Navigating the Waters: U.S. Stimulus Checks for Americans Living Abroad

For millions of Americans residing outside the United States, the announcement of stimulus checks during the COVID-19 pandemic brought a mix of hope and confusion. While designed to provide financial relief to U.S. citizens, the practicalities of distributing these funds across borders, to individuals with foreign addresses, bank accounts, and unique tax situations, proved to be a significant hurdle. This article delves into the intricacies of the initial $1,200 stimulus check (Economic Impact Payment or EIP) from the CARES Act for U.S. citizens living abroad, exploring eligibility, common challenges, and, most importantly, how many eventually received their entitled funds.

Understanding the Economic Impact Payment (EIP)

The first stimulus check, authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, was designed to provide rapid financial assistance to American households. It offered eligible individuals up to $1,200, and an additional $500 for each qualifying child. Crucially, these payments were not considered taxable income; rather, they were an advance on a refundable tax credit known as the "Recovery Rebate Credit." This distinction is vital, especially for expats.

The IRS primarily used information from 2018 or 2019 tax returns to determine eligibility and payment method. If you had filed a tax return for either of those years, and had direct deposit information on file, the payment was often deposited automatically. If not, a paper check or debit card was mailed to the address on record. This reliance on previous tax filings and U.S.-centric payment methods immediately created challenges for Americans living overseas.

Who Was Eligible (and Why Expats Often Were)

The eligibility criteria for the initial $1,200 payment were seemingly straightforward:

1. U.S. Citizen or Resident Alien: This is the foundational requirement. U.S. citizens living abroad, regardless of where they reside, generally maintain their U.S. citizenship and therefore their eligibility. Green Card holders living abroad may also qualify if they meet residency tests.
2. Valid Social Security Number (SSN): The individual, and any qualifying children claimed, needed to have a valid SSN. This was a critical point for many expat families where one spouse might be a non-U.S. citizen with an Individual Taxpayer Identification Number (ITIN) instead of an SSN.
3. Not a Dependent: The individual could not be claimed as a dependent on someone else’s tax return.
4. Adjusted Gross Income (AGI) Thresholds:
   • Single filers: AGI up to $75,000 for the full $1,200. The payment was phased out above this, completely disappearing at $99,000.
   • Married Filing Jointly: AGI up to $150,000 for the full $2,400. Phased out above this, disappearing at $198,000.
   • Head of Household: AGI up to $112,500 for the full $1,200. Phased out above this, disappearing at $136,500.

The Expat Advantage: How FEIE and FTC Played a Role

For many Americans abroad, particularly those earning significant foreign income, the AGI thresholds might have seemed prohibitive. However, this is where U.S. tax provisions for expats became incredibly relevant. The Foreign Earned Income Exclusion (FEIE) allows qualifying expats to exclude a significant portion of their foreign earned income from U.S. taxation (up to $107,600 in 2020, for example). Similarly, the Foreign Tax Credit (FTC) allows expats to claim a credit for income taxes paid to a foreign government, which can often reduce their U.S. tax liability to zero.

Because the stimulus payment eligibility was based on your U.S. Adjusted Gross Income (AGI), the FEIE could effectively lower your AGI to zero, or well below the phase-out thresholds, even if your actual foreign income was substantial. This meant that many high-earning expats, who paid little to no U.S. tax due to these exclusions and credits, were still fully eligible for the stimulus checks, often to their surprise.

The Disconnect: Why Many Expats Missed Out Initially

Despite their eligibility, a significant number of U.S. citizens living abroad did not receive their stimulus checks automatically. Several factors contributed to this:

1. No U.S. Bank Account on File: Many expats live their lives entirely within their host country’s financial system. If they hadn’t maintained a U.S. bank account or hadn’t used one for their most recent tax refund, the IRS had no direct deposit information.
2. Foreign Address on File: While the IRS does mail checks internationally, the process is slower, and many expats reported never receiving checks mailed to foreign addresses. Mail delivery can be unreliable in some regions, and checks could be lost, stolen, or held up indefinitely.
3. Reliance on Old Tax Returns: The IRS used 2018 or 2019 tax data. If an expat had only filed a paper return in those years, or if their address/banking information had changed, the direct deposit might not have gone through, or a paper check might have been sent to an outdated address.
4. "Non-Filer" Tool Limitations: The IRS launched a "Non-Filers: Enter Payment Info Here" tool for individuals who weren’t required to file tax returns. While helpful for some, it often required a U.S. mailing address and/or U.S. bank account for the process to work smoothly, which many expats lacked.
5. Never Filed from Abroad (Even If Required): A surprising number of U.S. citizens living abroad are unaware of their ongoing U.S. tax filing obligations. If they hadn’t filed a U.S. tax return for years, the IRS had no record of their existence, address, or banking information, making automatic payment impossible.
6. SSN vs. ITIN Issues: As mentioned, the requirement for a valid SSN for all individuals (taxpayer, spouse, and dependents) meant that many expat families with non-U.S. citizen spouses or children who only had ITINs were excluded from receiving the portion of the payment for those individuals, even if the primary taxpayer qualified.

The Path to Recovery: Claiming the Recovery Rebate Credit

For the vast majority of U.S. citizens abroad who were eligible but did not receive their stimulus check, the solution lay in claiming the Recovery Rebate Credit (RRC) on their 2020 federal income tax return.

The stimulus checks were, in essence, an advance payment of the RRC. If you didn’t receive the advance, or received less than you were entitled to, you could claim the full amount (or the difference) when you filed your 2020 tax return.

How it Worked:

• Filing a 2020 Tax Return: This was the crucial step. Even if an expat’s income was entirely covered by the Foreign Earned Income Exclusion (FEIE) and they had no U.S. tax liability, they still needed to file a 2020 Form 1040.
• Line 30 on Form 1040: The Recovery Rebate Credit was claimed on Line 30 of the 2020 Form 1040. Here, taxpayers calculated how much stimulus they should have received based on their 2020 income and family situation, then subtracted any amount they did receive. The difference was their RRC.
• Refund or Reduced Tax: If the RRC amount exceeded any tax liability (which was common for expats using FEIE/FTC), the credit would result in a refund. If there was a tax liability, the credit would reduce it.

This mechanism proved to be the most reliable way for expats to finally receive their stimulus funds. It bypassed the direct deposit and mail issues, allowing the payment to be processed as part of a regular tax refund.

Common Scenarios and Solutions for Expats

Let’s look at some specific situations and how expats navigated them:

• "I haven’t filed U.S. taxes in years!"
  • Solution: You need to become compliant. For the stimulus, you specifically needed to file a 2020 tax return. While the IRS has programs like the Streamlined Filing Compliance Procedures for past non-compliance, for the stimulus check, filing the 2020 return was the immediate priority.
• "I only have a foreign bank account."
  • Solution: When claiming the RRC on your 2020 tax return, you could indicate that you wanted a paper check mailed to your foreign address. While this method still carried some risk of delay or loss, it was often more reliable than the initial mass mailing. Some expats opened U.S. bank accounts for this purpose, or used a trusted family member’s U.S. account with their permission.
• "My address on file with the IRS is old/U.S.-based."
  • Solution: You needed to update your address with the IRS (Form 8822, Change of Address). However, for the RRC, the most important thing was to ensure your 2020 tax return had your current, accurate foreign mailing address.
• "My spouse/child doesn’t have an SSN, only an ITIN."
  • Solution: Unfortunately, for the $1,200 stimulus, individuals (including children) needed an SSN to qualify for their portion of the payment. This was a point of frustration for many expat families.
• "I received some money, but not the full amount."
  • Solution: You could still claim the difference as part of the Recovery Rebate Credit on your 2020 tax return. The IRS form would guide you to enter the amount you received, and calculate the remaining credit.

Essential Steps for Expats Who Still Haven’t Received Funds

If you are a U.S. citizen living abroad and believe you were eligible for the initial $1,200 stimulus check but never received it, here’s what you should do:

1. Verify Your Eligibility: Reconfirm that you met all the criteria (U.S. citizen, SSN, not a dependent, and met AGI thresholds considering FEIE/FTC for 2020).
2. Gather Necessary Documents: You’ll need your foreign income statements, any U.S. income documents, and personal identification.
3. File Your 2020 Federal Tax Return (Form 1040): This is the most crucial step. Even if your income was below the filing threshold or fully excluded by FEIE/FTC, you must file a 2020 return to claim the Recovery Rebate Credit on Line 30.
4. Ensure Accurate Information: Double-check your current foreign mailing address and, if you have one, your U.S. bank account details for direct deposit.
5. Consider Professional Help: Navigating U.S. tax laws from abroad, especially if you haven’t filed in a while, can be complex. An expat tax specialist can ensure your filing is compliant and that you correctly claim all eligible credits.
6. Beware of Scams: The IRS will never contact you via email, text, or social media asking for personal information to "process" your stimulus payment. All legitimate communication will be through official mail or your IRS online account.

Beyond the $1,200: Understanding Your Broader Expat Tax Obligations

While the focus here has been on the initial $1,200 stimulus, it’s a stark reminder for many U.S. citizens abroad about their ongoing U.S. tax obligations. The U.S. is one of only two countries in the world (the other being Eritrea) that taxes its citizens on worldwide income, regardless of where they live. This means even if you live and work entirely abroad, you likely still have an annual U.S. tax filing requirement. Understanding this obligation, along with mechanisms like FEIE, FTC, and FBAR (Report of Foreign Bank and Financial Accounts), is crucial for financial peace of mind as an expat.

Conclusion

The distribution of the $1,200 stimulus check highlighted the unique challenges faced by U.S. citizens living abroad. While initial payment methods often failed to reach them, the mechanism of the Recovery Rebate Credit on the 2020 tax return provided a reliable pathway for eligible expats to receive their due funds. For those who still haven’t received their payment, filing the 2020 tax return remains the primary course of action. It’s a testament to the fact that even when physically distant, U.S. citizens abroad remain part of the American financial framework, with both rights and responsibilities.