The Coronavirus Aid, Relief, and Economic Security Act, widely known as the CARES Act, was passed by the United States government in March 2020. Among its various relief measures, it included a one-time stimulus payment of $1,200 to help individuals deal with the economic impact of the COVID-19 pandemic. While millions of Americans rightfully received and benefited from the payment, a significant number of nonresidents and foreign nationals who were not eligible also received it in error. Understanding the eligibility requirements and reasons for such mistakes is essential to address this issue correctly.
Understanding the CARES Act Stimulus Payment
The CARES Act stimulus payment, officially termed as the Economic Impact Payment, was designed as a financial relief tool to support taxpayers during the global health and economic crisis. The Internal Revenue Service (IRS) administered the payment, issuing checks or direct deposits based on tax returns filed for the years 2018 or 2019.
Eligibility for the payment was determined based on several criteria. Primarily, it was available to those who met income thresholds, held a valid Social Security Number, and were classified as either U.S. citizens, permanent residents, or resident aliens for tax purposes during the 2020 tax year. The amount was phased out for individuals with higher incomes and was not available to dependents or nonresidents.
Eligibility Criteria for the Economic Impact Payment
To determine whether you were eligible for the stimulus payment, it’s important to examine the detailed criteria laid out by the IRS. These criteria include:
U.S. Citizenship or Tax Residency
One of the most fundamental criteria was being a U.S. citizen, a lawful permanent resident, or a resident alien under the IRS’s Substantial Presence Test. Tax residency is different from immigration residency and depends on the number of days you were physically present in the U.S. over a specific timeframe. Being classified correctly was key to determining eligibility.
Valid Social Security Number
Individuals had to possess a valid Social Security Number issued by the Social Security Administration that was valid for employment in the U.S. Those with Individual Taxpayer Identification Numbers (ITINs) were not eligible for the payment.
Filing a Tax Return
Eligible recipients must have filed a federal tax return for either 2018 or 2019, unless they were receiving certain government benefits such as Social Security retirement or disability benefits. The IRS used information from these tax returns to determine eligibility and send out the payments.
Income Thresholds
The full $1,200 payment was available to individuals with an adjusted gross income (AGI) of $75,000 or less. The payment amount gradually decreased for incomes above this threshold, and individuals earning more than $99,000 were not eligible.
The Substantial Presence Test Explained
To be considered a resident alien for tax purposes, non-citizens must pass the Substantial Presence Test. This test calculates the number of days a person has been physically present in the U.S. over the current and previous two years.
To pass the test, an individual must be present:
- For at least 31 days during the current tax year
- And for at least 183 days over the past three years, using the formula:
- All the days present in the current year
- One-third of the days present in the previous year
- One-sixth of the days present two years prior
However, certain visa holders such as F, J, M, or Q may be exempt from counting these days for a limited number of years. This is often misunderstood, leading to incorrect assumptions about residency status.
Common Mistakes That Led to Ineligible Payments
A large number of international students, visiting scholars, and temporary workers received the CARES Act stimulus payment by mistake. Most of these cases occurred due to tax filing errors or changes in residency status that were not reflected in IRS records at the time of issuing the payment.
Filing as a Resident by Mistake
One of the most frequent issues was the incorrect filing of tax returns using Form 1040, which is intended for U.S. residents. Nonresident aliens should use Form 1040-NR instead. Unfortunately, general tax software often defaults to the resident form and does not properly account for nonresident status or visa types, leading to widespread misfilings.
Misunderstanding Visa Exemptions
International students and scholars on F-1 or J-1 visas are typically considered nonresidents for tax purposes for a specific number of years. For example, F-1 visa holders are exempt from the Substantial Presence Test for the first five calendar years. After that period, they may be considered residents for tax purposes, depending on their physical presence in the country.
Many individuals incorrectly assumed they were residents because they had lived in the U.S. for several years or had employment income. This misunderstanding led them to file incorrectly and subsequently appear eligible for the stimulus payment.
Changes in Residency Status
It is also possible that someone was a resident alien during 2018 or 2019 and filed taxes accordingly but then left the U.S. and no longer qualified as a resident in 2020. Because the IRS used prior year tax returns to determine eligibility, such individuals may have received payments despite being ineligible for the 2020 tax year.
Systemic Oversights
Due to the urgency with which the payments were distributed, the IRS did not conduct thorough real-time checks of immigration or residency status. Payments were automatically issued based on existing tax records, leading to numerous cases of incorrect disbursements.
Importance of Correct Tax Filing
Accurate tax filing is critical not only for compliance with IRS regulations but also for maintaining a clear and honest record with U.S. immigration authorities. Incorrect filings can have far-reaching consequences, particularly for nonresidents who may seek to return to the U.S. in the future on work visas, student visas, or as permanent residents.
If a person received a stimulus payment in error due to incorrect tax filing, the situation must be addressed by reviewing their previous tax filings and making necessary corrections.
Leaving the U.S. and Ineligibility for 2020
If you filed your 2018 tax return as a resident alien and later left the U.S., your status for the 2020 tax year may no longer qualify you as a resident. Since the eligibility for the Economic Impact Payment was ultimately tied to your tax residency in 2020, being a nonresident that year means you were not eligible to receive the stimulus.
In this scenario, even though the payment was issued based on valid filings in 2018 or 2019, your departure from the U.S. and change in status meant that the payment was received in error. It is essential to recognize this and take appropriate steps to return the payment to the IRS.
Why You Should Not Keep the Payment
Keeping a stimulus payment you were not eligible for might seem inconsequential, but it could have significant long-term consequences. Immigration authorities often review tax records as part of visa or green card applications. Having received and kept a payment you were not entitled to can raise red flags and may affect your ability to re-enter the U.S., renew your visa, or obtain permanent residency.
Moreover, if the IRS discovers that an ineligible individual kept the payment, they may initiate a recovery process. While the IRS has not yet enforced repayment in many cases, the possibility of future audits, penalties, or repayment demands cannot be ruled out.
Verifying Your Situation
Before taking further action, you should verify whether you were actually ineligible for the payment. This involves:
- Reviewing your physical presence in the U.S. over the relevant years
- Determining whether you passed or failed the Substantial Presence Test for 2020
- Identifying the tax forms you used to file your returns
- Understanding the impact of your visa category on your tax residency status
Once this analysis is complete, you can determine whether your receipt of the CARES Act payment was legitimate or an error. If it was in error, it is your responsibility to rectify the situation by amending your tax returns and returning the funds.
Verifying Tax Filing Status and Amending Past Tax Returns
After determining that you may have received the CARES Act stimulus payment in error, the next essential step is verifying your tax residency status during the years that the IRS used to issue the payment. Many individuals mistakenly received the Economic Impact Payment because of incorrect tax filings, either due to misunderstanding the tax code or using filing tools not designed for nonresidents. Addressing this properly requires a methodical approach to confirm your tax status, identify any filing errors, and submit the necessary corrections to the Internal Revenue Service.
Understanding U.S. Tax Residency
The U.S. tax system categorizes individuals as either resident aliens or nonresident aliens. This classification depends on your physical presence in the United States, visa status, and duration of stay. Immigration status does not automatically equate to tax residency. Therefore, even if someone holds a legal visa, their tax residency must still be evaluated based on IRS criteria.
Criteria for Tax Residency
There are two principal ways to be considered a U.S. resident for tax purposes:
- Holding a green card at any point during the year
- Passing the Substantial Presence Test
Most non-citizens fall under the second category. The Substantial Presence Test uses a three-year formula based on your physical presence in the U.S. over the current and two preceding years. Certain visa types, including student and academic exchange categories, have exemptions from this test for a limited period.
Exempt Individual Categories
If you were present in the U.S. under a student visa (like F-1 or J-1), you are generally classified as an exempt individual for the Substantial Presence Test. Students are usually exempt for up to five calendar years. Similarly, teachers and trainees on J or Q visas may be exempt for two out of every six years.
These exemptions can prevent you from being classified as a resident for tax purposes, even if you lived in the U.S. for a significant period. Misunderstanding this distinction has led many to file incorrect tax forms.
Identifying Incorrect Tax Filings
The Consequences of Filing the Wrong Form
If you were a nonresident alien but filed as a resident, you likely used Form 1040 instead of the appropriate Form 1040-NR. This mistake can cause various issues, including receipt of tax benefits you weren’t eligible for, like the CARES Act payment.
Incorrectly filed returns could also include ineligible deductions or credits, further complicating your tax record. Because tax data is reviewed during many types of visa and immigration applications, these errors must be corrected promptly.
Signs of a Filing Error
There are several indicators that suggest you may have filed your taxes incorrectly:
- You used a tax software platform that did not ask about your visa type
- You filed Form 1040 instead of 1040-NR as a nonresident
- You claimed tax credits or deductions not available to nonresidents
- You received a stimulus payment despite leaving the U.S. before 2020 or being on an exempt visa status
Even if you didn’t realize it at the time, these signs suggest that a thorough review of your filing history is necessary.
Verifying Past Filings
To check whether you filed the correct form, obtain copies of your federal tax returns for the years in question. Review the forms you submitted and confirm the form type and your declared status.
Also, review any supporting documentation, such as:
- Copies of W-2 forms or 1099s
- Form 8843 (for nonresidents)
- Visa documentation and I-94 travel records
Matching these details with the IRS guidelines for nonresident and resident filing will help confirm whether your original filing was accurate or in error.
Amending Your Tax Return
When to File an Amended Return
If you discover that you filed as a resident in error when you were a nonresident, the IRS requires that you amend your return using Form 1040X. This form is used to correct previously filed Form 1040s and submit the correct nonresident version of your return.
Amending is also necessary if you claimed credits, exemptions, or benefits you were not eligible for. Doing so voluntarily can demonstrate good faith and reduce the risk of complications with future IRS or immigration matters.
Preparing the Correct Forms
To properly amend your tax return:
- Complete Form 1040X for the year you filed incorrectly.
- Prepare the correct Form 1040-NR for that year, reflecting your actual status.
- Attach all original documentation that supports the amended return, including:
- Revised W-2s or 1099s
- Form 8843 (if applicable)
- Copies of your visa and immigration records
Clearly explain in your submission that the amendment is to correct a residency status misclassification. Provide a short statement referencing the Substantial Presence Test or visa exemption rules that apply to your case.
Mailing the Amended Return
Once completed, the amended return and all attachments should be mailed to the IRS address specified in the instructions for Form 1040X. This address can vary depending on where you live and whether you are including payment.
Amended returns cannot be filed electronically in most cases, especially when changing from a Form 1040 to a Form 1040-NR. Therefore, use a secure, trackable mailing method to send your documents and keep proof of submission.
Time Limits on Amending Returns
There is a statute of limitations for filing an amended return, generally three years from the original filing date or two years from the date the tax was paid, whichever is later. However, correcting a filing error related to nonresident status should be done as soon as it is discovered, regardless of the deadline.
If you received a CARES Act payment in error due to an incorrect return, the sooner you correct the error, the more favorable your position will be in case of future review by the IRS or immigration services.
Dealing With IRS Responses
After you submit an amended return, it may take the IRS several months to process the changes. You should monitor the status of your amended return through official IRS tools and be prepared to respond to any follow-up requests.
The IRS may ask for clarification, additional documentation, or supporting evidence. Always respond promptly and thoroughly to any correspondence. If the correction results in taxes owed, be prepared to make payment, including any applicable interest.
Consequences of Not Correcting the Error
Failing to amend your return if you filed incorrectly can have long-lasting implications. For one, the IRS may assess penalties, interest, or back taxes if they discover the error. More critically, incorrect tax filings can be used as grounds for denial in future immigration applications.
U.S. immigration authorities often review tax filings during visa renewals, green card applications, and adjustment of status procedures. Having inconsistent or inaccurate tax records can delay or even jeopardize these processes. Amending your return proactively signals your intention to comply with tax laws and can reduce scrutiny in future dealings with both the IRS and immigration services.
Dual-Status Returns
Some individuals may find that they were considered residents for part of the year and nonresidents for the other part. This situation results in a dual-status tax year. Preparing a dual-status return is more complex, requiring parts of both Form 1040 and Form 1040-NR.
If your situation involves entering or leaving the U.S. mid-year or a change in visa status, you may fall under this category. Understanding how to allocate income and deductions appropriately is crucial to ensure an accurate return.
Consulting a Tax Professional
Given the complexity of correcting past tax returns, especially involving nonresident and dual-status situations, consulting a tax professional with expertise in international or nonresident tax law is advisable. A professional can:
- Help you interpret IRS rules correctly
- Ensure you complete all required forms accurately
- Assist in preparing a brief explanation to include with your amended return
Professional guidance also minimizes the chance of errors in your correction, helping you meet deadlines and improve your chances of avoiding negative consequences.
Gathering Supporting Documents
Before filing an amended return, collect all relevant documentation that can support your correction. This includes:
- Passport and visa records
- I-20 or DS-2019 forms
- Travel history from I-94 arrival/departure records
- Prior tax returns
- Any IRS notices related to the CARES Act payment
Organizing this documentation will make it easier to substantiate your amended status and ensure a smoother review process.
Multiple Year Amendments
If the same error occurred in more than one year, you must file a separate Form 1040X and accompanying 1040-NR for each tax year that needs correction. Label each submission clearly, and include a cover letter explaining the nature of the correction for each year.
Avoid combining documents or mailing all amended returns in a single envelope. Processing is more efficient when each year’s correction is submitted separately and sent to the appropriate IRS address.
How to Return the CARES Act Stimulus Payment Received in Error
After confirming that you received the CARES Act stimulus payment in error due to an incorrect tax filing or a change in your tax residency status, the next important step is returning the funds to the Internal Revenue Service (IRS).
Even though the payment may have been issued automatically based on your past tax returns, if you were not a qualifying resident alien for the 2020 tax year, you were not eligible to retain the stimulus. The IRS has provided clear instructions for returning these payments, and following them properly helps maintain your tax compliance and avoid future complications, especially in matters related to U.S. immigration.
Why Returning the Payment Matters
The IRS issued stimulus payments quickly based on data from previously filed tax returns. This rapid rollout left room for mistakes, including payments going to individuals who no longer lived in the United States or who had incorrectly filed their taxes as resident aliens.
Returning an ineligible payment demonstrates integrity and compliance with U.S. tax regulations. Failing to return the payment, even if received by mistake, could create legal and financial consequences. In addition, keeping the funds may adversely affect future applications for U.S. visas, extensions, or permanent residency, as immigration authorities may review your tax history.
Confirming Your Ineligibility
Before proceeding to return the funds, it’s critical to confirm that you were indeed ineligible. Review your residency status for the 2020 tax year, taking into account your physical presence in the U.S. and whether you met the Substantial Presence Test. Also check whether you were under a visa category that exempted you from counting days toward residency. If you did not qualify as a resident alien in 2020, you should not have received the Economic Impact Payment.
When You Should Return the Payment
You should return the payment if:
- You filed a return as a resident alien but were actually a nonresident alien
- You received the payment while residing outside the United States with no tax residency for 2020
- You were never eligible to receive the payment due to visa-related exemptions or insufficient presence in the country
Even if you have already amended your tax return, the stimulus payment must be returned separately and not bundled with any payments for amended returns or tax liabilities.
How the Stimulus Payment Was Issued
To understand the return process, it’s helpful to know how the payments were originally issued. The IRS distributed stimulus payments in three ways:
- Direct deposit into the recipient’s U.S. bank account
- Paper checks mailed to the address on file
- Prepaid debit cards sent to some recipients
Depending on the method you received the payment, the steps to return it differ slightly.
Returning a Paper Check (Uncashed)
If you received a paper check and have not yet cashed or deposited it, follow these steps:
- Write “Void” across the endorsement area on the back of the check. Do not sign it or deposit it into any account.
- Write a brief note explaining why you are returning the check. A simple statement such as “I am returning this check because I was not eligible to receive the Economic Impact Payment” is sufficient.
- Mail the voided check and your note to the IRS address that corresponds to your last known residence or where you last filed taxes. Use the official IRS website to find the appropriate mailing address.
- Use a secure mailing method, such as certified mail or a courier service, so you have tracking information and proof of delivery.
Do not staple, paper clip, or tape the check to your note or any other documents. Keep a copy of the check and the note for your personal records.
Returning a Direct Deposit or Cashed Check
If the payment was deposited directly into your bank account or you already cashed a paper check, the process involves issuing a repayment to the IRS yourself:
- Write a personal check or obtain a money order payable to “U.S. Treasury.”
- Include your taxpayer identification number, typically your Social Security Number or ITIN, on the memo line.
- Write “2020EIP Return” on the memo line as well.
- Write a short note explaining that you are returning the stimulus payment because you were not eligible. Include your full name, address, and the reason for the return.
- Mail the check or money order and the note to the IRS address appropriate for your location. Confirm the latest mailing details using the IRS website.
This method is necessary because the funds have already been transferred into your possession. Keep a copy of your payment and mailing receipt as proof that you fulfilled your obligation.
Returning a Prepaid Debit Card
If you received the stimulus through a prepaid debit card and have not activated or used it, you can return it following the issuer’s instructions. If the card was used, the balance must be repaid to the IRS via check or money order, following the same steps as for a direct deposit.
Contact the debit card issuer to inquire about cancellation and return procedures if the card has not been activated. Include a note with your return explaining why you are returning the funds.
What to Include With Your Return
Regardless of the payment method, the following should accompany your return:
- A note with your name, contact information, and taxpayer identification number
- A clear explanation that the payment is being returned because you were not eligible
- If applicable, the voided check or personal check/money order for the amount received
The IRS does not require a specific form to accompany the return of an Economic Impact Payment. However, keeping your explanation clear and concise helps ensure your return is processed without delay.
How to Find the Correct IRS Mailing Address
The IRS maintains different mailing addresses depending on the type of form, the state you lived in when you last filed, and whether or not you are including a payment. Visit the IRS’s official website and navigate to the “Where to File” section to locate the appropriate address for your situation.
If you are unsure of the correct location, contact the IRS or consult the latest instructions from the IRS page dedicated to Economic Impact Payment returns.
Documentation and Record-Keeping
Always keep copies of all documents related to the returned payment, including:
- A copy of the original stimulus check or a record of the direct deposit
- The personal check or money order used to return the funds
- Your explanatory note
- Shipping receipts and tracking numbers
- Any IRS correspondence acknowledging receipt or further instructions
Having these documents on hand can help if questions arise later, or if you need to demonstrate compliance in future interactions with tax or immigration authorities.
How Long the Process Takes
Once received, the IRS may take several weeks or even months to process your returned payment. Currently, the IRS does not issue formal acknowledgments for every returned payment, but in some cases, taxpayers receive confirmation letters.
If you want confirmation that your payment was received, consider sending it via a mail service with tracking or delivery confirmation. You can also monitor your IRS account online to verify updates to your record.
Potential Consequences of Not Returning the Payment
Keeping a payment that you were not entitled to may not lead to immediate penalties, but it could cause issues later. The IRS retains the right to recover improperly issued funds, especially if they result from incorrect or fraudulent filings.
Beyond tax-related consequences, accepting a stimulus payment in error may impact future visa or immigration applications. U.S. immigration officers frequently assess an applicant’s history of compliance with federal laws, including tax regulations. A questionable payment on record may prompt inquiries or delays.
Failing to return the funds could also lead to complications if the IRS audits your return or reviews your eligibility in the future. Although no widespread enforcement has been reported as of now, the possibility exists.
What If You Are No Longer in the U.S.?
If you have permanently or temporarily left the United States and received the payment by direct deposit or check forwarded internationally, you are still obligated to return it if you were not eligible. The IRS accepts returned payments from overseas.
You should:
- Use an international money order or check in U.S. dollars made payable to the U.S. Treasury
- Include all necessary identification and explanation
- Send the payment to the IRS address that handles international correspondence
Use an international mail carrier that offers tracking and delivery confirmation to ensure your payment reaches its destination safely.
Handling Other COVID-19 Relief Payments
In addition to the first CARES Act stimulus, subsequent relief bills issued additional Economic Impact Payments. If you received any later payments in error, the return process is the same. Confirm your tax residency for the relevant year and determine eligibility accordingly.
If you discover multiple payments were received in error, each one should be returned separately with a note referencing the tax year and payment number if known. Keeping detailed records will simplify the process and help if any follow-up is required.
IRS Contact and Assistance
If you are unsure about how to return the payment or need specific guidance for your circumstances, you can contact the IRS for help. International callers can reach out to the IRS International Taxpayer Service. Be prepared to provide your tax identification number and details of the payment received.
IRS representatives can guide you on where to send your return and what supporting documents to include. However, due to high call volumes, wait times may be long, so plan accordingly.
Avoiding Future Filing Errors
To prevent similar issues in the future, it is important to:
- Use tax filing tools that are designed for your visa and residency status
- Understand the Substantial Presence Test and visa-related exemptions
- File the correct tax forms for your residency status each year
Taking the time to understand your obligations can help you stay compliant and avoid unintentional errors that could affect your financial and legal standing.
Conclusion
The CARES Act stimulus payment was designed as a critical lifeline during an unprecedented public health crisis. However, due to the speed and scope of its rollout, many individuals, particularly former international students, scholars, and other nonresident aliens, received payments in error. Whether due to filing mistakes, outdated residency status, or lack of awareness about eligibility criteria, these payments have left recipients with uncertainty about their obligations.
Understanding your tax residency status is the first and most crucial step in determining your eligibility. Filing as a resident alien for one tax year does not guarantee future eligibility, especially if you’ve left the United States or no longer meet the Substantial Presence Test. If you confirm that you were not a qualifying resident alien for the 2020 tax year, it is your legal and ethical responsibility to return the funds to the IRS. Doing so not only fulfills your tax obligations but also protects your standing with U.S. immigration authorities, which may consider tax compliance when reviewing visa or green card applications.
Returning the payment, although procedural, is a straightforward process once you identify the method by which you received it via paper check, direct deposit, or prepaid debit card. Following the IRS’s return instructions carefully and keeping proper documentation ensures your action is recognized and recorded appropriately.
Moving forward, remaining vigilant in how you file taxes in the United States, particularly in distinguishing between resident and nonresident status, can help you avoid similar complications. International taxpayers face unique challenges, and it’s essential to use the appropriate forms, understand visa-specific rules, and consult reliable resources.
Ultimately, taking the necessary steps to return a stimulus payment received in error reflects responsibility and foresight. It reinforces your commitment to lawful behavior and positions you well for any future interactions with the U.S. tax system or immigration processes. By correcting any past mistakes and maintaining transparency with the IRS, you contribute to the integrity of federal relief programs and uphold your personal compliance record.