Overseas Tax Services

US Income Tax Preparation for Americans Living Abroad

COVID-19 Tax Changes

Last updated April 30, 2020 (updates in blue). (April 9-13 updates in red.)

Congress and the IRS have been issuing a steady stream of responses to the COVID-19 Coronavirus pandemic. We will attempt to keep this page updated with the key tax-related changes that affect most of our clients. This page is not comprehensive and is certainly not final authority on anything. It may also get out of date as we try to keep up with processing tax returns while the rules keep changing around us. But it may answer some of your big-picture questions about where things stand as of the date listed above. In addition, the IRS is posting Coronavirus-related updates here.

Deadlines

  • Individual tax returns and tax payments for 2019 that would normally be due April 15, 2020 are now due July 15, 2020. No interest or penalty will be charged as long as returns are filed and tax is paid by that date.
  • Extensions to October 15, 2020 may be requested up until July 15, 2020.
  • Overseas filers who normally have until June 15 to file now have until July 15 to file, like everyone else. (You do not get an extra two months beyond the July date! But the July 15 date applies.)
  • Every state makes its own decision about deadlines. Most are conforming to the Federal change, and all have extended beyond April 15, but a few have May or June deadlines, rather than July 15. We will do our best to keep track of them all.
  • First and second quarter estimated taxes for tax year 2020 are also due July 15, 2020.

2020 Economic Impact Payments

(AKA Stimulus Payments, Recovery Rebates, etc.)

  • Technically, the payment is a credit based on your 2020 income. In most cases, it will be issued now, based on your 2018 or 2019 income, but will be reconciled on your 2020 tax return. i.e. If you don’t receive it now, or don’t receive as much as you’re entitled to, you’ll receive it when you file your 2020 tax return. However, if you receive more than you’re entitled to, you will not have to pay back the difference.
  • Maximum payment is $1200 for singles, $2400 for Married Filing Joint, plus $500 for each child under age 17. Dependents age 17 and older (e.g. dependent college students) are not eligible for a payment on their own nor on their parents’ return.
  • If your adjusted gross income (AGI) is under $75,000 (Single), $112,500 (Head of Household), or $150,000 (Married Filing Joint) you are entitled to the full payment.
  • Above those limits, the payment phases out for incomes up to $99,000/$136,500/$198,000 respectively. Above these higher levels, you are not entitled to a payment.
  • AGI will be determined directly from your tax return (2018 Form 1040 line 7 or 2019 Form 1040 line 8b) without adding back the Foreign Earned Income Exclusion or other adjustments.
  • If you have already filed a 2019 return when they issue your payment, the calculation will be based on your 2019 Adjusted Gross Income. If you have not yet filed a 2019 return, it will be based on your 2018 AGI. If you haven’t filed either year, it will be based on your 2019 Social Security benefits, if you received any. Payments began going out by direct deposit on April 10. Checks started being mailed around April 20 and will continue throughout the spring and summer.
  • If you were not required to file a tax return for 2018 or 2019, and you do not receive Social Security benefits, you may use a tool on the IRS website to submit your information so as to receive a payment. You can find the non-filer tool here. Do not use this tool if you were required to file for either of those years and just haven’t done so yet.
  • The IRS is authorized to issue payments electronically to any bank account that you used to receive direct deposit of a tax refund since Jan. 1, 2018. The IRS has set up an online portal where you can provide bank account information if they do not already have it. The tool is available here. As of April 30, it does not appear to be handling foreign addresses, but most other taxpayers should be able to log in and provide bank information as needed. The tool is a bit finicky. Be sure to enter your address exactly as shown on your latest tax return. Alternatively, the IRS will mail a check to the last address they have on file. Within 15 days of making a payment, the IRS will send a letter to your last known address indicating the amount of the payment and how the payment was made. We know there are lots of concerns about people who have changed bank accounts, divorced, moved, etc. I expect more information will be forthcoming from the IRS as to how they will manage this process to try to get the payments reliably into the correct hands.
  • Taxpayers with ITINs rather than SSNs are not eligible for the payment. To the best of our understanding, even if only one spouse or child has an ITIN, no one on that tax return is eligible for a payment.
  • Please keep a record of the amount of payment you received as this will need to be reconciled on your 2020 tax return. Again, you won’t need to pay back any excess, but you could be eligible for an additional payment depending on your income, dependency status, etc.

IRA changes

  • Contributions for the 2019 tax year may be made up until July 15 if you are otherwise eligible to contribute. Anecdotally, we have heard that some banks may have trouble accepting contributions after April 15 and counting them as 2019 contributions. They may get this fixed, but if you’re planning to make a 2019 contribution and have not yet done so and your cash flow can support it, it may be advisable to go ahead and do so before April 15.
  • A “coronavirus-related” distribution is a withdrawal made during 2020 by someone who is diagnosed with COVID-19, someone whose spouse or dependent is diagnosed, or someone who had adverse financial consequences due to COVID-19. More guidance should be forthcoming about this from the IRS.
  • You may take a coronavirus-related distribution from your IRA of up to $100,000 without incurring a 10% early-withdrawal penalty.
  • The taxable income from coronavirus-related distributions will be spread over three years (2020-2022) unless you elect to include it all in your 2020 income.
  • If you take a coronavirus-related distribution, you may pay it back within 3 years of the date of the distribution. This effectively lets you give yourself a loan from your IRA.
  • Required Minimum Distributions (RMD’s) are suspended for 2020. i.e. For those age 70 1/2 or older, you are not required to take your RMD for 2020. If your account is set up for automatic RMD’s, you may wish to tell your bank to stop for this year. For those with inherited IRA’s being withdrawn on a 5-year schedule, I’m not sure yet if this applies to you as well.

Miscellaneous other changes

  • Starting with tax year 2020, taxpayers using the Standard Deduction may take a deduction of up to $300 for charitable contributions. (Usual documentation rules apply.) This seems to be only for 2020, though it’s possible it may continue in future tax years.
  • Self-Employment tax for 2020 can be spread over three years, as follows: 50% due with your 2020 tax return; 25% due by 12/31/21; 25% due by 12/31/22.
  • Net Operating Losses (NOLs) from 2018, 2019, and 2020 can be carried back five years.
  • There are lots of changes affecting paid sick leave and family and medical leave, as well as help for business owners, including the self-employed. I’m not going to try to cover those here, but the Department of Labor has a Q&A page here. The Small Business Administration is the other place to look for information on loans and grants, as well as your local bank.