Oops! Are you Canadian spending too much time in the United States? Then you may be considered a U.S. resident according to the IRS. The U.S. has certain rules which may deem you to be a resident there for income tax purposes based on the number of days you were present in that country.
Just like the sojourner rule in Canada, if you were present in the U.S. for 183 days or more in a calendar year, you are considered a resident for the full year, and may be subject to tax on your world income.
If you are a Canadian resident as well according to Canadian rules, then you must look to the Canada-U.S. tax Treaty’s “tiebreaker rules” to see which country has the right to tax you. But even if the Treaty determines you are a Canadian resident, you must still file a U.S. non-resident income tax return (Form 1040-NR) and claim treaty protection (Form 8833).
Apart from the 183-day rule, there is a second rule known as the “substantial presence test” that could categorize you as a U.S. resident. This test is also based on the number of days you spend in the U.S. You pass this test (or maybe fail is a better word) if you were physically present in the U.S. for 31 days or more in the year, and if the total number of days in the U.S. is 183 or more, using the following formula:
- Total number of days spent in the year, plus
- 1/3 the number of days spent in the previous year, plus
- 1/6 the number of days spent in the second previous year.
As a result of this formula, it is possible that you may be considered to be a resident of the US in a particular year even if you were present in the US for less than 183 days in a single year.
If you meet the above substantial presence test, but were not present in the U.S. for 183 days in a single year, you could be considered a non-resident if you claim the “closer connection” exemption. This would enable you to avoid filing a tax return, but you would still be required to file form 8840 to claim the exemption. This form must be filed by June 15 of the following year.