Life has become more complicated for Canadians who spend as much as half the year in warmer United States climates.
Canadians who spend longer than 120 days in the U.S. are subject to U.S. tax laws. To avoid liability they must file a Closer Connection Exemption Statement for Aliens form with the Internal Revenue Service, according to an RV West article (complete story at www.rvwest.com) by Karen Kornelsen.
Tracking Canadians’ time across the border got easier last year when the two countries signed an agreement to share information about citizens crossing the international border. The agreement allows Canada and the U.S. border officials to swap passport information to track time spent in the countries.
Kornelsen’s story quotes Southern Interior MP Alex Atamanenko’s constituency assistant Gail Hunnisett, who explains how the system now works.
“This means they now have the ability to enforce residency regulations,” said Hunnisett. “Previously, you stopped at the American border on your way into the U.S., so they knew when you came in. But when you crossed back you came to the Canadian border, so they had no idea how much time you spent there. Now border officials — not tax agencies — can request that information if they have reason to.”
According to Hunnisett, many Canadians believe that if they spend fewer than 183 days per year in the U.S., they will both avoid U.S. taxation and retain their provincial healthcare. This is a common misconception. In fact, retirees who own second homes and/or spend the winter months in the southern states may have to submit forms to the Internal Revenue Service in order to maintain primary residence in Canada.
“I think it’s important to look at who this is targeting and who is most likely to be affected by this,” Hunnisett said. “This is for people with RVs or homes, often retirees, who go down to the U.S. for the winter. It’s a common misconception they can stay down there for 182 days and the primary concern was to get back to Canada, specifically B.C., so they don’t lose their medical coverage. But it’s a little more involved than that.”
Each trip across the border, even for the few minutes it takes to gas up or check the mail, counts as a full day, so Canadians who cut it close with the number of days they spend in the U.S. need to keep close track of their visits in order to avoid legal hot water.
“This is where people can get in trouble and why people need to know about this,” said Hunnisett. “If they go down to the U.S. and spend five or six months there and they come back and haven’t filed any forms, then they go to cross the border to buy gas or do some shopping, they may exceed their residency threshold and get into trouble. If they have not been filing form 8440, to establish their closer connection and their legal residence as Canada, they can be detained, penalized or prevented from re-entering the U.S. So there are some pretty heavy penalties associated with this.”
Hunnisett’s recommends keeping a log of each trip across the border.