Canadian resident who exceed the number of days they are allowed to spend in the U.S. under the Substantial Presence Test are considered U.S. residents for tax purposes.  This qualifications results in a person having to pay taxes in the United States.

However, Form 8840 provides an exemption to Canadians who fall into this category.  This is commonly referred to as the Closer Connection Exemption.

You may be able to rely on the Closer Connection Exemption and avoid paying taxes in the U.S.  For this to be possible you need to meet certain criteria. You need to prove that you have a more substantial connection to Canada than the U.S..  In addition, you would need to file Form 8840 with the IRS annually by the prescribed deadline.

IRS Form 8840 – Closer Connection Exemption Statement for Aliens

Get IRS Form 8840 (fillable version)

  Actual Days Included Days
How many days will you spend in the U.S. in the current calendar year? 0
How many days did you spend in the U.S. in the previous calendar year? 0
How many days did you spend in the U.S. two calendar years ago? 0

TOTAL Included Days spent in the U.S.

0

If your total is less than 183 days, you are likely not considered a U.S. resident for tax
purposes

 

Important Calculator Notes

What is the test for U.S. residency?

The IRS Substantial Presence Test considers you to be a U.S. resident for tax purposes if you have been physically present in the USA for a certain length of time:

  • for 31 days during the current year, and
  • for 183 days in the three years that include the current year and the two preceding years, on a weighted average basis.

Even if you meet the Substantial Presence Test, you may still qualify for an exemption from being considered a U.S. resident for tax purposes. Contact us to discuss the proper steps to take and what forms must be sent to the IRS.

**What are “Included Days”?

For the Substantial Presence test calculation, The IRS requires you to include:

  • All days spent in the U.S. in the current calendar year
  • 1/3 of the days spent in the U.S. in the preceding calendar year
  • 1/6 of the days spent in the U.S. in the calendar year prior to the preceding calendar year

In addition, be sure to use calendar days, not 24 hour periods. For example, if you enter the U.S. at 11:00 pm on a Thursday and leave at 11:00 am the next day, it would count as 2 days, even though you were only in the U.S. for 12 hours.

Disclaimer

This substantial presence test calculator is for informational purposes only, does NOT constitute tax or legal advice and should not be relied on as such. If you require tax or legal advice about your U.S. residency status, you should retain a qualified tax or legal professional to advise you based on your unique situation and circumstances.

If you have any further questions please don’t hesitate to contact us.

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