The United States assesses personal income tax on its citizens, unlike Canada, which assesses personal income tax on its residents. The U.S. means of assessing tax has been long established and is not a recent development.

Are you considered a U.S. person for tax purposes?

Consider these questions:

Were you born in the U.S. and have maintained your U.S. citizenship?
Have you ever working in the U.S. and do you currently possess a valid U.S. green card?
Were both of your parents born in the U.S.?
Was one of your parents born in the U.S. and have you spent time living in the U.S.?
Have you spent 183 days cumulatively in the U.S. this year?
If you have answered “yes” to any of these questions, you may be considered a U.S. person for U.S. tax purposes and should discuss your status with a competent, cross border tax advisor.

Substantial Presence Test

For those who do not have ties to the U.S. from an immigration perspective, but regularly spend in excess of 120 days cumulatively in the U.S. each year may be deemed to have a substantial presence in the U.S. for tax purposes.

In the instance that you exceed the Substantial Presence Test and are deemed to have a substantial presence in the U.S., it is prudent for you to demonstrate and establish closer connections with Canada from a tax perspective.

We highly recommend that any person that exceed the Substantial Presence Test file Form 8840– Closer Connection Exception Statement for Aliens (http://www.irs.gov/pub/irs-pdf/f8840.pdf )with the IRS. This will help establish that they have met the Closer Connection Exception and are not U.S. taxpayers by reason of that exception.

Substantial Presence Self Test* (for 2011)

An individual is considered a U.S. taxpayer if physically present in the U.S. for at least:

31 days during 2011; and
183 weighted days during the period of 2011, 2010 and 2009 – counting 100% of the 2011 days, plus one-third of the 2010 days, and plus one-sixth of the 2009 days.
By not filing Form 8840 and having a substantial presence in the U.S. in 2011, you will be deemed a U.S. taxpayer.

For example:
Mr. and Mrs. Client reside in Victoria, B.C., but spent the following time in Arizona – 125 days in 2011, 100 days in 2010 and 90 days in 2009.

Mr. and Mrs. Client were in the U.S. for more than 31 days in 2011, however the subsequent calculation determines that they were only in the U.S. for 173 weighted days: 125 days + 33.3 days (100/3) + 15 days (90/6) = 173 days

—- Thus, they did not have a substantial presence in the U.S. for 2011.

However, if Mr. and Mrs. Client spend 126 days in Arizona in 2012, they will be deemed to have a substantial presence in the U.S. for 2012:

126 days + 42 days (125/3) + 17 days (100/6) = 185 days; and they were in the U.S. for more than 31 days in 2012.

—- If this occurs you will be subject to the same reporting obligations as a U.S. citizen, and subject to the Canada U.S. Tax Treaty “Tie-breaker Rules” which are beyond the scope of this checklist.

*This is an example only and is not definitive, please speak to a competent cross border expert to discuss these rules further to determine your current status

Your Assante advisor can work with you to review your circumstances and help identify whether you have U.S. tax filing obligations and how you may be affected by recent U.S. tax initiatives.

We also recommend that you speak to a competent, cross-border tax or immigration professional to further determine the U.S. tax reporting requirements you may face and what steps should be taken in your circumstances.

Disclaimer

The above information is intended to provide general guidance only and should not be construed as legal or financial advice. While the FATCA legislation has been passed, the regulations detailing how it will work and exactly what measures financial institutions will be required to take have not yet been finalized. As a result, the information here could change and will be updated as new information becomes available. It is highly recommended that where it has been determined that you have, or may have, U.S. tax ties, you should speak with competent cross-border tax, will and estate planning experts who regularly engage in cross-border planning. United Financial and/or United Financial and design are trademarks of CI Investments Inc.