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Terry Ritchie, U.S., Canada Now Tracking Snowbirds More Closely

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In this interview, Terry Ritchie speaks with Rudy Mezzetta of InvestmentExecutive.com about the recent U.S.-Canada agreement to an “entry-exit” initiative. Though Canadians have long been allowed to self-report total days spent in the U.S., the Department of Homeland Security will now track that number.

For Canadians, there are several reasons this is important: spending more than 182 days in the U.S. can result in being banned from re-entry for three years; staying more than 365 days can lead to a 10-year ban. In addition, if a Canadian meets the Substantial Presence Test of the Internal Revenue Service, he or she will be treated as a U.S. resident for tax purposes, and taxed by the U.S. on worldwide income. You can see the government’s information on your Canada-U.S. travels here. To assess whether you meet the Substantial Presence Test, add the number of days spent in the U.S. during the current year, plus one-third of the number of days in the first preceding year and one-sixth of the number of days in the second preceding year. If the sum of that calculation is more than 183 days, substantial presence is established for tax purposes. Canadians do have an out from being taxed by the U.S. on their worldwide income, and that is filing Form 8840, Closer Connection Exception Statement for Aliens by June 15th of the year after the Substantial Presence Test is met. If the exception is met, filing this form correctly and on time will keep your worldwide assets safe from U.S. taxation.

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