Thousands of Americans living abroad were given incentive checks. This is why – Community News
Stimulus Check

Thousands of Americans living abroad were given incentive checks. This is why

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According to federal data, thousands of Americans living abroad have been given incentives during the Covid-19 pandemic.

While that may not be in line with the idea of ​​a “stimulus” to the US economy, lawmakers generally had good reason to send money abroad, according to tax policy experts.

“They cast a very wide net and… [payments may] going to places where people think, ‘Did they really have to go there?'” said Kyle Pomerleau, senior fellow at the American Enterprise Institute, a right-wing think tank. “But I think the answer is generally yes. ‘”

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According to agency statistics, the IRS has issued more than 3.7 million payments worth $5.5 billion to individuals outside of the 50 states and Washington, DC. The figures include three rounds of payment from the pandemic era through June 3, 2021. (Additional payments may have been sent since then.)

The data includes US citizens abroad, military personnel stationed abroad, and residents of US territories such as Puerto Rico. (While U.S. territories are not “overseas” in the sense that foreign countries are, the IRS does not report these stats separately.)

Less than 1%

According to the United States Department of State, approximately 9 million American citizens live abroad.

It’s normal that many of them would get checks because of the expanded eligibility framework set by Congress, Pomerleau said.

The size of overseas payments is also small relative to the total – 0.7% and 0.8%, respectively, of the $803 billion and 472 million payments issued over three financing rounds.

“The amount of payments going abroad is less than 1% of the [total]Pomerleau said. “It wasn’t really much when you look at it.”

Congress authorized the IRS to send stimulus checks three times during the pandemic: in March 2020 (up to $1,200 per person), last December ($600), and last March ($1,400).

The funds are technically advances of a repayable tax credit (the reclaim credit). The advances are called Economic Impact Payments — the legal terminology for what Americans have come to call “stimulus checks.”

But according to tax policy experts, the term “stimulus checks” is a bit of a misnomer.

The term implies that lawmakers wanted to stimulate demand for goods and services in the U.S. economy by sending money to households. But it seems Congress’ primary intent was to maintain household finances during a time of mass unemployment and financial hardship, policy experts say.

Whether US citizens live here or abroad is not an important distinction amid a global pandemic.

Janet Holtzblatt

senior fellow at the Urban-Brookings Tax Policy Center

“One perspective on these payments is that they were primarily intended to help taxpayers meet their daily expenses, with each incentive the icing on the cake,” said Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.

“If aid to struggling families is the intended goal, then it makes no significant difference whether American citizens live here or abroad amid a global pandemic,” she added.

Citizens living abroad must also file a U.S. tax return on their worldwide income. (Some may qualify for tax breaks on foreign income.) To the extent that such citizens pay taxes, providing an Economic Impact Payment seems reasonable, according to Garrett Watson, senior policy analyst at the Tax Foundation.

Wrong payments

Of course, in the later rounds of payments, budget hawks hated spending more federally, and wondered if households needed extra financial help as the economy picked up steam.

And the IRS mistakenly sent money to many non-citizens. (Congress only allowed payments to U.S. citizens and “resident aliens,” a category that includes individuals with a green card or who have been in the U.S. for a specified amount of time.)

More than 30,000 first-round checks worth more than $37 million may have been incorrectly paid to non-residents living abroad, according to the Inspector General of the IRS. (Many such individuals may have filed an incorrect tax return that made it appear as if they were living in the US.)

The federal government has also made other erroneous payments, according to the watchdog, such as double payments to people living in U.S. territories, payments to ineligible dependents and payments to deceased persons. Overall, the IRS has correctly paid at least 98% of its first-round funds, the report said.