US COVID payment stimulus

In 2020 some US citizens and US resident aliens received a payment under the US Economic Income Payment Program (US EIP). US EIP is a refundable tax credit for US citizens and US resident aliens as part of an economic stimulus package under the Coronavirus Aid, Relief and Economic Security Act.

The initial tax credit was up to $1,200 for individuals and $2,400 for married filing jointly.  Under the program taxpayers automatically received an advance payment in the spring and summer of 2020 if they meet the eligibility requirements. The tax credit is adjusted depending on taxpayer’s gross income and is fully eliminated if adjusted gross income exceeds $99,000 for individuals filing single or married filing separately, $136,500 for head of household, and $198,000 for taxpayers filing as married jointly.

A second payment of $600 for each individual was announced at the end of December 2020.  This second payment is under the same criteria as the initial payment and the IRS is currently working on distributing to those eligible during the first part of 2021.

If you did not get a payment or not a full payment but may be eligible based on your 2020 information, the IRS has created a Recovery Rebate Credit that can be claimed on your 2020 US tax return.  This credit is based on the same criteria as the US EIP.

The following individuals were not eligible for US EIP:

  • those who do not have a valid Social Security Number
  • non-resident aliens
  • those who filed Form 1040-NR, Form 1040NR-EZ, Form 1040-PR or form 1040-SS for 2019

Canada Revenue Agency (CRA) view

Americans living in Canada who received this U.S. government assistance related to the Covid-19 pandemic will not have to include these amounts on their Canadian tax returns.  This was confirmed per a recent CRA technical interpretation dated August 31, 2020 “the amount of any Advance Payment received, or Tax Credit claimed, under the US EIP by a Canadian resident individual, would not be required to be included in the individual’s income under the Income Tax Act. In this respect, we would not consider a reduction of U.S. income taxes in the circumstances described (either in the form of a Tax Credit or an Advance Payment) to be income from a source for Canadian income tax purposes and hence not taxable.”

The non-taxability of the US COVID stimulus payments in Canada is welcome news especially in such a trying year where every dollar counts.

If you require further information on these payments or your eligibility we encourage you to consult with one of our US specialists.