Canadian_Retirement

The Great Snowbird Migration

Published On August 29, 2013 | By Joseph (Ken) | Personal tax, Retirement

snowbirds

Snowbirds may have to pay income tax in the USA
“Claudio and Anne-Marie Riti are among the 700,000 Quebecers who visit the United States each winter and now have to tackle an intimidating U.S. tax form.

“The couple, who own a condo in Florida, fear that the process could rob them of the peace of mind they seek by fleeing the winter weather from January to April.

“Those who fail to fill out the 8840 form will be subject to fines of $10,000.

“To fill it out, one must calculate the total number of days one has spent in the U.S. for the last year, add one-third of that sum to the total days in the U.S. the previous year, and then add on one-sixth of the total from the year prior.

“Anyone with more than 182 days in the U.S., according to the formula, must fill out the form.

“Those who should have filled out the tax form and do not could be fined.

“You might be subject to a penalty which is $10,000,” Charness said.”

Here is the most important information to take from the article:

Canadians can stay in the U.S. for up to 180 days each year without a visa, but that arrangement with the Immigration department does not concern the IRS.  Those who spend less than 120 days in the United States and consider themselves Canadian and live in Canada shouldn’t have to worry.

If you would like more information and a link to download the 8840 Form, see Canadian Snowbirds Association
“8840 form or Closer Connection Form – Canadian residents who winter in the United States are technically subject to U.S. federal income tax if they meet or exceed a specific number of days in the U.S. in any one year. This “substantial presence test” is based on a calculation that is completed on the 8840 form related to your travel to the U.S. over the past three years.

“It is important to note that becoming a U.S. taxpayer is not conditional on receiving U.S. based income but also by being physically present in the United States for more than a certain time each year. Taxation in the United States is based on world – wide income just as it is in Canada by the Canada Revenue Agency.

“Generally speaking, if you consistently spend four (4) months or more each year in the United States, your total score on the “substantial presence test” makes filing the form mandatory to avoid paying U.S. income tax. If your three year calculation score falls below the threshold, it is your choice whether to submit the form or not. The form may be downloaded from our website at www.snowbirds.org. We also recommend that you fill out the 8840 form if you own property in the U.S. Both spouses need to fill out the 8840 form.”

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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