So you’re fine if you keep your days in the U.S. to 180 a year, right? Not necessarily. You may still meet the IRS’s “substantial presence” test, which is a more complicated way of calculating residency.
For the “substantial presence” test, take the number of days you were in the United States in the current year, add to that one-third of the amount of days you were there the previous year, and add that to one-sixth of your U.S. days in the year before that. If the total is less than 183 days, you haven’t met the criteria for general residency. If the total is greater than 183 days, you could be considered a U.S. resident for tax purposes. (Keep in mind that if you make quick day trips over the U.S. border during the summer months for shopping, gas or weekend outings, those days count as well.) This works out to about 120 allowable days per year over a three-year period.
However, there is still a way to avoid paying U.S. taxes if you meet the “substantial presence” test. You can fill out the Form 8840 Closer Connection Exception Statement for Aliens, to assert that you have closer connections to Canada than the United States, Mr. Altro says.
“If you are in the United States for less than 120 days per year, you have no need to fill that out. But if you are there for more than 120 days and less than 180 days, it is in the client’s best interest to fill it out every year."
Residency rules for Canadians may change in the future. The JOLT Act (Jobs Originated through Launching Travel) which went before U.S. Congress last fall, would extend the amount of days Canadians could stay in the United States without a visa to 240 days. But Mr. Altro says it’s a bill that could be bad for Canadians.
“The problems with it are, No. 1, you could lose your Canadian health care [coverage] if you’re outside the province too long. Two, you could become a U.S. taxpayer, which could also be a problem. Those things would have to be fine-tuned when it comes to the final bill that could get passed. Nobody knows if it’s ever going to happen.”
In the meantime?
“Don’t go over the 180 days,” he says.