Recently we have had several queries from Canadians who routinely spend long periods in the U.S. and are concerned about their tax liabilities to Uncle Sam. In any scenario, taxes are complicated. But dealing with the IRS adds immeasurably to those complications.
Because this may become a growing issue among more and more long-term Canadian visitors, we have asked international tax advisor S.L Richard Brunton to field tax-related questions from you via our site.
Obviously, TravelinsuranceFile site is not designed to offer personalized, detailed tax advice, but if your questions deal with more general issues that are applicable to a broader audience, send them in and we will ask Richard to respond.
Just to get you started, here are some basic ground rules offered by Richard for those of you wondering if you may have to deal with the IRS.
To avoid your unwittingly becoming a U.S. resident alien for U.S. income tax it might be helpful to provide the exact U.S. income tax residency rules. If you are a non-U.S. citizen you become a U.S. resident alien if you:
1) Meet the “substantial presence test” and do not file a valid Form 8840 (Closer Connection Exception Statement) by the deadline, or
2) Possess a green card (even one for which the card itself has “expired”), or
3) Elect to be a U.S. resident.
The “substantial presence test” is a fractional computation of the numbers of days you are in the U.S. over a three-year period. Certain individuals can ignore some of the days.
Also, for clarification, even if you are deemed to be a U.S. resident alien under rules 1) or 2) above, you may be able to file a nonresident tax return in the U.S. under the provisions of the tax treaty. In this case you would not be subject to U.S. tax on your worldwide income (only certain U.S. source income) although you would have to disclose your worldwide income.
Be sure to consult an international tax expert before proceeding.
Mr. Brunton is a Boca Raton, Florida-based international tax advisor. You may reach him through this website or directly via firstname.lastname@example.org