Beware the taxman

[Tequila]

Tax Change Alert



Are you a Canadian Snowbird? Do you usually winter out in the United States?

The IRS & CRA are now sharing information and closely tracking how much time you spend in the US. This is going to blindside a lot of Canadian Snowbirds, hard. You are only allowed to be in the United States for 183 days during any 12 month period, or you pay have to pay US tax and be taxed by the US on your worldwide income. Furthermore, Revenue Canada may consider that you are no longer a Canadian resident and have disposed of your assets, and tax you on those capital gains. It is important to note that the rule is not 183 days per calendar year, it is 183 days per 12 month period. That can get people into a lot of trouble. You also have to realize that that 30 minute trip across the US border to buy gas counts as 1 day. Many people may go camping in the summer in the US for a week or 2, and forget to count that as well. The US seems just like Canada, so its easy to forget you are in a foreign country. If you violate this rule you can be banned from the United States for 3 to 10 years, depending on how many days you are over. If you are in the US for more than 120 days in a calendar year, you will automatically attract the scrutiny of the IRS. Since 911, your trips into the US & out are heavily monitored. The days of waving at the border guy as you drive across are over, and they know exactly how long you are in the US. Both countries share all this information. George Orwell's world, has finally arrived.

Here is how the IRS makes its determination for tax purposes: The total number of days you spend in the States (including non-consecutive and partial days) is one of the ways the Internal Revenue Service (IRS) uses to determine if you are a resident or a non-resident alien. Each day in the current year counts as a full day, each day in the year before that counts as one-third of a day and each day in the year before that one counts as one-sixth of a day. If the total is at least 183 days, you will generally be considered as a resident alien for the current tax year. You will probably have to file a U.S. tax return and declare income from all sources, including Canadian income. So you can see that even if you do only spend less than 183 days, you can easily be nailed. If you spend less than 120 days, you will not attract attention.



All of this is making Mexico more attractive. Every day you spend in Mexico is a day less on your day count. It is important to note that passport tracking may not be as intense with Mexico, outbound from the US, and you need to keep documentation you were down there, be it RV park receipts, your vehicle paperwork or toll road receipts. It is also good to ensure when you do your paperwork after crossing the border, that Mexican immigration stamps your passport. When you cross from the US into Mexico, US immigration may not be aware that you have done so. It is a good idea to make a copy of your Mexican tourist card and keep it.



Canadians should also be aware, that being out of Canada for more than 6 months in some Provinces or 7 months in others, can cause you to lose your free Provincial Health Care. Technically speaking, it is days outside your own Province, but you are not tracked when traveling internally in Canada, so you can get away with that one. (avoid using your passport for ID flying within Canada). What can nail you is that summer trip to Europe which will raise your totals. Once again the calculation is based on a 12 month period and not necessarily a calendar year.


(info from www.coppercanyonrvtours.com/tax.php)

[boston_blacky]

Here's the latest on what's what when it comes to the law . . .

http://www.cbc.ca/news/business/taxes/canadian-snowbirds-tax-season-2016-1.3451763?ref=fh,content.ighome.com

BB

[alfredmay]

Remember, this is individual net worth. If you and your wife each own half of the family farm, house, condo, stock, mutual fund, vehicles, etc...... then your wealth together must be 13.22 million CAD before US IRS estate taxes would be triggered.

If your spouse is a citizen of the USA when you die then nothing left to him/her is taxed.
http://estate.findlaw.com/planning-an-estate/gift-and-federal-estate-taxes-faq.html

[Kidoo]

Not there yet!

[alfredmay]

As an American I know nothing of Canadian income tax laws...... but I do know something about US IRS taxes. Moisheh states that "US income tax laws are much different than Revenue Canada's . For instance upon death much of your estate will be taxed".

This statement is not correct. Your estate would be subject to tax by the IRS, but the current exemption before any tax kicks in is 5.43 million USD.
http://www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/

19 states also have some form of inheritance or estate tax, but none of them are snowbird states and most use the same exemption as the Federal government.
http://taxfoundation.org/blog/state-estate-and-inheritance-taxes-2014

So if your estate in CAD is not over 6.61 million (a $1.22 exchange rate) then the estate tax will not apply to you.

[John___Angela]

moisheh wrote:
John: You could lose your citizenship for criticizing the CBC!!

Moisheh

:). The funny thing is their French counterpart (RDI) is not bad. Much better global reporting and much better fact gathering and balance. Go figure. :).

[moisheh]

John: You could lose your citizenship for criticizing the CBC!!

Moisheh

[Kidoo]

Thanks John

[John___Angela]

moisheh wrote:
From the CSA:

"TORONTO, Jan. 19, 2015 /CNW/ - In a recent article which appeared on CBC News' British Columbia website, it was suggested that Canadian citizens are only allowed to spend 120 days in the United States each year. For clarification purposes, the Canadian Snowbird Association would like to remind travellers to the U.S. that this information is incorrect.

"Under current policy, eligible Canadian citizens may spend up to six months less a day, in the United States, in any 12 month period," said Bob Slack, president of the Canadian Snowbird Association. From a tax perspective, long-term visitors who typically spend four or more months in the U.S. each calendar year may be deemed resident aliens for tax purposes. In order to be treated as a non-resident alien, these individuals need to claim a "closer connection" to Canada by filing IRS Form 8840 annually.

Further, the CBC News article also discussed the Entry/Exit Initiative, a bi-national border program in which entry and exit data will be shared on individuals travelling between Canada and the United States. While this initiative was scheduled to be expanded on June 30, 2014, to include Canadian and American citizens, the necessary legislative and regulatory changes have not been implemented. At present, the Entry/Exit Initiative is not fully operational.

The Canadian Snowbird Association is an 85,000 member, non-profit, non-partisan organization representing Canadian travellers from across the country. The CSA works in partnership with government and business to educate and advocate on behalf of all travelling Canadians, helping to ensure access to safe, healthy travel with no restrictions on freedom of movement."

Although the above is not up to date it does address that there are 2 US agencies involved. The IRS worries about taxpayers and the Border Agents worries about overstaying. Both follow different rules. The form to be filled out and that formula are from the IRS not Customs or Immigration.

Moisheh

Excellent post. Gotta love the CBC for screwing up all the facts. 🙂

[John___Angela]

Kidoo wrote:
When entering the days on 8840 form where it says "Enter the number of days you were present in the United States during 2012, 2013, 2014" do you enter the actual total days for every years or do you divide by 1/3 for 2013 and 1/6 for 2012?

Actual days.

[Kidoo]

I guess the formula is just to see if you have to fill the form?

You can find a lot of info. about when and why you have to fillup the form but I could not find any that explains the form itself and how to fill it up. I am pretty sure I am not the only one that find those "fit for all forms" difficult to understand, as for any governement forms. There is a little bit of info. on the back but they should have a text for every line.

[almcc]

Kidoo wrote:
When entering the days on 8840 form where it says "Enter the number of days you were present in the United States during 2012, 2013, 2014" do you enter the actual total days for every years or do you divide by 1/3 for 2013 and 1/6 for 2012?

I entered the actual days for each year, I didn't do the formula work.

[Kidoo]

When entering the days on 8840 form where it says "Enter the number of days you were present in the United States during 2012, 2013, 2014" do you enter the actual total days for every years or do you divide by 1/3 for 2013 and 1/6 for 2012?

[moisheh]

From the CSA:

"TORONTO, Jan. 19, 2015 /CNW/ - In a recent article which appeared on CBC News' British Columbia website, it was suggested that Canadian citizens are only allowed to spend 120 days in the United States each year. For clarification purposes, the Canadian Snowbird Association would like to remind travellers to the U.S. that this information is incorrect.

"Under current policy, eligible Canadian citizens may spend up to six months less a day, in the United States, in any 12 month period," said Bob Slack, president of the Canadian Snowbird Association. From a tax perspective, long-term visitors who typically spend four or more months in the U.S. each calendar year may be deemed resident aliens for tax purposes. In order to be treated as a non-resident alien, these individuals need to claim a "closer connection" to Canada by filing IRS Form 8840 annually.

Further, the CBC News article also discussed the Entry/Exit Initiative, a bi-national border program in which entry and exit data will be shared on individuals travelling between Canada and the United States. While this initiative was scheduled to be expanded on June 30, 2014, to include Canadian and American citizens, the necessary legislative and regulatory changes have not been implemented. At present, the Entry/Exit Initiative is not fully operational.

The Canadian Snowbird Association is an 85,000 member, non-profit, non-partisan organization representing Canadian travellers from across the country. The CSA works in partnership with government and business to educate and advocate on behalf of all travelling Canadians, helping to ensure access to safe, healthy travel with no restrictions on freedom of movement."

Although the above is not up to date it does address that there are 2 US agencies involved. The IRS worries about taxpayers and the Border Agents worries about overstaying. Both follow different rules. The form to be filled out and that formula are from the IRS not Customs or Immigration.

Moisheh

[moisheh]

If one has easily proved closer ties to Canada there is no problem. Example: you pay income tax in Canada, have investment and bank account in Canada, own a home in Canada, have Canadian credit cards, family in Canada, vehicles registered in Canada, Canadian DL, etc. But there are those who do overstay in the USA and have some of the above in the USA. They have lots to worry about. US income tax laws are much different than Revenue Canada's . For instance upon death much of your estate will be taxed. The original article that was in some BC RV rag is a bunch of bad journalism with quotes from those who know nothing. No interview with either American or Canadian customs and immigration people. Others are quoting that article without fact checking. I think we will see further news from a real source on this subject in the near future. As is stated: Those who are legal and follow the rules have nothing to fear. I have only heard of a few RV'rs in the last 10 years that have had problems. Most were full timers with no real Canadian permanent address. Casual RV'rs are not normally hassled. Strange that the IRS and US border agents are worried about Canadians instead of the 10 million plus Hispanic Illegals. Adding in the Oriental, Slavic, African and Muslim illegals gives a population larger than many countries. As for losing your Canadian health care: Have you known any snowbirds that were denied coverage in Canada? Most provinces do not add up your total days outside of Canada. They allow the clock to restart when you return. That may not be the actual rule but I think they turn a blind eye. The Canadian Snowbird Assoc. has much information on this subject.

Moisheh

[silversand]

Most Americans are unaffected, not too many head north to escape the heat.

...Americans with dual citizensip (ie American acquiring Canadian co citzenship) living in Canada have to file a US (and, Canadian) tax return (and have to report foreign currency $10,000+ bank accounts every year before the deadline). The rules for dual are getting complex now, and you'd better see your CPA and/or CA to see where you stand.

Interestingly, roughly 1 million Canadians hold Canadian/US dual citizenship.