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Tax Consequences for Snowbirds

Effective June 30, 2014, when you travel between Canada and the U.S. you will be required to swipe your passport both when you enter and when you depart each country. As well, both countries will be sharing information on people entering and leaving.

If you are a Canadian snowbird, this exchange of information will impact you, as you will now need to be very conscious of counting and reporting your days in and out of each country. You will need to track the number of days spent in the U.S. during a three year period for the Substantial Presence Test (SPT).

For this test you must be in the U.S. for at least 31 days during the current calendar year and a total of 183 days or more based off the following formula that includes the current year and two years preceding it. Add the number of days you were present in the current calendar year plus 1/3 of the days you were present in the prior year plus 1/6 of the days you were present in the year before that.

If you meet the criteria of the SPT, you may be considered a U.S. resident for tax purposes by the IRS and will be required to report and pay tax to the IRS on your worldwide income unless you file a Form 8840 (Closer Connection form) with the IRS by June 30 of each year. This form shows the IRS that you have a closer connection to a country other than the U.S. and the IRS will treat you as a non-resident alien.