Heading south for the winter?

Did you know that Canadians who spend four months of a calendar year in the United States may be considered by the Internal Revenue Service (IRS) as U.S. tax residents, and must file and pay taxes in the U.S.?

What does this mean?

Visitors to the U.S. that spend the requisite amount of time in the country will be deemed residents for tax purposes by the U.S. government. All citizens and deemed residents of the U.S. are required to file a tax return, regardless of permanent country of residence.  For individuals in this situation, the IRS assumes the visitor is required to filea tax return, and will send notices for estimated tax due.  In addition, your estate may be exposed to U.S. Estate Tax, on top of  various other Canadian estate tax implications.  

The responsibility of explaining the situation and having any assessments waived by the IRS falls to the visitor.  Even if the amount of U.S. tax owing is zero, dealing with these situations retroactively is both difficult and time consuming.  The good news is this problem can be avoided if appropriate action is taken in advance. If you plan to spend a significant amount of time in the U.S. getting your facts straight with the IRS before they contact you is a wise course of action.  You should do a careful review of the IRS Form 8840 [NAME OF FORM HERE] with a cross-border tax specialist in the context of your particular facts and circumstances to determine your U.S. tax exposure.

Shawn Bausch

Principal – Cross-border

Bateman MacKay LLP

40 Village Centre Place

Suite 200

Mississauga, ON  L4Z 1V9

Email: sbausch@batemanmackay.com

Phone: 905-593-3033 ext 217

Cell:  905-867-6899

Fax: 905-593-3031

Toll Free:  866-236-9585