How Long Can Canadian Visitors in the U.S. Stay Free of the IRS?

Recent visitors to TIF have expressed fears that if they stay in the U.S. for extended periods they might have to pay taxes to the IRS.  That’s true.  But don’t panic.  There are perfectly simple, and legal ways to deal with that eventuality. Seasoned Canadian snowbirds do it all the time.

First let me make it clear that I am not a tax expert, I do not purport to give tax advice, and what I am dealing with here with is a fundamental issue of how you, as a snowbird, can maintain your Canadian identity and comply with IRS rules. It’s not complicated.

According to IRS rules, a Canadian snowbird, who is not a permanent resident of the U.S. or a green card holder, can still be considered a resident for income tax purposes if he or she spends a certain period of time in the U.S. over several years. You may be surprised to know that many of you fall into that category.

What is that “certain period of time?” Count all of the days you were present in the U.S. in  2010 (if that was more than 31), one third of the days you were present in 2009, one sixth of the days you were present in 2008. If that tallies up to 183 days or more, you will be considered substantially present for tax purposes.  However, and this is a big however, if you can prove you have a closer connection to Canada than to the U.S., and you have no other tax liabilities such as interest or investments earned in the U.S., or property rented or sold, or other income earned in the U.S., you can still be considered a non resident alien, exempt from U.S. taxes.

And how do you do this? The simplest way is to file an 8840 Closer Connection Exemption Statement for Aliens.  You can get one free from the IRS by going to www.irs.gov and on the top right hand side of the page you can type 8840 Closer Connection into the search box. Print it out, answer the questions (one of which will ask you to list the number of days you have spent in the U.S. over the previous three years) and the other questions will help you establish that your real home is in Canada, that Canada is where you pay your taxes, where you have your social and business interests, where you do your banking, and where you have your permanent home to which you return after you do your visiting—in the U.S. or any other country.

The filing date for the current year is June 15. Send the form off  to the IRS.  They will put it on record, but they will not reply. Do this each year, and whenever you go to the U.S. take a copy of the form with you.  It’s the clearest evidence you are complying with U.S. rules and you’ll make it a lot easier for the border agent to give you a smile and wave you through.

Of course there are many situations under which Canadians do have tax liabilities in the U.S. and the 8840 will not exempt them from those, but in that case you need to have an international or cross border tax advisor to work with you. That’s beyond my area of expertise.

And don’t forget your travel insurance.  You want to stay out of the grips of the IRS, but you don’t want to stumble into a major emergency without protection.

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