8840 Question

[MMCS]

Hello,

I go to the States frequently - weekly (strictly as a Canadian visitor) - my immediate family (wife and kids) live there and they are all Americans;
specifically, based on a 3 year test, I am actually over 183 days (current year + the previous one (at 1/3), it was a covid year before that so 0 for year "-2" but the bottom line is that for the previous year (1/3 applied) and the current year I'm at over 183 now, resp. I will be before the end of 2023).

I am strictly maintaining all my residence, assets, house, investments, tax, DL, work, my company, all of that is in Canada. I have no documentation ties in my name to the US at all. The only doc that the US gov has with my name on it is my marriage certificate, I suppose. Married for 6 years, btw, if that may have any bearing on it. I became aware of this 3 year test just now (for some reason I always thought it was just the current year being less than 183 days -- clearly not).

Do I have to file 8840? If so, is the timing right that I do that before June15, 2024 or do I have to file it immediately? I may decide at some point to switch to the US, apply for a spousal green card - would filing 8840 have any impact on that or anything I should be aware of?

[nelsona]

Yes, you do need to file an 8840. Since it is this year, 2023, that you will satisfy SPT using the 3-year calculation. then you need only file for the 2023 tax year, early in 2024.

Note that if you would ever exceed the 183 days in one calendar year, you could no longer file 8840. You would instead file a 1040NR on which you indicate how you meet the treaty definition of a Cdn resident rather than a US one. Be aware however that because your family lives in US, it may not be simple to satisfy the treaty at that point (on the point of centre of vital interests, which supersedes financial ties). And it could result in Canada "kicking you out" tax-residency-wise, triggering departure tax, etc under the "deemed non-resident rules".

Once you apply for a green card of course, then regardless of where you live, you will beging being required to report world income in US and -- if you still live in Canada -- Canada as well.

[MMCS]

"Canada "kicking you out""
- even if I spend more than 183 days in Canada in a calendar year?)

[nelsona]

Re-read what I wrote: " if you would ever exceed the 183 days in one calendar year...". Pretty hard to exceed 183 days in US and 183 days in Canada.

In any event, once we are talking residency test in the treaty, days spent in Canada have no bearing on any of the treaty tests. Only ties count... and family is the primary tie.

[MMCS]

I hear you on your point but the way days are calculated you can actually have both, more than 183 days in the US, esp with the 3 year formula and over 183 days in the Canada. also, the same day visit in the US still counts as a day spent in Canada, or a 3 day trip to the US, still counts as 2 days in Canada (talking vicinity of the border, car trips).

Back to the treaty though- documentation-wise, and practical-life considerations-wise, all my ties are to Canada, evidenced by documentation. So how exactly is this determination made then? simply by having a family in the US trumps my entire life being actually in Canada?

[nelsona]

The first step is meeting tax residency in US, which you would definitely with meeting SPT regularly.

Second is family "house and spouse". If you have a place to liver in US. and your family's there, your become US tax resident, regardless of any lesser ties you maintain in Canada. Nothing about days, financial ties, etc.

I'm simply warning you to be careful. You are already having to meet the requirements of 8840, which are treaty-based.

[nelsona]

The suggestion i always give to those working in US but having family in Canada is to have family visit them, not vice versa to avoid being considered Cdn resident (again, because days don't matter, centre of vital interest does).

It is not so much a requirement in your situation, but you are showing that your family lived in US and you spend your extra time there,

[nelsona]

Look at the first questions in form 8840 (14,15,16..) nothing about days or finances

[MMCS]

Again, I hear you and will have to probably deploy your services in the near future. We are frustrated because this situation split us apart and we went out of our way to keep everything separate, on the advice of the accountant(s) doing the taxes. The house in Canada is in my name, the house in the US is in my wife's name. No references to either spouse on either (CDN or US) side. My wife files in the US as the head of household, no mention of me at all, and so on with everything else. Just to keep it clean and separate.

So we've been careful all along but how "else" can we be any more careful without being split apart. It's much easier for me to see them down South as it is for her to commute with the kids.

[nelsona]

As I have said now at least a couple of times, as long as you don't stay more than 183 days in US, and as long as IRS accepts your 8840's you should be fine. But CRA created "deemed non-resident" status -- allowing them to impute departure -- for cases just like yours (although I doubt your last name is Bronfman).

The name on the house is not important; I'm sure you have a permanent place to stay when you visit your family.

Is there some overriding factor that prevents you from moving down to US, but allows you to spend half your time there?

What is the goal in maintaining Cdn tax residency for you?

Btw, if your accountant was advising you about this, he should have told you about 8840 at that time, which apparently they had not.

[MMCS]

Yes, positively no mention of 8840, but the accountants didnt think we would be living in this kind of situation.

The reason for me maintaining my CDN residence is that my business is in Canada and my clients require me to physically operate from Canada due to security reasons.

Also, all my assets - house (owned outright), company and its retained earnings, personal investments, etc, everything is in Canada.

If I wanted to take all that out, I am fairly sure I get stripped and hosed by both governments. Also, not sure I could operate from the US due to the above mentioned reasons unless I completely changed the model, resp. start from scratch - something entirely different.

[nelsona]

Well, you are clearly in the "deemed non-resident" danger zone. Be careful.

[ND]

RE:I may decide at some point to switch to the US, apply for a spousal green card - would filing 8840 have any impact on that or anything I should be aware of?
Filing a treaty tiebreaker for a year where you exceeded 183 days can jeopardize your green card!