you save thousands of dollars on your US taxes.

The maximum exclusion for 2024 is $126,500. If you’re filing under the married filing jointly status and your spouse also meets the FEIE requirements, you can exclude up to $253,000 of your foreign income in 2024.

FILING FOR THE FOREIGN EARNED INCOME EXCLUSION: A GUIDE FOR MARRIED COUPLES FILING JOINTLY

Written by Olivier Wagner | Posted in Expat Tax Expert • Expatriate • Expatriate Compliance Campaign • Foreign Earned Income Inclusion • TaxConnections

31 Jan 2024

The Substantial Presence Test: How To Calculate It With Examples

Navigating the complex landscape of U.S. tax regulations can be a daunting task, especially for individuals who split their time between the United States and other countries. One crucial concept that frequently comes into play is the Substantial Presence Test (SPT). This test is a critical determinant used by the Internal Revenue Service (IRS) to assess tax liability for individuals who are not U.S. citizens or green card holders but spend significant time in the U.S.

This article aims to provide a clear and detailed guide on the Substantial Presence Test, elucidating its criteria, implications, and how it applies to non-resident aliens. Our goal is to offer valuable insights that aid in achieving compliance with U.S. tax obligations, ensuring a thorough understanding of your tax residency status.

WHAT IS THE SUBSTANTIAL PRESENCE TEST?

The Substantial Presence Test is a criterion set by the United States Internal Revenue Service (IRS) to determine an individual’s tax residency status in the U.S. It applies to non-U.S. citizens and assesses whether they have spent a sufficient amount of time in the United States to be treated as a resident for tax purposes. This test is pivotal as it affects how and to what extent individuals are subject to U.S. income taxes.

The test calculates this by counting the total days of physical presence in the U.S. over a 3-year period. If the sum equals or exceeds 183 days, the individual is considered a U.S. resident for tax purposes for that year. This determination has significant implications for an individual’s tax liabilities, as it dictates whether they are subject to U.S. tax on their worldwide income.

WHAT ARE THE DAYS OF PRESENCE IN THE UNITED STATES?

Days of presence in the United States refer to the number of days an individual spends physically present in the country. This can include days spent for work, vacation, or any other purpose. For non-residents and foreigners, days of presence are often closely monitored to determine their tax liabilities and immigration status. For US citizens and residents, it can also impact their taxation and eligibility for certain benefits.

HOW TO CALCULATE THE SUBSTANTIAL PRESENCE TEST?

Written by Olivier Wagner | Posted in TaxConnections

30 Jan 2024

How Far Back Can The IRS Audit?

Navigating the labyrinthine world of U.S. taxes, including federal tax returns and individual tax returns, is challenging enough when you’re stateside. For U.S. expatriates, the complexity can multiply. One question that often looms large is, “How far back can the IRS audit?” Understanding the rules, statute of limitations, and exceptions surrounding IRS audits is crucial for maintaining compliance and peace of mind. Generally, the IRS has a three-year window to audit your tax returns, but as you’ll see, there are exceptions.

If you don’t file your tax returns, the statute of limitations never starts, allowing the IRS to audit the return at any time in the future. This is particularly important for U.S. expats who might assume they’re exempt from filing because they’re living abroad.

What Is The Statue Of Limitations?

The term “statute of limitations” refers to the time frame within which the IRS is legally allowed to audit your tax returns for potential errors, omissions, or fraud. This period is generally three years from the date you filed your return or the due date of the return, whichever is later. After the statute of limitations expires, the IRS generally can’t question the information you’ve reported on your individual income tax return, or your filing history, or request additional documentation.

Taxpayers generally have three years from the date they filed their original tax return to claim a refund.

What Happens When You Don’t File Your Tax Returns?

Written by Olivier Wagner | Posted in Audit

23 Jan 2024

Tax Deductions And Credits Are Available For U.S. Expatriates

There are a few deductions and exemptions available to a U.S. person who lives and works overseas. These will help you to lower your expat taxes and might even get you a refund.

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. The most common deduction is the Foreign Earned Income Exclusion, which is calculated on Form 2555. If you qualify for this you may exclude up to $108,700 of your foreign earned income. To qualify, you will need to meet either the Physical Present Test or Bona Fide Resident Test for living outside of the U.S.

Foreign Housing Exclusion or Deduction is another option that can save you some money on your taxable income. You need to be either a salaried employee, a wage earner or a self-employed individual to qualify for this deduction. It’s in an addition to FEIE and increases the exempted income by the amount of your qualified housing expenses. Depending on the country of your residence, the allowable deductions for the foreign housing will vary and are subject to limitations.

Tax credits allow you to lower the tax due after your taxable income has been fully calculated. Your tax credit may include what you have already paid to your resident country. Foreign Tax Credit is useful for any expat who has paid taxes overseas. This option does not require a person to prove their residence in an overseas location. If a U.S. citizen works overseas or is involved in foreign investments, it is likely that they have paid taxes to a foreign government. If the tax rate of the foreign country is equal to, or greater than, the U.S. tax rate, the Foreign Tax Credit will successfully rid the expat of any U.S. tax obligation on that amount.

Use Form 1116 “Foreign Tax Credit” to figure out the amount of foreign tax paid and calculate the credit. To qualify for this credit, you will need to meet the following requirements:

Written by Olivier Wagner | Posted in Tax Deductions And Tax Credits

18 Jan 2024

Introduction To Citizenship Based Taxation

You will also learn alot from this YouTube Video: https://www.youtube.com/watch?v=DWYnIGgG0Ak

Part A: Introduction – About Citizenship-based Taxation
Part B: How the Internal Revenue Code is designed to mitigate the effects of double taxation in certain circumstances
Part C: Determining what is “foreign source” income
Part D: The problem of international waters …
Part E: The effect of sourcing to the US income earned in international waters by dual tax residents
Part F: Deducting “foreign taxes” paid – although income from international waters may not be foreign, it is still subject to the payment of “foreign taxes”
Part G: Can a US citizen living abroad be saved by a tax treaty? Maybe if he/she lives in Canada****
Part H: Conclusion and the need for “Pure Residence-Based Taxation”

Part A: Introduction – About Citizenship-based Taxation

Whether they live in Mexico, France, Canada, Brazil or even on a yacht, US citizens are taxable on their worldwide income. Worldwide income means income of all kinds, from all sources and wherever earned. US citizens are taxable an ALL income sources. It doesn’t matter whether the income has a source in Mexico, France, Canada, Brazil or even on a yacht. For example, a US citizen living in France who has ONLY French source income is required to treat that income as taxable in the United States. The fact that the income is also taxable in France is irrelevant!

The Internal Revenue Code is based on a presumption of double taxation. The presumption of “double taxation” is reinforced by the “saving clause” in US tax treaties where the treaty partner country agrees that the US retains the right to tax US citizens regardless of the tax treaty. The treaties themselves typically contain a small number of specified exceptions that mitigate against the effects of double taxation in certain narrow circumstances.

Relief from double taxation is available either domestically under the Internal Revenue Code or through provisions in international tax treaties (or possibly both). Each avenue of mitigation will be considered separately.

Written by John Richardson | Posted in TaxConnections

10 Jan 2024

A Guide To Recovery Rebate Credit For U.S. Expats: You May Still Be Able To Claim This Credit

If you’re one of the many U.S. expats who are owed stimulus money, you can still claim it through Recovery Rebate Credit. As the matter of fact, 2024 is the last year to get all the stimulus checks you might have missed! It will either boost the amount of your tax refund or reduce the taxes you owe to the IRS. Either way – you win! Don’t miss out on the opportunity to get the money you’re entitled to. Keep reading to find out how the credit works and what makes you eligible to qualify.

WHAT IS RECOVERY REBATE CREDIT?Recovery Rebate Credit is part of the Covid-19 Economic Relief program. The credit makes it possible for those who didn’t receive Economic Impact Payments (also known as stimulus payments) to claim their missing money. So if you were eligible for stimulus payments but did not receive them (or you received a partial payment), you can claim them through Recovery Rebate Credit on your tax return.

HOW TO CLAIM RECOVERY REBATE CREDIT

Getting your Recovery Rebate Credit is not too complicated. You just need to file the right tax return and you’re good to go. For stimulus payments made in 2020 that you haven’t already received, you can claim the Recovery Rebate Credit on your 2020 tax return. And for payments made in 2021, you will need to file a 2021 tax return.

Even If you don’t usually file taxes but are otherwise eligible for stimulus checks, you will still need to file in order to get your money. And keep in mind – 2024 is the last year to do it! If you need any help along the way, don’t hesitate to reach out to us.

RECOVERY REBATE CREDIT VS STIMULUS CHECKS

To put it simply – stimulus payments were actually just advanced payments of the tax credit. The U.S. government provided them in response to COVID-19, aiming to get money into the hands of taxpayers as fast as possible, without having to wait for them to file their tax returns.

In total, three rounds of stimulus checks have been paid out. The amounts you were eligible to receive varied depending on your filing status and other factors.

RECOVERY REBATE CREDIT 2020

The first and the second stimulus checks were advance payments of the 2020 Recovery Rebate Credit claimed on a 2020 federal tax return. They were sent out in 2020 and early 2021. Here’s how much the first 2 rounds of Stimulus Checks are worth:

The first stimulus payment provided up to $1,200 per eligible individual, while a married couple filing a joint return received up to $2,400. An additional $500 was provided per dependent child.
The second stimulus payment provided up to $600 for eligible single individuals, and up to $1,200 for married taxpayers filing a joint tax return. An additional $600 was provided per each dependent child.

RECOVERY REBATE CREDIT 2021

The third round of stimulus checks (including the plus-up payments) was an advance payment of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. These checks were issued starting in March 2021 and continued through December 2021.

The third stimulus check of up to $1,400 was made available per eligible individual. A married couple filing a joint return could get up to $2,800. An additional $1,400 was provided for a dependent of any age.

ELIGIBILITY FOR THE RECOVERY REBATE CREDIT

The eligibility rules for the recovery rebate credit are basically the same as they were for the Economic Impact Payments (stimulus checks).

The only major difference is that eligibility for the stimulus check was typically based on the information that the government had at the time of distributing the payments. On the other hand, eligibility for the credit is based on the IRS’s most recent information for you on file.

You’re generally eligible to claim the Recovery Rebate Credit if you meet the following requirements:

You are a U.S. citizen, Green Card Holder, or qualifying resident alien.
You are not a dependent of another taxpayer
You have a valid Social Security number (SSN)
You did not receive the entire credit through previously issued stimulus payments (this means you received a partial payment or missed an entire check)

If you’re claiming additional stimulus money based on your dependent children, they also need to have a valid SSN or adoption taxpayer identification number (ATIN).

Nonresident alien individuals, estates, and trusts don’t qualify for the credit. On the other hand, eligible U.S. expats who are thinking about renouncing their U.S. citizenship will be able to claim the credit. If you’re one of them, don’t let the cost of renunciation discourage you. Your Rebate credit will more than likely cover any fees and expenses you might have.

After meeting the qualification requirements above, the individual’s adjusted gross income (AGI) must fall within certain income limits to receive the full credit. Find more information on income requirements in the section below.

HOW TO CALCULATE RECOVERY REBATE CREDIT

As with the stimulus checks, calculating the amount of your recovery rebate credit starts with a “base” amount. If you’re eligible for the full credit, the base amount you may receive is up to $3,200 for single filers or $6,200 for married couples filing a joint return. You can claim even more money in case you have children or adult dependents.

The actual amount of your Recovery Rebate Tax Credit is based on the following:

Filing status – as we already mentioned, the base amount you are eligible to receive differs depending on your filing status (Single Filer or Married Filing Jointly)
Number of qualifying children or adult dependents – you are eligible to receive a certain amount of money per each child (or an adult-dependent in case of a third stimulus check)
Adjusted gross income – After adding up the base amount and any additional amount for your dependents, you then need to determine if your recovery rebate credit is reduced because of your income. If your income is less than $75,000 (for Single Filers), $112,500 (for Head of Household filers), or $150,000 (for Married Couples Filing a Joint Return), you can get the full benefit. The credit starts to decrease for people with higher earnings that exceed these income thresholds.
Amounts of Stimulus Payments you previously received – Finally, you need to subtract the total amount of stimulus checks and “plus-up” payments you received in the past.

If you have already received the full amount of stimulus payments that you’re eligible for, you don’t qualify for any additional credit. However, if you ended up receiving more than you qualified for, you are not required to pay it back.

HOW TO TRACK YOUR STIMULUS CHECKS

What if you forgot the exact amount of money you received through stimulus checks? There are several ways to find out your payment status:

The amount received from the first stimulus check can be found on IRS Notice 1444, the second stimulus check on Notice 1444-B, and the third on Notice 1444-C, which were all sent out by the IRS. Through March 2022, they also sent out Letter 6475 which confirmed the total amount of the third stimulus check and any received “plus-up” payments.
To find the amount to subtract from the credit, you can also check your IRS online account (if you have one). The exact amount of stimulus payments you previously received is listed under the Tax Records tab – “Economic Impact Payment Information.”
You can also locate the amount of your first, second, and third stimulus payments by checking your bank statements, in case you had them direct deposited. These payments should be labeled “IRS TREAS 310” with codes “TAXEIP1” (1st payment), “TAXEIP2” (2nd stimulus payment), or “TAXEIP3” (3rd stimulus payment).
Finally, you can request a tax account transcript from the IRS. All transcript types are available online through the IRS’s Get Transcript service. To have your transcript mailed to you – submit a Form 4506-T or make a request using the IRS’ automated phone transcript service at 800-908-9946.

If the above options don’t work for you, you can provide the amount of your stimulus checks based on your memory. If you misremember the exact amount and make a mistake, the IRS will correct the error for you. In case this happens, they will send you a notice of any changes made to your return.
But should you do it? Keep reading to find out.

WHEN WILL I GET MY RECOVERY REBATE CREDIT?

You will most likely get Recovery Rebate Credit as part of your tax refunds. But how long will it take to get your money? Depending on the filing options you chose and the accuracy of the information, it usually takes between 3 to 8 weeks to receive your refund.

Making a mistake will not result in financial loss, but might require extra time to fix. Any errors on your federal tax return, including those related to calculating the recovery rebate credit can cause delays and prolong the wait for your refund. So if all the information on your tax return is correct, it might take just a couple of weeks. But If there are errors or red flags, it can go on for months.

You can receive your payment faster through direct deposit rather than waiting for it to arrive in the mail. Depending on your preferences, your refund can be deposited into your bank account, prepaid debit card, or mobile app.

CAN I STILL CLAIM THE CREDIT IF I ALREADY FILED MY 2020 OR 2021 TAXES?

Since many individual taxpayer situations change from year to year, some people who were not eligible in the past may become eligible in 2023. Here are some situations when this might happen:

Some people may have received less than the full Stimulus Payment because their adjusted gross incomes were too high. A change in income could make a filer eligible for more credit.
Eligible taxpayers can get additional stimulus money if their family expanded in the meantime through the birth or adoption of a child.
Eligible people who did not have a valid Social Security Number but acquired Social Security Number in the meantime may now be able to qualify.
Individuals who were claimed as dependents in the past (and were, therefore, ineligible) may qualify for the credit if they are no longer dependents. This also includes some first-time filers, like college students for example. Many college students are first-time filers, as they are no longer claimed as their parents’ dependents. They can also claim the credit if they meet the eligibility requirements.

RECOVERY REBATE CREDIT FAQ

How do I claim Recovery Rebate Credit on my tax return? You need to file a tax return for the year in which the credit applies, and include information on the stimulus payments received. You can report the total amount of the Recovery Rebate Credit that you are claiming using Form 1040 or 1040-SR (enter the amount of your credit on line 30).
How to Claim the 2021 Recovery Rebate Credit? Following the instructions above, file a 2021 federal tax return and include the information on any stimulus payments you already received.
How to Claim the 2020 Recovery Rebate Credit? Simply file your 2020 federal tax return and include all the relevant information on the stimulus payments you received in the past.
What if my stimulus check was lost? If you suspect that your check was lost, stolen, or destroyed – don’t file for the Recovery Rebate Credit but instead ask the IRS to trace the payment. If the check was not cashed, the IRS will reverse your payment and notify you. On the other hand, if the check was cashed, the Treasury Department’s Bureau of the Fiscal Service will send you a claim package that includes a copy of the cashed check.

WRITTEN BY

A tax preparer who is both an Enrolled Agent and a CPA (New Hampshire) very well aware of the tax situation of US citizens living abroad. He runs the tax practice 1040Abroad.

Written by Olivier Wagner | Posted in Expatriate Taxpayers

09 Jan 2024

Grab Your Unclaimed Stimulus Checks: Last Chance For Late Tax Filers!

As a US expat, you’re accustomed to navigating the complexities of living abroad. But there’s one opportunity you don’t want to miss – claiming your federal stimulus checks, also known as Economic Impact Payments, which can amount to up to $3,200. The final deadline is looming: June 15th, 2024. This is not just another date on the calendar; it’s your last chance to access funds that could significantly support your life overseas. In this article, we’ll guide you through the essentials of becoming compliant and how to claim what’s rightfully yours. Remember, it’s now or never!

WHAT ARE STIMULUS CHECKS?

Understanding the Basics

The stimulus package, officially known as Economic Impact Payments, were introduced by the federal government as a response to the economic challenges posed by global events. These checks are designed to provide financial assistance to American citizens, including those living abroad.

Eligibility Criteria for US Expats

The eligibility criteria for U.S. expats to claim the government relief package issued by the IRS during the COVID-19 pandemic are as follows:

U.S. Citizenship or Residency: You must be a U.S. citizen or U.S. resident alien.
Dependent Status: You must not be claimed as a dependent on someone else’s tax return.
Social Security Number: You must have a valid Social Security Number (SSN). If you or your spouse is a member of the military, only one of you needs a valid SSN.
Income Limitations: For the third stimulus check, individuals earning up to $75,000 annually and married couples earning up to $150,000 annually were eligible for the full $1,400 stimulus payment. Payments phased out entirely at $80,000 for individuals and $160,000 for married couples filing joint return.
Tax Filing: Even if you live overseas, you qualify if you fall within the income threshold, have a social security number, and file taxes.

The IRS uses your tax return information to determine your qualification for the stimulus check. This means if you haven’t filed your taxes while living abroad, now is the time to do so.