Revenue Canada VS the IRS

[alfredmay]

From time to time Canadians have discussed the possibility of the IRS making a money grab for their income if they overstay their allotted time in the USA without filing the required tax form to prevent this. Has anyone on this Forum actually had this happen to them?

I would like to report a Revenue Canada money grab that happened to me. I own some shares of stock in an American energy company. It was purchased by a Canadian company. The Canadian company set up an American subsidiary. I had to surrender my old stock in order to receive stock in the new company. Before receiving my new stock I had to fill out some simple Revenue Canada forms. Revenue Canada then collected tax on the dividends I received from the American subsidiary company.

[joebedford]

pianotuna wrote:
I would not bet on that. You may still be required to PROVE you have closer connections. The best way is still to stay no more than 120 days.

Form 8840 'proves' closer connection. The real best way is to file form 8840.

But not for you because you have closer connection to USA.

[toedtoes]

pianotuna wrote:
Hi toedtoes,

I would not bet on that. You may still be required to PROVE you have closer connections. The best way is still to stay no more than 120 days.

toedtoes wrote:
It depends on whether you have a Closer connection to a foreign country.

If you have a stick & brick home in Canada and vote in Canada, then you don't have to worry about the 3 year rule. For full-timers with no stick & brick, then it becomes more important.

Pianotuna has no owned home in Canada, and cannot vote in Canada, and owns property in the US - so there is a lack of proof to a "connection with a foreign country", so the IRS will see him as a US resident under the rules if he hits that 3-year limit.

You will notice I indicated proof in my post. A home in Canada and voting rights in Canada go a long way towards that proof.

[John___Angela]

Bottom line. It’s 120 days if you can’t prove “closer ties to” and 183 days if you fill out the form and can.

The immigration limit however is 180 days. That kind of takes priority.

[pianotuna]

The 183 days are a calculation not based on your actual physical location.

It is nutty.

FULLTIMEWANABE wrote:
Like I said, I'm seriously confused how it can state 183 days and be only 120 days combined based on the calc's. In addition we've had several friends question this from various sources "border control", general taxation offices etc who were apparently told don't worry about it, the 183 days max is the key. So confused by all this.

[pianotuna]

Hi toedtoes,

I would not bet on that. You may still be required to PROVE you have closer connections. The best way is still to stay no more than 120 days.

toedtoes wrote:
It depends on whether you have a Closer connection to a foreign country.

If you have a stick & brick home in Canada and vote in Canada, then you don't have to worry about the 3 year rule. For full-timers with no stick & brick, then it becomes more important.

Pianotuna has no owned home in Canada, and cannot vote in Canada, and owns property in the US - so there is a lack of proof to a "connection with a foreign country", so the IRS will see him as a US resident under the rules if he hits that 3-year limit.

[toedtoes]

It depends on whether you have a Closer connection to a foreign country.

If you have a stick & brick home in Canada and vote in Canada, then you don't have to worry about the 3 year rule. For full-timers with no stick & brick, then it becomes more important.

Pianotuna has no owned home in Canada, and cannot vote in Canada, and owns property in the US - so there is a lack of proof to a "connection with a foreign country", so the IRS will see him as a US resident under the rules if he hits that 3-year limit.

[FULLTIMEWANABE]

Sorry forgive my idiotic brain but why is this all so unnecessarily complicated when it categorically states without a shadow of a doubt in my mind and that of like I said tens of thousands of other Canadians, that "You will NOT BE TREATED as a US resident if present for fewer than 183 days in previous year".

Even though you would otherwise meet the substantial presence test, you will not be treated as a U.S. resident for 2017 if:
• You were present in the United States for fewer than 183 days during 2017,
• You establish that during 2017, you had a tax home in a foreign country, and
• You establish that during 2017, you had a closer connection to one foreign country in which you had a tax home than to the United States.

Sorry truly am not trying to antagonize anyone, just how can there be one rule on the 3 prior years calculations but it categorically states not a US resident if under 183 days present in the prior year.

The vast majority have been following the 183 day presence as snowbirds and even those highlighting this fact to IRS through the closer connection form we've been sending in, it is not being brought up as a red flag to them????

2011 - 165 days
2012 - 181 days
2013 - 176 days
2014 - 171 days
2015 - 180 days
2016 - 159 days
2017 - 169 days

Any combination of 3 years of the above should have been a huge red flag to the IRS if we truly are limited to 120 days and not the 183 days. Like I said, I'm seriously confused how it can state 183 days and be only 120 days combined based on the calc's. In addition we've had several friends question this from various sources "border control", general taxation offices etc who were apparently told don't worry about it, the 183 days max is the key. So confused by all this.

[toedtoes]

Here is the IRS explanation

According to it, you will not be considered a resident if you stay less than 183 days according to the three year calculation.

So using the 120 day example:

2015 - 120 days
2016 - 120 days
2017 - 120 days

2017 = 120 days current + 40 days prior + 20 days 2 years prior for a total of 180 days which is below the 183 day limit.

2018 = 120 days current + 40 days prior + 20 days 2 years prior for a total of 180 days.

Now, if you had stayed 180 days in 2015 and in 2016, then in 2017, you would have 60 days counted for 2016 and 30 days counted for 2015, leaving you a maximum stay of 92 days for 2017.

In addition, you would have to have stayed in the US for a minimum of 31 days in the current year.

[pianotuna]

Hi,

I suggest you search the wobbly wide web.

The rule works something like this. (I used 120 days to make the math easier).

120 day stay in 2016, 1/3 of days count towards 2017 stay (40), 1/6 of days count towards 2018 (20).

120 day stay in 2017, 1/3 of days count towards 2018 stay (40), and 1/6 towards 2019 (20).

If you stay 120 days every year--then you have maxed out your 180 day welcome. i.e. 120 +40 +20 = 180 days.

I full time, and do not have a sticks and bricks in Canada. That means I can't vote. Therefore it behooves me to follow the rules carefully.

I do own property south of the border which again means I have to be careful.

Can you get away with more days? The answer is a resounding "maybe", if you don't get caught.

Remember with the new passports that came online in June of 2013, they know EXACTLY how many days you spent in the south.

[FULLTIMEWANABE]

pianotuna wrote:
Here is a link to the form.

https://www.irs.gov/pub/irs-pdf/f8840.pdf

As a Canadian we get an "automatic" visa for 90 days. If you plan to stay longer, you should apply for an extension.

We can only stay 121 days per year if going south each and every day.

With all due respect Pianotuna, as I'm truly and purely, trying to understand but ....... I've seen you write about this many, many times over the years, yet I'm still totally confused based on the following cut and paste from the closer connection form (which we complete every year ourselves), below and the fact that tens of thousands of Canadian RVers spend close to 180 days each and every year for many years continuously in the winter in the USA.

Please advise what we are all missing and most importantly after many years of submitting these forms to the IRS why they've not pulled us up on our number of days presence of say 178 or 180 days on several years having been an issue???

Quote from form: Even though you would otherwise meet the substantial presence test, you will not be treated as a U.S. resident for 2017 if:
• You were present in the United States for fewer than 183 days during 2017,
• You establish that during 2017, you had a tax home in a foreign country, and
• You establish that during 2017, you had a closer connection to one foreign country in which you had a tax home than to the United States.

[pianotuna]

Here is a link to the form.

https://www.irs.gov/pub/irs-pdf/f8840.pdf

As a Canadian we get an "automatic" visa for 90 days. If you plan to stay longer, you should apply for an extension.

We can only stay 121 days per year if going south each and every day.

[pianotuna]

If you end up paying ONLY USA tax, then Revenue Canada deems that all your Canadian assets have been sold and you get to pay capital gains on everything (except perhaps a TFSA account).

[alfredmay]

FTWannabe,

Thanks for the info. In my case the tax amounted to 15% of all dividends paid over the course of the year.

[FULLTIMEWANABE]

FWIW: When ever we sell US traded stocks in our US dollar margin accounts, which we do a lot of the time, as there's not as much choice on our Canadian stock markets so many of us do trade in US listed stocks, there is automatically a tax charge taken off typically of a few cents (dependant on the stock price and number of shares owned) at point of sale. Just saying as a Canadian and a FYI.