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COVID-19 US Tax Relief Overlooks Overseas Americans

Tax relief designed to help US taxpayers in hardship due to coronavirus requires a CDC-Approved COVID-19 test, which is difficult to obtain overseas

Published on August 12, 2020

Covid-19 World Mask

When the CARES Act was passed in March 2020, many overseas Americans were pleased to finally be recognized by the US Government, as the provision for Economic Impact Payments extended to all Americans, including those living outside of the United States. Although it hasn't been plain sailing for Americans abroad who received impact payments, more evidence has emerged that the Act overlooked some of the basic issues facing US taxpayers living overseas.

Part of the CARES Act provided tax relief on pension distributions for those diagnosed with COVID-19. As Katelynn Minott, a partner and managing CPA at Bright!Tax, explains, "The CARES Act provides relief to US taxpayers who take a distribution from a qualified retirement account (ex. Traditional or Roth IRA accounts) as a result of hardship caused by COVID-19. The withdrawal must be in connection with expenses directly related to a COVID-19 diagnosis of the taxpayer, their spouse or dependents. To qualify there must be a positive test, but not just any COVID test. The test must be approved by the CDC or FDA."

The requirement for the test to be approved by the CDC or the FDA leads to a number of problems for overseas Americans who don't have easy access to such approved tests. As Minott proceeds to say, for "US taxpayers living abroad, access to a test that meets CDC/FDA testing standards is a potential challenge ... There are CDC-approved tests being used abroad, but their availability varies by country. As such, the CARES Act, which was designed to assist US taxpayers around the globe, comes up short by overlooking, as has happened often before, the millions of Americans who reside outside the US."

If you've received a positive COVID-19 test whilst residing outside of the US, and were hoping to use the CARES Act provision to take a distribution from a qualified retirement account, the best advice for now is to contact your healthcare provider to ask if the test was CDC or FDA approved. If you're about to get tested, this is also a good question to ask for future reference.

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