Foreign Snowbirds in U.S., IRS wants You!

BTW I also caution folks not to run afoul of the IRS, although many "foreign nationals" who come here don't seem concerned.

We paid taxes in two countries for a long time after arriving in the US. I was eventually able to get the UK Inland Revenue folks sorted out, and received a nice check for the taxes they'd wrongly collected. Following IRS rules, and with CPA guidance, I promptly filed this as "income" and sent the IRS a large check for the tax on this "income".

That started a whole chain of events and dialog lasting many months, and the IRS threatened to seize assets and property from us. I tried in vain to resolve it, and eventually had my CPA visit the IRS. They fixed their error on the spot, and the IRS agent told my CPA "if your client hadn't been so honest, we would not have known he received that money from the UK, he would not have had to send us that large check, and he would not have endured this ordeal".

Hopefully, this (abbreviated version of the) story helps explain the first line of this message.

For you doubters (Canadian or American) as to whether your passport is scanned or not, Watch carefully when you hand it to the border agent. They are VERY skilled at this and although it may appear that he just glances at it, it has been scanned in one fluid motion at the same time the questions are being asked and he/she is looking you in the eye.

Several years ago when entering the USA, I was asked (as is usual) where I would be staying and I flubbed the number portion of the address. The agent said to me, "did you mean 1698 Diamond...? ". He was correct of course.....

Each of us, (wife and I, as times can differ) do keep a log of all our time in USA for all the reasons mentioned by Steve, Ed and others. My USA bank requests a Form W8BEN... at least every three years that is then filed with the bank itself. Each of us file Form 8840 with the US IRS by mail each Spring.

Steve said:

I believe passports with barcodes are being scanned.  Ours have been on recent trips.

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Minor quibble.    My current and previous passports have never had a barcode.  However the bottom two lines are in a format which is easily scannable very similar to the bottom line of cheques.

(BTW what really irks me is that the idiots who designed the passports did *NOT* use a four digit year for birthdate.  You laugh but I'm sure there is the occasionally centenarian traveling.)

Some countries are already or will soon be issuing passports with RFID chips built into them.  This is of concern to some because they can be read from a distance with the right gear.  Therefore, if you are a little paranoid, you may wish to purchase a copper or steel "wallet".

Stu,

Are you saying that both US and CDN border agents scan passports? It's highly likely I would not have noticed CDN agents do it.

I have no doubt that US border agents scan passports, and I've seen them do it countless times. The only times I recall they didn't were when we docked at the 'customs dock' in San Diego aboard our own boat or a friend's, and had to request agents to come down from the airport to check us out.

One time, after returning from MX, I couldn't find our passports because I'd put them in a 'safe' place when we left home 3 months earlier. All our passengers were OK, but the agent insisted on seeing either a US birth certificate or a passport from me. After I sweated for a while, he asked for my drivers license, called his office on the phone, and said "you're good; you're in our computer and have been in and out of the US so many times over the years, we know who you are. Have a nice day". WHEW!

Meanwhile, I explained that Chris wasn't feeling well and was laying on the bed in the forward berth. They didn't ask for her passport, preferring not to disturb her.

I believe your vechile licence plate is scaned before you get to the border agent, that's going both ways ( Cdn and USA )We have no problem keeping track of our time in the US, credit card data does the trick for us .

Hfx_CDN said:

Canadians are allowed entry to the US as a visitor for up to 6 months without paperwork.

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In fact, Canadians or other "aliens" who remain in the U.S. for six months or less (according to the calculation of the 8840 exemption) are expected to file paperwork in the form of the 8840 Closer Connection Exemption.

Excerpts from Closer Connection Exception Statement for Aliens Form 8840 (excluding my commentary)

Purpose of Form
Use Form 8840 to claim the closer connection to a foreign country(ies) exception to the substantial presence test. The exception is described later and in Regulations section 301.7701(b)-2.

Note: You are not eligible for the closer connection exception if any of the following apply.
? You were present in the United States 183 days or more in calendar year 2010.
? You are a lawful permanent resident of the United States (that is, you are a green card holder).
? You have applied for, or taken other affirmative steps to apply for, a green card; or have an application pending to change your status to that of a lawful permanent resident of the United States.

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Who Must File
If you are an alien individual and you meet the closer connection exception to the substantial presence test, you must file Form 8840 with the IRS to establish your claim that you are a nonresident of the United States by reason of that exception.

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Substantial Presence Test
You are considered a U.S. resident if you meet the substantial presence test for 2010. You meet this test if you were physically present in the United States for at least:
? 31 days during 2010 and
? 183 days during the period 2010, 2009, and 2008 (IOW the last three years)

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Please refer to the official forrm for complete details of who qualifies, how to calculate the number of days and filing procedures.

Additional resources on the subject of 8840 filing:

Canadian Snowbirds Assoc

Global Tax Services

A pdf copy of forum 8840 (2010 reporting year) is attached.  For up to date version, visit the IRS HERE.

Thanks for the links Steve, this is certainly a minefield. I sincerely wish that this stuff wasn't imposed on our Northern neighbors.

Steve said:

? 183 days during the period 2010, 2009, and 2008 (IOW the last three years)

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Hold on a sec.  That's not accurate.  That sentence is actually "183 days during the period 2010, 2009, and 2008, counting all the days of physical presence in 2010 but only 1/3 the number of days of presence in 2009 and only 1/6 the number of days in 2008."

Tony said:

That's not accurate

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The quotation was intended as an overview, which is why I added the comment about referring to the form for the specifics of making the calculation.

I believe those who would be affected would be using the actual form, thereby following the instructions.

Tom said:

I sincerely wish that this stuff wasn't imposed on our Northern neighbors.

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It's not that hard, Tom.  It's simply a matter of maintaining a simple log, which, for anyone who spends longer periods of time in your Country can do using an ordinary calendar.  We keep track of other things for income tax, medical expenses, balancing check books...so why should this be any more difficult?

I see it as being part of life's responsibilities and complying with the laws of the Country hosting us.

On the topic of sharing information between US and Canadian govt depts here's a story where idiots rented expensive vehicles in Detroit, drove them to Canada and then reported them stolen in the USA.  The point being that it was Canadian Customs who would have recorded the license plate info and driver info and not American Customs.  Then the American police somehow had access to that information.

http://news.nationalpost.com/2011/09/01/u-s-police-foil-canada-to-iraq-luxury-car-scheme/

Discussion on snowbirds bringing medications to the U.S. split and moved HERE

    On a similar but not identical line of thought, I haven't seen this on any US press coverage.  It is concerning to many of the approximate 1 million US born Canadians, many of whom used to visit US family, but no longer can cross the border.
    It does speak volumes to how the IRS thinks, and why we need to be so careful in our dealings with the US government.

Ed

http://www.theglobeandmail.com/news/opinions/opinion/help-im-on-the-irs-hit-list/article2171697/comments/

[size=12pt]Wow!  I hadn't visited this topic for some time and was surprised to find it still active.  There have been some really informative and interesting comments. 

As a regular foreigner RVing visitor  (a Brit though)  I guess I might also get trawled by the IRS one day.  Unlike the Canadians, however, I'm not allowed to earn income in the USA (naturally) so perhaps the 8840 requirements wouldn't apply? 

I had always assumed that Canadians weren't allowed to work either so this IRS situation is a surprise for me......[/size]

    Macmac, that the crux of the problem, it has nothing to do with money earned in the US, US laws require taxes on money earned world wide if it is deemed that you fit IRS tax requirements, and that is judged on the formula that goes back 3 years to establish how much time was spent in the US, and that disregards the fact that taxes are paid in your home country, or that you can legally be a tourist for up to 6 months each year.

Ed

Hfx_Cdn said:

    Macmac, that the crux of the problem, it has nothing to do with money earned in the US, US laws require taxes on money earned world wide if it is deemed that you fit IRS tax requirements, and that is judged on the formula that goes back 3 years to establish how much time was spent in the US, and that disregards the fact that taxes are paid in your home country, or that you can legally be a tourist for up to 6 months each year.

Ed

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Yes I understand now - it's if one is deemed to fit the IRS tax requirements......  thanks

Do both myself and my husband each have to fill an individual  Closer connection form. We have been filling one out for years, but thought it applied to both of us.

leapfrog said:

Do both myself and my husband each have to fill an individual  Closer connection form.

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yes

workingtorv said:

I'm confused now...what is it about the last 3 yrs?  I'm obviously missing something, sorry.

D.

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did you read the form?? it clearly explains it on the form.Read the form as its pretty straight forward

leapfrog said:

Do both myself and my husband each have to fill an individual  Closer connection form. We have been filling one out for years, but thought it applied to both of us.

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read the form it very very clearly says ONE for EVERY person must file individualy. 

I am (or at least was) a Tax Specialist working at a CA (=(CPA) office. I am also a Canadian snowbird.

To make everything just a bit more complicated, there are THREE separate calculations for Canadians:

1. For US Government: We can stay a block of 6 months in the US.
2. For US IRS : we have to calculate the number of days in the last three years per a formula to see if we have to file the Closer Connection Form.
3. For our Provincial Health Care plan rules: most provinces allow 3 months and up to 6 months absence from a province in order to remain covered under a provincial plan (nothing to do with travel medical.... they assume that we are covered by Provincial Health Care). Many provinces have recently raised this to 7 months. Any longer than that and we have to prove that we really are a bona fide resident of our province.

These three are three seperate calculation, each with different criteria.
And yes, every day, including shopping days, count.Only exception is when in transit at a US airport on the way somewhere else. 

Eventually, whether your passport was scanned at the border or not, it will be up to us to prove our number of days. And yes, I keep a spreadsheet to keep track of all this.

Note that Canada and the USA now exchange border crossing info in real time especially of "third party nationals" (i.e. non Canadians or Americans). Phase I was started last September, Phase II in January 2014 and the final phase to come.

Elly