Sylvie Gagné | Desjardins Group
Are your returning from an extended stay in the United States? Don't forget to calculate your days of presence.
Non-residents of the United States are subject to U.S. tax if they meet the Substantial Presence Test criteria.
Do I have to complete form 8840?
Below is the calculation method for individuals present in the U.S. for at least 31 days in the current year AND 183 days spread over a three-year period based on the following formula:
Number of days spent in the U.S. in the current year X 1
Number of days spent in the U.S. in the previous year X 1/3
Number of days spent in the U.S. in the year before that X 1/6
If the result is
- Less than 183 days based on the Substantial Presence Test: you don't have to file de the form 8840
- More than 183 days based on the Substantial Presence Test: you must file form 8840
- More than 183 days for a given year: you must file a U.S. tax return (form 1040NR)
The following example illustrates a calculation of over 183 days over three years:
2014: 1 x 144 days = 144 days
2013: 1/3 x 114 days = 38 days
2012: 1/6 x 132 days = 22 days
Total: 204 days
If, as in the above example, your stay exceeds 183 days, based on the calculation over three years, you must file form 8840 Closer Connection Exception Statement for Aliens to avoid being taxed by the U.S government. You must send the completed form to the Internal Revenue Service (IRS).
This form certifies that you meet the substantial presence criteria, but will not be filing a U.S. tax return given that you can demonstrate you have a closer connection to a foreign country, such as Canada, where you will pay tax on your annual income.
Once you've filed the form, if everything is in order, don't expect to hear back from the IRS. However, keep a copy of the completed forms just in case.