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US Taxation Issues for Canadians - Closer Connection Rules

Basis of taxation

Canadians, deemed to be a U.S. resident alien, are required to file a U.S. income tax return and will be taxed on their world wide income. There are two tests to determine whether a Canadian is a U.S. resident alien:

  1. Lawful permanent test – also known as the “green card” test.
  2. The physical presence test

    1. Present in the US for at least 31 days during the year; and
    2. The number of days present in the calendar year, when added to the sum of one-third the number of days present during the first preceding calendar year and one-sixth the number of days present during the second preceding calendar year, equals to or exceeds 183 days.

U.S resident aliens are required to file Form 1040 EZ, Form 1040A, or Form 1040 depending on their tax situation. The return is due by April 15.

Closer connection

If an individual is deemed to be a resident of the U.S. because of the physical presence test, he/she can still claim a closer connection to Canada by filing Form 8840 to establish a claim of non residency of the U.S. by reason of that exception. Generally Form 8840 must be filed April 15th. If you did not receive wages as an employee subject to U.S. withholding taxes, the form must be filed by June 15th. Extension to the filing due dates may be available upon filing the appropriate request form.

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