Millions of dollars in U.S. pandemic stimulus payments could find their way into Canada in the coming weeks and months.
Canadians with U.S. citizenship, who may not have paid taxes in the U.S. for decades, still qualify for the Trump administration’s one-time pandemic support payment.
In order to get the payment, Canadians with dual U.S. citizenship and U.S. citizens living and working in Canada must have filed a tax return with the Internal Revenue Service for 2018 or 2019 reporting their global income.
In some cases, people who qualify for the payment can also get the full U.S. COVID-19 benefit payment while earning substantially more per year than they would if they lived in the United States because of special tax exemptions only available to American ex-pats.
Democrats Abroad, a Canadian-based group that helps Americans vote, file taxes and stay informed while living abroad, held a seminar last month explaining how its members could apply for the payment.
“Most of them are surprised, really surprised about it, because … there are people who’ve been here 40 years and they’ve never gotten a cent from the U.S. government, except some who get U.S. social security cheques, and they aren’t many — and now all of a sudden they are getting $1,600,” said Ed Ungar, co-vice chair of Democrats Abroad.
“They are really happy to get it, but it wasn’t something they counted on.”
Ungar said he does not know of anyone who has received the payment but said most of the people he’s spoken to are convinced the payment will arrive within six months.
In the U.S., many Americans who have their banking details on file with the IRS already have received their payments. Many of those who don’t are still waiting for their cheques.
The problem for many dual citizens in Canada is that while many have been filing their taxes with the IRS for years, there is no bank account attached to their filings because they have not had to pay penalties or receive payments.
Without a U.S.-based bank account, Canadians with dual citizenship and Americans living and working here don’t have a way to receive an electronic payment. They have to wait for cheques to be sent out to the addresses on their last income tax filings.
Filing worldwide income to the IRS
U.S. citizens living abroad who wish to retain their American citizenship are required to file a U.S. tax return every year detailing their worldwide income.
If it’s determined that the U.S. citizen paid lower taxes abroad than they would have if they had earned the same income in the U.S., they are required to pay the difference to the IRS.
The IRS’s economic impact payment, EIP, is similar to the Canada emergency response benefit, CERB — a cash payment offered to citizens across the country who are struggling financially because of the pandemic.
Canadians who qualify for the CERB can claim it for a maximum of four four-week periods. The EIP is a one-time payment.
To qualify for the full EIP of $1,200 US, ($1,687 Cdn), plus an additional $500 US ($702) for each qualifying child, U.S. citizens can earn a maximum of $75,000 US ($105,400) as an individual, or $112,500 US ($158,100) if they are the head of a single-income family.
Married couples with joint earnings of no more than $150,000 US ($210,800) qualify for a joint benefit of $2,400 UD ($3,374).
A major difference between the Canadian and American pandemic benefits is that in Canada, people must apply to receive it, but in the U.S. the payment is automatically dispersed, providing the person filed a tax return in 2018 or 2019.
The U.S. EIP maximum payment is gradually reduced after people reach their maximum amount of earned income until the benefit is cut off at $99,000 US ($139,200) for individuals, at $136,500 US ($192,000) for single-income families and $198,000 US ($278,300) for families with two incomes.
Earning more in Canada
The major difference when it comes to U.S. citizens living abroad is that they are allowed to exempt up to $103,900 US ($146,000) of income from their 2018 tax filing, or $105,900 US ($149,000) of income from their 2019 return.
“Somebody living outside the U.S. would actually … earn more income than somebody living in the U.S. and be eligible to receive that benefit because of this Foreign Earned Income Exclusion,” said Kevin Kirkpatrick, a U.S. tax lawyer with the international firm Moody’s.
In some cases, the Foreign Earned Income Exclusion can effectively lower a person’s income to the level where they can still receive the benefit.
For example, in 2018 an individual U.S. citizen living in Canada could have earned $250,000 Cdn while still qualifying for the full EIP — but if they lived in the U.S. they could have earned a maximum of about $105,000 while getting the same benefit.
CBC has requested information from the IRS and the U.S. embassy in Ottawa on how many U.S. citizens live in Canada and file U.S. tax returns, but neither agency was able to provide that information.
Several follow up questions to both the embassy and the IRS were not returned by the time of publication.
According to the 2016 census, 377,410 people in Canada identified themselves as being either fully or partly of American origin.