Recently, many of these migrating “snowbirds” have been the focus of discussion due to increased vigilance by the Internal Revenue Service (IRS) regarding the filing of Form 8840. If you, a Canadian citizen, spend an average of 4 months each year in the United States, you and your accountant should discuss the potential requirement for filing this form.
The IRS uses a formula to calculate visitors’ eligibility. To illustrate this formula, let us use an example of a fictional Canadian snowbird, Jane Doe. For many years, Jane would leave Canada on November 1, travel to Arizona, and then return home to Canada on March 31. During the spring of 2012, Jane discussed with her accountant the possibility of filing the IRS Form 8840. In order to determine this need, they added the following three amounts:
• the total number of days Jane spent in the USA during the prior year (January to March 2011: 90 days; November to December 2011: 61 days; 90 + 61 = 151);
• the number of days Jane spent in the USA two years ago (January to March 2010: 90; November to December 2010: 61; 90 + 61 = 151) multiplied by 1/3 (151 * 1/3 =50.33);
• the number of days Jane spent in the USA three years ago (January to March 2009: 90; November to December 2009: 61; 90 + 61 = 151) multiplied by 1/6 (151 * 1/6 = 25.16).
Jane’s formula total was 226.49 (151+ 50.33+25.16). Jane and her accountant realized this total was greater than the 183-day threshold, so Jane was required to file Form 8840 by June 15, 2012. All Canadian travellers who calculate a formula total more than 183 days must file IRS Form 8840. The form includes a list of questions determining how closely one is linked with the United States. Individuals who file this IRS Form 8840 are exempt from filing a personal income tax return in the United States.
If you would like assistance with the filing of this form, please contact your local Kemp Harvey Group office more information.