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Snowbirds: It's that time of year again

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This is our annual reminder to Canadians who spend significant amounts of time in the United States each winter.

Snowbirds have an obligation to file a Form 8840 with the U.S. government, if they have established a "substantial presence" in the U.S. The filing deadline is June 15.

Most folks don't realize it, but all Canadians who visit the U.S. casually do so under a B-2 Visa, which is for "tourism, vacation and pleasure visitors." Our ability to visit and spend our money in the U.S. is a privilege, not a right.

For 2012 (and the current June 15 filing deadline), a Canadian has established a "substantial presence" in the U.S. by spending 31 days or more in the U.S. in 2012 and a total of 183 days during 2012, 2011 and 2010, counting all of the days of physical presence in 2012, one-third of the days of presence in 2011 and one-sixth the number of days in 2010.

If you spent more than 121 days each year, this absolutely applies to you, without even doing the calculation. That's the cut-off line, as illustrated here, for a person spending 121 actual days in each year:

-- 2012 -- 121 days (all count);

-- 2011 -- 40 days (one-third of 121);

-- 2010 -- 20 days (one-sixth of 121).

This total is 121 + 40 + 20 181, which is less than the 183 limit. Therefore, no "substantial presence." However, if this example had shown 123 days in 2012, that would make the total 183, and therefore a "substantial presence" and a filing requirement.

Don't count days that you commute to work in the U.S. or days you were unable to leave due to a medical problem that developed while you were in the U.S. However, travel days that include presence in the U.S. count.

You probably don't need to file an actual U.S. tax return, as long as you have a "closer connection" to Canada than to the U.S. It is this "closer connection" that is proven by filing Form 8840, the Closer Connection Exception Statement for Aliens by June 15.

This form asks which country issued your passport, the location of your family members, car registration, social, religious and political organizations, where you are registered to vote, where you do business and your own opinion about your closer country connection.

If this shows you have a closer connection to Canada, then you're done. If it shows a closer connection to the U.S., then get an accountant qualified to prepare U.S. tax returns, as that will be required of you.

One question is "Type of U.S. visa" and your answer is likely a B-2 visa, the one I mentioned for "tourism, vacation, pleasure visitors." However, if you are working in the U.S., your answer may be different.

The form 8840 and related information can be located on the IRS website at www.irs.gov. The printable page is found at www.irs.gov/pub/irs-pdf/f8840.pdf.

Once completed, the form is mailed to Department of the Treasury, IRS Centre, Austin, Texas, 73301-0215.

Every year, I hear people say they don't want to make the IRS aware of their existence. While I empathize, it's naive to think they don't know you are crossing the border, since the Border Service scans your passport and puts in into the master database.

Ultimately, the IRS can compel you to file a tax return if you have a substantial presence and have not proven your closer connection to Canada, or deny you access to the U.S. entirely.

Dollars and Sense is meant as an introduction to this topic and should not be construed as a replacement for personalized professional advice.

David Christianson, BA, CFP, R.F.P., TEP, is a financial planner and vice-president with National Bank Financial Wealth Management.

Republished from the Winnipeg Free Press print edition May 31, 2013 B7

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