Keep track of your visits to the States

About two weeks ago, I wrote about a new information-sharing initiative between Canada and the U.S., the “Entry/Exit Initiative of the Perimeter Security and Economic Competitiveness Action Plan,” which will allow both governments to track border crossings between our countries in “real time” and share that information with one other.
It prompted many questions from readers, so I took those concerns to the minister for national revenue Kerry-Lynne Findlay. As a result, I have a bit of an update for you this week.
Space does not permit me to recap the entire previous column, so here is a quick summary.
Because the governments of both the Canada and the U.S. now can track and share the time you spend in each place, the minister for national revenue advised that Canadians who cross the border on a frequent or regular basis should “be more vigilant” in tracking their border crossings and time spent in the U.S.
The potential “trap,” if you want to call it that, for Canadians who frequently visit the U.S. is that that country has very strict citizenship rules. And if you spend too much time across the border, you may be required to submit an income tax return and pay U.S. income taxes.
The taxes you may be required to pay may be higher than you are used to paying—and could be in addition to other taxes you may be required to pay as a citizen of Canada.
So, basically, if you spend a significant amount of time in the U.S., and lose track of how may days you have spent in that country, it could end up being a very costly mistake as the IRS will know the exact amount of time.
If this happens, and you exceed the maximum time you are entitled to spend in that country, you could end up receiving a hefty and unexpected tax bill.
The questions you posed were variations of the following: “Since the monitoring of border traffic is now done in ‘real time,’ will a one-hour visit across the border (say to gas up or pick up a parcel) count as a full day or one hour spent in the U.S.?”
“How could going over the various time limits affect my taxes owed in Canada and the U.S.?” and “How can we expect the U.S. government to deal with Canadian citizens who spend more time than allowed in a year?”
I took these questions back to Minister Findlay and, as before, I will share some of the detailed response I received from her staff (edited to remove personal and non-critical information):
“. . . It was explained to me that the annual limit of time allowed in the United States is calculated according to the U.S. tax laws. If you exceed your time limit in the United States, you may be considered a resident alien in the U.S.
“Generally, resident aliens are taxed in the U.S. on income from all sources inside and outside the U.S.
“For more information on resident aliens, and whether or not you have to file a U.S. tax return, please visit the Internal Revenue Service (IRS) website.”
Regarding “snowbirds.” “As a ‘snowbird,’ Canada would generally consider you to be a resident [of this country] even if you exceeded your time limit by a few days in the United States.
“As a resident of Canada, you are taxable on your world income. If you are considered a resident alien in the U.S., you may be considered to be a resident of Canada at the same time.
“However, there is a tax treaty between Canada and the U.S. that contains rules to help decide where you would be resident. Under a tax treaty, you can only be resident in one of the countries.
“The tax treaty overrules the Income Tax Act.”
In a nutshell, if you are concerned about your travel and tax status, you should consult the IRS website to determine your citizenship status and the maximum stay you are allowed per year without being subject to tax penalties in that country.
Additionally, you also should carefully track and log your cross-border visits while remembering that a one-hour trip across the border will, in fact, count as a full day spent in that country.
In closing, I again would like to again thank Minister Findlay and her staff for their prompt and thorough responses to our concerns, and urge anyone who is having difficulties with the new policy to contact my office for assistance.
My staff and I are here and ready to help.

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