To File or Not to File? 8840

Spring 2004 CSANews Issue 50  |  Posted date : May 05, 2007.Back to list

I do not mean to be repetitive BUT...
I can't remember how many times I have written about the Closer Connection Exception Statement (Form 8840) filing for visitors to the United States ­ including Canadians!

What is It?
The U.S. Congress passed a law several years ago on behalf of the Department of the Treasury, Internal Revenue Service (IRS), which states that visitors could be liable for U.S. income taxes on their worldwide income. If visitors spend 183 days or longer over a three-year period, they meet the "Substantial Presence Test" (see below) and could be liable for this taxation. However, one way of avoiding this is to prove your closer connection to another country (Canada) for income tax purposes by filing the exception statement.

This past winter, I met many Canadians who: told me that they don't know about it; simply don't care; claimed that you only have to file it once; said that their accountant told them to ignore it; accused me of scare tactics and told me to mind my own business! However, I also met many Canadians who "thanked" me for reminding them to file and for providing copies of the form. And many of you are appreciative of the CSA's commitment to inform them about such matters as these.

IRS Confirmation
To overcome the "doubtfulness" of this law, I took the liberty of once again calling the International Division of the U.S. Internal Revenue Service for their reaction to the above comments and for clarification of the actual law. Guess what? At press time, two weeks after my request and several phone calls since ­ I still have not received a response. Hopefully, I'll have it in time to pass on to you in the next issue.

The Substantial Presence Test
Count all the days on which you were in the United Sates for the current year, in this case, 2003.

Add 1/3 of the days you were in the U.S. for the year 2002.

Add 1/6 of the days you were in the U.S. for the year 2001.

If the total is fewer than 183 days, you do not need to file the form 8840. If the total sum is 183 or more days, you should file the form. Mail the completed form to the IRS Center, Philadelphia, PA 19255 no later than June 15, or include it with your U.S. tax form if you are submitting one.

Some Border Problems
Generally, Canadian snowbirds are not interrogated too extensively when entering the U.S. However, with the new Homeland Security in effect, most border agents are more knowledgeable about other department's laws (INS, IRS and Customs) than before. In fact, several Canadians told me that they were interrogated more this past year and here are some examples. A couple from Barrie, Ontario was pulled over and questioned extensively when they couldn't prove ownership of their property in Florida. At one point, the agent said that they might have to return home to get this proof; fortunately, they had a copy of their completed 8840 form for 2002 in the glove box ­ the agent was familiar with it and allowed them to enter the U.S.

In another case, the agent actually asked if they had filed the form, since they admitted to spending five months annually in the U.S. Remember, it's wise to be truthful when asked how long you will be visiting, especially since your license tag has probably been recorded.

It seems to me that, "it's better to be safe than sorry!" If you pass the Substantial Presence Test, or even come close to it, complete and file the form, and keep a copy in your car, it's good protection just in case it's your turn to be pulled over and questioned more extensively at the border! It tells the agent that you respect U.S. law!

Working for Barter
Here is something else I encounter quite often. If you are doing any kind of work in the U.S. such as a "golf course ranger," and you are compensated through a barter system or cash in lieu of a proper payroll system ­ be careful ­ it is illegal, considered to be income and could be subject to U.S. income tax. I've heard "horror" stories about this kind of thing, including the deportation of the accused and a fine against the so-called employer. In the next issue, I'll tell you about some of these cases.

If you have had, or have heard of any problems for Canadians crossing
the border this past year, please let me know by calling toll-free at 1-877-633-4722 or e-mail me at

Have a great summer!