With the number of Americans living and working abroad steadily rising thanks to remote work and all of the freedom provided by technology, many digital nomads have encountered the confusion and complexity of an unexpected aspect of remote life: filing taxes abroad. When the COVID-19 pandemic hit, the problem for many expats took on a new scope as they struggled to figure out how to collect stimulus payments owed to them as US citizens.
MyExpatTaxes emerged in 2018 as one of the few tax filing platforms catering directly to American expats seeking filing help overseas. During 2020 the company saw a tidal wave of growth as more expats than ever needed help with the protocol for collecting their stimulus checks. We sat down with MyExpatTaxes’ co-founder Nathalie Goldstein for a window into what anybody planning to work overseas should plan for and how existing expats should prepare for their next stimulus payment.
What are the most common issues expats face with filing taxes abroad?
Nathalie Goldstein: To start, a major challenge that American expats face is that many of them are unaware that they legally are required to file an annual tax return if they live outside of the US. US expats are commonly not informed about the changing tax laws, especially how they impact those filing abroad.
For example, US Expats that have moved abroad for a life partner that is not a US Citizen. In most cases, they need to file as Married Filing Separately. The threshold for those filers is five U.S. Dollars. They are also not able to utilize common deductions like the student loan interest deduction.
Expats are often not aware that they are eligible for U.S. expat tax benefits when they file a return. We consider these benefits to be the main reason to file. That’s why MyExpatTaxes focuses on claiming thousands in refunds for U.S. Expats. Right now MyExpatTaxes are acting diligently to ensure that US Expats receive the First and Second Stimulus payments and the Additional Child Tax Credit. The average U.S. Expat with children will get $1400 in U.S. refunding using MyExpatTaxes.
Also, expats struggle with getting specialized professional help with US expat tax laws. Often U.S. based tax accountants or the tax software programs are not familiar with the complexity of international tax law, and fail to maximize benefits. Often finding a tax firm that specializes in expat tax is extremely expensive, starting at $500 a return.
This is why we created MyExpatTaxes, the leading US Tax Software for Expats – allowing expats to file in 30 minutes and starts at a flat fee of 149 euro.
How did the stimulus program affect expats? Were they able to receive funds?
NG: Expats were certainly impacted differently than U.S. citizens residing in America. Based on our survey results, less than one-third (29%) of US expats received their stimulus check by the end of May 2020. The majority of those that did receive their payment had to wait over 4 weeks after they filed their 2019 tax return. Many expats are still waiting to this day for their stimulus payments.
We found that the main problems impacting these numbers are that 65% still cannot use the IRS Get My Payment Tool due to their foreign address formats. Without access, expats were unable to confirm if they were even eligible for the Stimulus Payment. Direct deposits for the Stimulus Payments were also only allowed for US bank account holders, even though many expats are able to get Social Security Benefits deposited into their local foreign banks.This further caused issues, as receiving the payment via direct deposit or paper check without being able to confirm their payment details on the IRS portal. In many cases, the check was sent to an address from the 2018 tax return, and not the recipient’s current address.
However, we are proud to say that as the only U.S. tax software that allows eFiling for the majority of expats, we were able to help thousands of expats receive their much needed Stimulus Payments faster than they thought was possible.
If you’re living abroad, what do you need to know about collecting a stimulus payment?
NG: Based on our findings from the first stimulus payment experience, a major advantage would be to open up a US Bank Account to receive the Stimulus Payments. Due to the ongoing issues with the IRS Get Your Payment Tool accepting foreign addresses, a US bank account helps to avoid having checks sent overseas. If you can’t create a US Bank Account, try to use a US mailing address.
Also, try to avoid paper mailing your current year tax return, many expats who paper mailed their 2019 tax return still haven’t gotten the 1st Stimulus Check. Use a tax firm or software that will allow you to eFile. MyExpatTaxes is the only tax software that allows 99% of expats to eFile their current year tax return!
If you don’t think you meet the stimulus check income requirements, Claiming Foreign Earned Income Exclusion on the 2020 tax return can lower an expat’s Adjusted Gross Income (AGI) so they meet the income threshold for the next round of payments. The threshold limit starts at 75,000 AGI per person.
Lastly, if you haven’t filed your taxes but want to receive both the 1st and 2nd round of stimulus checks, you can still apply through the IRS Amnesty Program (Streamlined Foreign Offshore Procedure) and back claim the Stimulus Payments on your 2020 tax return.
What’s next for MyExpatTaxes?
Our goal is to be able to service even the most difficult of U.S. tax situations in an automated and accurate way, so we will continue to add more support tax forms, deductions and profiles throughout 2021. When we first launched in 2018, we only supported salaried employees and now we support over 500 tax forms and worksheets across 4 years of taxes, allowing everyone from salaried employees to those with self-employment, investment, retirement, rental and more to use our Do-It-Yourself tax software for 149 euro.