How Long Can Canadians Remain in the US? And What About Those Taxes?

This past weekend, January 17 to 19, CBC Radio West aired an interview purportedly “clearing up” some misinformation about how long Canadians, particularly snowbirds, can stay in the US legally and without having to file tax returns to the IRS.

Unfortunately, in an attempt to clear up some misunderstanding, the interview may have left an impression that snowbirds can only stay in the US for a total of 120 days—four months—in a single year, and those who overstay that number of days risk:

  • having to pay taxes to the US,
  • losing their Canadian residency and health care,
  • being banned from entering the US for long periods of time.

The article went on to urge travellers to keep a log of their trips, and to chart the number of days spent in the US, as US Customs and Border Protection and the Canadian Border Services Agency have jointly implemented a new exit/entry data-sharing system that records all individual border crossings in either direction down to the exact date and time. In effect, when you leave Canada by land, you are deemed to have entered the US and when an American resident enters Canada, he or she is deemed to have left the US.

Up to now, the departures from either country were not always being recorded as there was no way of doing that. Canadians don’t go to a checkout counter when leaving their own country. Same with Americans.

We strongly support any recommendation that you keep such a log, but we need to clarify the article’s interpretation of the ground rules governing how long you can travel to the US, be it on your multi-month winter trips or your incidental border hops for buying gas, seeing sports events, or quick shopping trips.

 

The B2 Visa

First: we must emphasize that according to the B2 visa (visitor’s visa), you are allowed to stay in the US for up to six months (182 days) in any 12-month period, so long as the US Customs agent is satisfied that you have the resources to maintain yourself, that you will not work while in the US, and that you will return to Canada by your allotted return date. That is history—no changes. All Canadian snowbirds know that part by heart.

 

Substantial Presence Test

Where it gets a little more complicated is in the implementation of US tax rules, specifically the Substantial Presence Test and the definition of resident, or alien, for tax purposes. And this is where the reference to the 120-day/four-month limit comes into play. We’ll give it to you just as the IRS has published its Substantial Presence Test:

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

  1. 31 days during the current year, and
  2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
  • All the days you were present in the current year, and
  • 1/3 of the days you were present in the first year before the current year, and
  • 1/6 of the days you were present in the second year before the current year.

Example: To determine if you meet the substantial presence test for 2015, count the full 120 days of presence in 2015, 40 days in 2014 (1/3 of 120), and 20 days in 2013 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2015. And that means you’re not taxable.

If, however, you are a diehard snowbird and determined to squeeze every last day out of your B2 visa 182-day allotment, you will be taxable in the eyes of the IRS. Since that is a lot worse than having a root canal, you want to avoid it, and you easily can by filing an IRS form 8840—a relatively short and simple form that allows you to substantiate that you have a “Closer Connection” to Canada: it’s where you have a permanent residence, do you primary banking, pay your taxes, have your social contacts, where you vote, and so on.

You don’t need a lawyer or tax expert to fill it out. Do it yourself with an 8840 form you download from the IRS website, once every year, and you won’t have to deal with the IRS. Experienced snowbirds have been doing that for years. There is nothing new about that either.

Now, remember that the B2 visa (visitors, non-workers, etc.) and the Substantial Presence Test are separate issues, deriving from different legislation, different rules, different purposes, and where they intersect is where the confusion often arises. We often get queries from Canadian visitors to the US claiming that a friend told them they are allowed to stay in the US only 120 days according to the Substantial Presence formula. Others claim “they heard” that they can stay longer than the 182-day B2 visa threshold if they agree to pay US. taxes. No.

The bottom line is that according to immigration rules, the B2 visa allows you a six-month reprieve from shovelling snow, and the 8840 allows you to escape the tax consequences of that reprieve.

These rules are not new. Experienced snowbirds generally know them pretty well and abide by them.

 

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