Short Sales Pinal County

Canadians May Have To Pay Double Tax

Posted on Oct. 14, 2010 by admin in Canadian Snowbirds

Each Fall through winter, many Canadian active adult seniors (or snowbirds), travel to Arizona looking to buy a home in this warm and scenic region of the United States.

Although Canadian snowbirds share much in common with their American counterparts, there is one distinct difference. Canadian snowbird are subject to a U.S. Tax if they stay longer than the allotted 182 days annually. To exceed this limit would trigger a tax that would have to be paid in both countries.  This double taxation is an expense which most snowbirds simply cannot afford.

Canadians who stay in the U.S. for less than 30 days in a calendar year are considered “visitors” and need not worry this additional tax rule.  However, if a Canadian chooses to stay in the U.S. for greater than 182 days in a calendar year, he or she would be considered a “resident alien” for tax purposes and therefore required to file a U.S. tax return. For those Canadians whose visits fall between 30 and 183 days in a single calendar year, there may still be concern for a tax obligation as this may still be considered a “substantial presence” in the U.S.

However, a “substantial presence” may not necessitate Canadian snowbirds having to pay U.S. taxes. In such cases, Canadian snowbirds will at the very least, need to file a Form 8840, Closer Connection Exception Statement for Aliens, with the U.S. Internal Revenue Service. Failure to do so may result in significant penalties, even if taxes were not owed.

To assess whether or not a Canadian visitor meets the criteria for a “substantial presence”, you may use the following formula:

Add the total number of days spent in the U.S. during the current calendar year, plus 1/3 of the days visited in the preceding year, and then 1/6 of the days visited in the year prior to that preceding year.

In any case, for more specific information about the tax laws, speak with an accountant, tax lawyer or the U.S. Internal Revenue Service.

Tags: active adults, canadian snowbirds, double tax, IRS, seniors