Taxation of Canadians in America. David Levine

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СКАЧАТЬ Area offices may identify returns for examination in connection with local compliance projects. These projects require higher level management approval and deal with areas such as local compliance initiatives, return preparers, or specific market segments.

      An examination may be conducted by mail or through an in-person interview and review of the taxpayer’s records. The interview may be at an IRS office (i.e., office audit) or at the taxpayer’s home, place of business, or accountant’s office (i.e., field audit). Taxpayers may make audio recordings of interviews, provided they give the IRS advance notice. If the time, place, or method that the IRS schedules is not convenient, the taxpayer may request a change, including a change to another IRS office if the taxpayer has moved or business records are there.

      The audit notification letter tells which records will be needed. Taxpayers may act on their own behalf or have someone represent or accompany them. If the taxpayer is not present, the representative must have proper written authorization. The auditor will explain the reason for any proposed changes. Most taxpayers agree to the changes and the audits end at that level.

      Taxpayers who do not agree with the proposed changes may appeal by having a supervisory conference with the examiner’s manager or appeal their case administratively within the IRS, to the US Tax Court, US Claims Court, or local US District Court. If there is no agreement at the closing conference with the examiner or the examiner’s manager, the taxpayers have 30 days to consider the proposed adjustments and their next course of action. If the taxpayer does not respond within 30 days, the IRS issues a statutory notice of deficiency, which gives the taxpayer 90 days to file a petition to the Tax Court. The Claims Court and District Court generally do not hear tax cases until after the tax is paid and administrative refund claims have been denied by the IRS. The tax does not have to be paid to appeal within the IRS or to the Tax Court. A case may be further appealed to the US Court of Appeals or to the Supreme Court, if those courts are willing to accept the case.

      Note: Do not attempt to handle an IRS audit on your own; hire an experienced and competent tax professional to represent you.

      5. Filing

      All US citizens and noncitizens of the US that are residents (referred to as resident aliens) are required to file a US tax return if they meet certain income thresholds. To be clear, if you are considered a resident of the US, you are subject to the tax laws of the US, even if you are here illegally. You are a resident alien if you meet one of the following tests:

      • Legal Permanent Resident (e.g., Green Card holder).

      • You meet a 183-day substantial presence test. This is a two-part test and if you fail the first part of the test, you are generally a US resident, with limited exceptions. If you fail only the second part of the test, you can file Closer Connection Exception Statement for Aliens (Form 8840) to claim a closer connection to a foreign country (Canada) and will not be considered a US resident, assuming that in fact you do have a closer connection to Canada.

      • Part 1 of the test: You are physically present in the US at least 183 days during the calendar year. Note that each partial day counts as one day. The only exception is if you are traveling by plane and you simply pass through the US on your way to another foreign destination.

      • Part 2 of the test: You are physically present in the US for at least 183 days using the following three-year formula:

      • Year 1: Each day counts as one day.

      • Year X-1: Each three days counts as one day.

      • Year X-2: Each six days counts as one day.

      For example, if you spent 122 days each year, each of the last three years, this is what you would have:

      • In 2011, you spent 122 days, times 1/1 = 122 days.

      • In 2010, you spent 122 days, times 1/3 = 41 days.

      • In 2009, you spent 122 days, times 1/6 = 20 days.

      Total number of days using the formula, equals 183 days and you fail Part 2 of the test and are considered a US resident unless you file Form 8840.

      Note: If you arrive in the US on November 1 and leave on March 31, you would have been in the US a total of 121 days. If you did this year in and year out, you would pass the second part of the test most years. Every leap year, you would have stayed in the US 122 days and therefore failed the test and must therefore file Form 8840 to avoid being considered a US resident and subject to tax.

      What makes this rule confusing are primarily two things: the fact that the test has two parts, and the fact that immigration has different rules. Remember that being in the US for less than 183 days is only one part of the test, if you are in the US every year for 122 days or more, you have failed part two of the test and must file Form 8840 to show the IRS that you are not a US resident. If you fail the second part of the test and do not file Form 8840, you are a US taxpayer and subject to US tax. In the Introduction, we mentioned that there is an estimated 1 million Canadians in the US that are residents who are not filing returns. It is this group of Canadians that spend four months or more each year in the US and do not file Form 8840 that we are mostly referring to.

      There is another set of rules that you need to be concerned about: the immigration rules. These are the rules that the customs agents at the border are concerned with. These rules use a rolling 12-month period instead of the calendar year the IRS uses. For example, if you stay in the US from October 1 through April 1, you would have been in the US 183 consecutive days, yet only be in the US for 92 days in the first year and 91 days in the second year. If you assume no other days in the US in either year, you clearly passed both parts of the residency test for tax purposes, but failed the test for immigration purposes. To make matters worse, the Customs agents are not consistent in their application of the rules. Fortunately, you are typically looking at only being hassled by the Customs agents and nothing serious comes of it, but it does make it confusing for you when you are constantly getting conflicting answers.

      If you are a resident or citizen, you still may not have to file a tax return if your income is less than certain thresholds. Table 1 shoes the income thresholds for two categories. (If these categories do not apply to you, you may fall into another category and corresponding threshold.)

       Table 1: INCOME THRESHOLDS FOR FILING

Category	You must file if gross income is at least
Single: Younger than age 65 Age 65 or older	$9,500 $10,950
Married filing jointly and living together: Both spouses younger than age 65 One spouse younger than age 65 Both spouses age 65 or older	$19,000 $20,150 $21,300

      Note: The US defines marriage as a man and a woman who are legally married. However, some states and many countries recognize common-law marriage, so the IRS will recognize common-law marriages if that marriage met, and continues to meet the requirements of that jurisdiction; allowing the couple to file jointly.

      While some states and many countries recognize same-sex relationships, the IRS will not recognize them and those couples will not be allowed to file a joint return.

      5.1 СКАЧАТЬ