# Potential new IRS issues for snowbirds



## Numbersman61 (Jan 26, 2015)

http://www.huffingtonpost.ca/cleo-hamel/tracking-exits-and-entrie_b_8452210.html
If true, this could make IRS filing a major problem


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## Eclectic12 (Oct 20, 2010)

The article I saw a year or so ago had Canada announcing that the the "near real time" tracking system where Canada and US were sharing entry/exit info *was* live. The articles at the time were warning snowbirds that lived in Canada near the US border who went for two hour trips for groceries/gas that by US law, these counted as one day in the formula. It quoted one snow bird as saying he was tracking everything to make 100% sure he wasn't over the limit.

This is not the same article but it does day:


> Canada and the U.S. have been sharing the names, ages, nationalities and other biographical information of all permanent residents and visitors crossing the common land border since last summer.


http://www.ottawasun.com/2014/01/16/canada-us-to-share-real-time-border-crossing-details

From a land crossing perspective, the info gathering started in mid 2013.


IAC, assuming the requirement to file FABAR is correct - it does complicate things. For me, it would provide incentive to stay below the 120 threshold. 

I'm wondering how accurate this is because the article then talks about "Proving you are not a U.S. resident for tax purposes". The articles I've read say that where one is the US too long, a Canadian can claim a closer connection to Canada - which avoids having to file a US tax return. AFAICT plus from what I've heard from co-workers, a long as one is aware of the potential need as well as the deadline, this is simple to file.


Cheers

*PS*

I seem to recall on of the CARP web articles talking about snowbirds recommending all snowbirds file for the closer connection, regardless of how likely the snowbird thought they might be over the limit.


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## Numbersman61 (Jan 26, 2015)

I also am not certain about accuracy of the article and will try to get the opinion of US tax experts when I return to Calgary. I posted the link to bring a potential problem to readers. I don't plan to change my travel plans (currently spend at least 160 days a year in U.S. and file form 8840) but I recognize my filing requirements may become much more onerous.


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## kcowan (Jul 1, 2010)

Numbersman61 said:


> currently spend at least 160 days a year in U.S. and file form 8840.


I think the main warning is the need to file the 8840 annually whenever you are likely to exceed 122 days in the US, including all the day trips. 

(We have people in BC who snowbird and then keep their boat in the Pt Roberts marina. Every trip on the water costs them an extra day. Some even have cottages there.)


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## Eclectic12 (Oct 20, 2010)

Where one was not paying attention ... the first warning is that things like day trips that did not used to be tracked have the info gathering in place now. It is important to pay attention.

The second warning is that the US is seeking more tax income, especially from accounts held in other countries so one should keep an eye out for changes.


Cheers


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## james4beach (Nov 15, 2012)

This is not exactly news, but yes it's very important -- if you exceed the Substantial Presence Test (SPT) you instantly become a US Person.

It can happen very easily. There are ways around it but you must still file IRS paperwork. I work in the US and have a US apartment, definitely exceeding the SPT, yet I am a US non-resident and am able to claim Canada as my tax jurisdiction.

It's complicated. You *must* see a cross-border tax professional.

In either case, I believe you must file the FBAR and disclose the account numbers and balances of all of your Canadian and international bank accounts. I do, because of SPT.


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## makemerich (Oct 1, 2015)

If you go to the US more than a couple times a year (like normal vacations) I would recommend filing the 8840 every single year:

https://www.irs.gov/uac/Form-8840,-Closer-Connection-Exception-Statement-for-Aliens

It is quick and easy to do. Basically states that yes you do spend substantial periods of time in the States, however, you are not a resident because your ties elsewhere are stronger. The way I look at it is it doesn't hurt to file it but can brutally hurt if you don't.


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## fatcat (Nov 11, 2009)

the only hope we have here is the finding of a psychiatrist who specializes in the neuroses sustained by the tax departments of large influential first world countries ... a deep analysis going back to the earliest days of the irs seems necessary ... we need to get the tax department on the couch

why would the united states want to broadcast a message to the world which effectively says "please don't stay in our country too long, don't own homes here or invest in companies ... under no circumstances, please do not stay for a long time and spend a bunch of money on our goods and services ... we are fed up and will begin to tax you if this behaviour continues .... that is all ... you have been warned"

craziness ....


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## AltaRed (Jun 8, 2009)

Crazy yes, but IRS is not interested in what people spend in the USA, only that they are recovering taxes per their mandate. A clear case of left hand and right hand going off in different directions. Given the dysfunction of US government, lack of coordinated direction/oversight is hardly surprising.


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## Numbersman61 (Jan 26, 2015)

The problem may be in the wording in the article (see link in original post)
The author jumps to commenting on over 182 days but does not specify if this in calendar year or 3 year weighted number. I believe the article is just poorly worded but will get clarification (likely will call author who lives in Calgary).


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## Eclectic12 (Oct 20, 2010)

Odd ... the link I read said:



> The Substantial Presence Test is the day counting test used by the IRS to determine if you are a resident for tax purposes and the magic number is 183 days. *You add the number of days you were in the U.S. in 2015, one third of the days you were in the U.S. in 2014 and one sixth of the days in 2013.*


It seems clear the author does know about that the IRS uses a three year weighted number for the substantial presence test (SBT).


After checking the SPT bit in the article, I now have two parts that I question.

The first is whether someone who has a closer connection to the a foreign country (who I believe does not have to file a US tax return) would then have to file FBAR forms. (May or may not be true)

The second is this:


> If these three numbers add to 183 or more, you cannot just file a Form 8840 Closer Connection and say you are a non-resident for tax purposes. You may still be able to file as a U.S. non-resident under the treaty but Form 8840 is not an option.


The CARP and G&M articles I've read in the past have listed Form 8840 as the way to avoid having to file a tax return in the US.

The article's claim also contradicts the IRS Closer Connection link that says if one is filing a US tax return one includes Form 8840 and where one is not filing a US tax return, send it into the IRS.
https://www.irs.gov/Individuals/Int...-for-a-Closer-Connection-to-a-Foreign-Country


Then too, the parent IRS link that leads to the details of the Closer Connection says:


> Even if you passed the substantial presence test you can still be treated as a nonresident alien if you qualify for one of the following exceptions;
> - The closer connection exception available to all aliens


https://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test


AFAICT, the situations where form 8840 would not apply are:
a) applying or taking steps to become a US Lawful permanent resident.
b) an application is pending to adjust one's status to a US Lawful permanent resident.
c) missing the deadline to file a form 8840 without proof that reasonable steps to become aware of/comply with the requirements were taken (i.e. some sort of special circumstances prevented it but are not the tax filer's responsibility).


Unless this article has wind of changes the US gov't is making that haven't hit the IRS web pages yet, the article seems out to lunch on form 8840. 


Cheers

*PS*

Closest for #2 that I can get to bad wording is if the author meant to say that 183+ means Form 8840 *and* FBAR forms.


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## Numbersman61 (Jan 26, 2015)

I checked the LinkedIn profile of the author. Interesting that she has NO formal accounting or tax training. Her education is PR and Management and Humanities. For 14 years she was with H & R Block in Corporate Communications. Since March 2015 she has been a shift supervisor with Starbucks plus since September 2015 she purports to be a senior tax analyst with American Expat Tax Services. I doubt that she has ever prepared a tax return for a client.
I'm sorry I started this thread and do not expect that a shift supervisor at Starbucks is qualified to provide expert advice on tax matters.


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## james4beach (Nov 15, 2012)

fatcat said:


> the only hope we have here is the finding of a psychiatrist who specializes in the neuroses sustained by the tax departments of large influential first world countries


No joke! I've racked my brain, worked my evenings decoding tax treaties, and _lost sleep_ as a result of US tax policies.



> why would the united states want to broadcast a message to the world which effectively says "please don't stay in our country too long, don't own homes here or invest in companies


I really can't understand this either. Because of US tax policies, I have firmly decided that I will never bring my money to the US. My capital comfortably lives in Canada, and it's staying there. My earned income flows out of the US, too.

Is this how you attract new business? Entrepreneurs? Innovation? My US bank asks if I will bring over money or investments from Canada. I reply, "No... sorry. The US government would make my life a living hell. I'm keeping my assets in Canada."


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## Eclectic12 (Oct 20, 2010)

Numbersman61 said:


> ... I doubt that she has ever prepared a tax return for a client.
> I'm sorry I started this thread and do not expect that a shift supervisor at Starbucks is qualified to provide expert advice on tax matters.


Sounds like she is branching out and writing teaser articles to get business ... maybe the info passed to her was bad and/or maybe she made a mistake. There is some info that looks accurate but then there is other info that looks suspect.

Don't be sorry about starting the thread ... it is another reminder that one should take the time to confirm what one needs to do.
Crossing borders is nowhere near as easy as going province to province.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> I really can't understand this either. Because of US tax policies, I have firmly decided that I will never bring my money to the US. My capital comfortably lives in Canada, and it's staying there. My earned income flows out of the US, too.
> 
> Is this how you attract new business? Entrepreneurs? Innovation? ...


The way it makes "sense" to me is where one builds in the assumption "everyone aspires to the best country in the world ... so they won't mind". :biggrin:


Cheers


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## snub (Jun 3, 2015)

Here is another article on the subject. This author makes no mention of U.S. tax implications, but focuses on the fact that "snow birds" may lose their Canadian benefits.


*Sneaky snowbirds could have financial wings clipped by new program 

*Jim Bronskill / The Canadian Press 
October 27, 2015 01:00 AM




> A summer 2014 memo, recently released under the Access to Information Act, says savings can be expected through "preventing abuse and eligibility fraud" with respect to the employment insurance, old age security and child tax benefit programs by ensuring Canadian residency requirements are fulfilled. It estimates savings over five years of: — $48 million by Employment and Social Development Canada for the old age security program; — $21 million by Employment and Social Development Canada for the employment insurance program; — $125 million to $250 million by the Canada Revenue Agency for the child tax benefit program. For instance, if a Canadian citizen or permanent resident was out of Canada for more than 183 days, entry-exit information would be shared with the revenue agency to administer the child tax benefit, says an explanatory memo.





http://www.timescolonist.com/news/n...ancial-wings-clipped-by-new-program-1.2096431


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> The way it makes "sense" to me is where one builds in the assumption "everyone aspires to the best country in the world ... so they won't mind".


They _really_ do believe that, you know.


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## Eclectic12 (Oct 20, 2010)

I picked that up pretty quickly at the coffee hour for announcements/park news in the Florida park my parents bought into. Working in the US confirmed it's not only Florida.


Cheers


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## james4beach (Nov 15, 2012)

snub said:


> Here is another article on the subject. This author makes no mention of U.S. tax implications, but focuses on the fact that "snow birds" may lose their Canadian benefits.


That's an interesting possibility. I can see this being a good idea for certain programs that have strict eligibility rules. For example, if someone is receiving Employment Insurance, they are supposed to stay in Canada and look for jobs. The entry/exit data from the border could help to ensure that people aren't leaving Canada and going on vacation while receiving EI.

So for specific government programs... yeah maybe. *However* they'd better make the entry/exit data way more accurate before trying this. I am able to pull up my entry/exit data through the DHS I-94 portal, since I do work under NAFTA.

The DHS has been working on this system, and improving it, for much longer than Canadian agencies have tried this. Yet it's still full of errors. Besides minor mistakes (such as "WINNEPEG") it also sometimes misses my border crossings. Not every border crossing is shown, even though I'm properly entering each time.

I just pulled up my log back to when it starts in 2013, and *it's missing a full 10% of my border crossings.* In fact this log is too unreliable to use when I complete my taxes and have to list the precise number of days I spent in the US.

A few months ago, I phoned the DHS because I was worried they did not register my entry into the US in this log. "Your records don't show my entry! Should I correct this somehow?" I asked. The guy said ... no don't worry about it, the system has inaccuracies so this isn't a surprise.

If governments are going to start using this data to enforce eligibility for things, I presume they are going to have to make the system much more accurate than it is right now. Maybe they have a fully accurate log somewhere that's hidden, but not from what I can see.


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