Snowbirds face U.S. tax filing deadline

Hey there, time traveller!
This article was published 01/06/2024 (510 days ago), so information in it may no longer be current.

The calendar reminds me it is time to remind Canadian snowbirds there is a June 15 deadline for a United States IRS tax filing.

I am referring to Form 8840: the “Closer Connection Exception Statement for Aliens.”

This is not the type of alien with which we have had Close Encounters or enjoyed on a Saturday Night Live skit, but rather a form that may be required to prove you don’t have to file a U.S. income tax return.

If you are a Canadian (typically a snowbird) who has a “substantial presence” in the U.S. — as calculated using a weighted average of the days spent in the U.S. over the last three years – you must file this form to prove that you have a closer connection to Canada than to the U.S.

If you prove that, then the IRS exempts you from the requirement to file a return.

Anyone who has spent more than a few months in the U.S. in the last three years should pay attention to this.

Here are the steps to determine if this applies to you:

Step 1

For 2023 (to comply with the June 15, 2024 filing deadline), a Canadian has a “substantial presence” in the U.S. by spending 31 days or more in the U.S. in 2023 and a total of 183 days during 2023, 2022 and 2021, counting all of the days of physical presence in 2023, onethird of the days of presence in 2022 and one-sixth the number of days in 2021.

If you spent more than 121 days each year, then this absolutely applies to you, without even doing the math.

For a person spending exactly 121 days in the U.S. each year, here is the calculation:

• 2023 = 121 days (count all)

• 2022 = 40 days (one-third of 121)

• 2021 = 20 days (one-sixth of 121)

This total is 121 + 40 + 20 = 181, which is just less than the 183-day limit.

Therefore, a person spending exactly 121 days per year in the U.S. does not have a “substantial presence.”

However, if we use an example of 123 days in 2023, that would have made the total 183 days, and therefore a “substantial presence” and the requirement to file a Form 8840.

You count your travel days if they include any presence in the U.S., but not days you were unable to leave the U.S. due to a medical problem that developed while you were in the U.S.

Step 2

Complete and file the Form 8840 to prove that you have a “closer connection” to Canada, and therefore do not need to file the U.S. tax return.

This form asks about your passport, banking, family, car registration, plus social, religious, and political organizations, voting, business connections and your own opinion.

If this shows that you have a closer connection to Canada, then your “tax home” is Canada, and you’re in the clear. If the answers show that you have a closer connection to the U.S., then you may be required to file a U.S. 1040NR tax return.

Form 8840 can be located on the IRS website (www.irs.gov). Once completed, the form is mailed to the Department of the Treasury, IRS Centre, Austin, TX, 73301-0215.

Don’t expect to receive any confirmation or acknowledgment, as the IRS does not work that way. But failure to track your days and file as required can mean a nasty surprise at the border one day.

Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice. Please consult legal, tax, insurance, and investment experts for advice on your unique situation

David Christianson, BA, CFP, R.F.P., TEP, CIM, is recipient of the FP Canada Fellow (FCFP) distinction. He is a senior wealth adviser and portfolio manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull: a No-Nonsense Guide to Personal Finance.