Canadians filing US tax returns

When do Canadians have to file taxes in the US? You may consider yourself a Canadian, and dutifully file a tax return in Canada, but if you exceed certain limits on time you can spend in the US you may have to file a return in the US as well (even if you do not owe any taxes). The US uses what they refer to as the “substantial presence test” to establish whether you are considered a US resident for tax purposes. It is very important to count each day, and factor in the frequency of your stays in the US.

If the IRS deems you a resident for tax purposes, you do have some options. You can claim the “closer connection exception”. To qualify for this you have to meet certain standards:

  • Have a permanent home in Canada
  • Have family in Canada
  • Have personal belongings in Canada
  • Have a banking institution in Canada
  • Have business connections or operate a business in Canada
  • Have a Canadian driver’s license
  • Vote in Canada

You may not apply if you have been in the US for over 183 days in the current year, or if you have applied for permanent resident status.

Those holding American citizenship or dual US/Canadian citizenship must file tax returns in both countries. However, tax credits from one country to another prevent double taxation. Filing cross-border related income taxes, and declaring rental property income for a Canadian on a property located in the US, can be complex. You should get professional advice so that you govern yourself in a way that minimizes your tax exposure. ATS has specialists who deal with these situations regularly and can give you the best and most up-to-date information possible.

An important formula for Canadians with extended stays in the US: No. of days in US this year plus 1/3 of no. of days in US last year plus 1/6 of the no. of days in US the year before equals whether you have to file a US tax return

An important formula for Canadians
with extended stays in the US:


No. of days in US this year

+

1/3 of no. of days in US last year

+

1/6 of the no. of days in US the year before

=

Whether you have to file a US tax return