Heading to the U.S.A. for the winter? Maybe you regularly hop across the border for a day trip? Or maybe you like to drive the shorter and more scenic route between Midway and Grand Forks through Washington State?
But you’re always happy to get back home to Canada, eh?
But if you fall into one or—heaven forbid—more of those categories then the definition of your “home” may be coming under closer scrutiny at the U.S. border.
Most snowbirds believe by spending fewer than 183 days each year in the U.S., they will avoid U.S. tax pitfalls. But it’s not that simple.
Canada and the United States signed the international agreement on the Foreign Account Tax Compliance Act (FATCA) this year. Border officials in both countries are now allowed to swap information on its citizens’ passports. Previously only entry dates could be tracked by the U.S.
Beginning June 30 this year, each day in the U.S. is recorded automatically by the American Department of Homeland Security. A quick trip across the border to buy gas counts as a full day.
There is an annual threshold of 122 days that should not be exceeded without filing IRS form 8840 by June 15 of each year. Form 8840 will allow you to remain in the U.S. for up to 182 days.
Anyone who overstays either threshold is flagged as an American resident and will be bound by U.S. world income and estate tax laws. Of course, Canada Revenue Agency will probably want some sort of explanation too.
They should have named it GOTCHA, not FATCA. What a refreshing new way for the governments, both north and south, to potentially tap your wallet.