So let’s walk the Form 8840, and discuss some of the more uncertain questions. Again, we’re focusing on Canadian snowbirds (and not necessarily people from foreign countries other than Canada).
Question 1 asks you the following: “Type of U.S. visa (for example, F, J, M, etc.)”. We suggest the Canadian snowbird answer the “B-2 Visa”. We say this even though Canada is a visa exempt country (so theoretically answering “no visa” on Question 1, or “Canadian- no visa” should be fine too. This is the typical visa utilized by a tourist to the United States. This question is a little challenging for the Canadian snowbird, because they generally simply present a passport at the border, and not an official visa. The US and Canada really do have a special relationship, and so typical formalities are not always required for Canadians visiting the US (and Americans visiting Canada). While a Canadian snowbird visiting the US may not need a visa. the proper answer on the Form 8840 is probably citing the B-2 Visa (the tourist visa).
Typically, Canadian snowbirds spending between 4 to 6 months will have an easy answer for the 1st 2 questions (Questions 7 and 8):
“7) Where was your tax home during 2012?”
“8) Enter the name of the foreign country to which you had a closer connection than to the United States during 2012”
For most Canadian snowbirds, this should be easily answered (for both) with the same answer: Canada. Canada was your tax home (for the prior year), and Canada was the country to which you had a closer connection to other than the US.
Typically, Canadian snowbirds will then leave Part III blank, because they probably do not have a closer connection to 2 foreign countries….so for most Canadian snowbirds spending a lot of time in the US, you will leave Part III blank.
Part IV asks a series of questions designed for the Canadian snowbird to prove to the IRS that his or her strongest connections really are with Canada (and not the United States). Keep in mind, the reason that you’re filling out this form to begin with is that you’re in the US a lot (on average between 4 and 6 months, year in and year out). So the IRS does not expect you to never answer: “United States”, with respect to the questions in Part IV. Of course you have some connections to the US. It’s just that you have more, and more substantial, connections to Canada.
“Where is your permanent home?” “Where is your family located?” “Where was your driver’s license issues?” “Where were you registered to vote?” All easily answered (presumably): Canada. And while some questions aren’t necessarily this easily answered (for example, you may have bank accounts in both the US and Canada), it should be quite easy for the Canadian snowbird visiting the US for the winter months to a answer a distinct majority of the questions with: “Canada”.
And that’s all you need to be deemed a resident of Canada, even if you are in the US between 4 and 6 months every year.
Don’t Forget the Treaty Protection
Final note- even if the Canadian is in the US more than 6 months in a given year, or is in the US between 4 to 6 months a year, year in year out, and fails to fill out the Form 8840 (and is therefore properly deemed a US tax resident for that year), the Canadian can still avoid that designation by simply citing the tie-braker provisions of the US-Canada Tax Treaty. Call me, if you are a Canadian who is deemed by the IRS to be a US resident for a given year (or if you believe you were indavertently a US tax resident for a given year). I can help you overturn that determination.