Making the short trip to a sunshine state to avoid the cold Canadian winter does not seem like such a bad idea for western farmers.
Since last summer, these “snowbirds” may have found it tempting to extend their stay in the sun because of the news that the U.S. Senate is considering changing immigration legislation.
Under this new legislation, Canadian retirees older than 55 who spend at least $500,000 on a residence can stay up to 240 days in the United States without a visa.
However, snowbirds should be cautioned that spending more than 182 days could result in significant tax implications because the tax and immigration laws do not line up with each other.
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An individual is now considered a U.S. resident from a tax perspective if the sum of all days spent in the U.S. in the current year, one-third of the days spent in the U.S. in the preceding year and one-sixth of the days spent in the U.S. in the second proceeding year total 183 or more.
However, an individual who spends less than 183 days in the U.S. should file specific forms to establish their status as non-taxable in the U.S. so long as they maintain a closer connection to another country where they wil be filing income tax.
Snowbirds who extend their stay to more than 182 days because of new U.S. immigration legislation would be deemed a U.S. resident for tax purposes and would no longer be able to file the necessary forms to claim otherwise.
Snowbirds would be unhappy to hear that they would be subject to U.S. tax on their worldwide income and be required to file a U.S. tax re-turn just as a U.S. citizen would, in addition to their Canadian filings.
As a deemed U.S citizen for tax purposes, these snowbirds could also be subject to an increased U.S. estate tax exposure, in which individuals are taxed on the total value of their estates.
To make matters worse, Canada and the U.S. are implementing a new joint entry-exit system this summer. Border officers will keep track of when people enter and leave each country, which is different from the current system, which tracks only on an entry basis.
Snowbirds should monitor the number of days they spend in the U.S. and make sure that they are not overstaying their welcome.
An extra two months in the sun would always be nice, but no one likes a surprise phone call from the Internal Revenue Service or Canada Revenue Agency.
