Snowbirds – beware of the substantial presence test: 121 days per year is all it takes!!!
If you are spending significant time in the United States you may be required to file a US tax return.
Substantial Presence Test (SPT) is a criterion used by the Internal Revenue Service (IRS) in the United States to determine whether a non-resident should be treated as a “resident for tax purposes”.
The Substantial Presence Test:
- The individual must have been physically present in the United States for at least 31 days in the year for which the tax return is being filed; and
- The total of (number of days present in the tax year) + (1/3)(number of days in the year before the tax year) + (1/6)(number of days in the year two years before the tax year) should be at least 183.
Example #1 if you were physically present in the US for 121 days in each of the past three years you would be tagged as having a substantial presence.
- Calendar year 2013: 121 days present in US
- Calendar year 2012: 121 days present in US x 1/3 = 41
- Calendar year 2011: 121 days present in US x 1/6 = 21
- SBT = 183 days (121 + 41 + 21)
Example #2 if you were physically present in the US for a varying number of days in each of the past three years you could meet the substantial presence test.
- Calendar year 2013: 140 days present in US
- Calendar year 2012: 90 days present in US x 1/3 = 30
- Calendar year 2011: 120 days present in US x 1/6 = 20
- SBT = 190 days (140 + 30 + 20)
Result of meeting the test:
- Required to file a US tax return 1040; or
- Meet one of the exemptions – i.e., unable to leave due to a medical condition; or
- Closer connection exemption Form 8840 is completed.
If you meet the SPT you should be checking out your filing responsibilities as there can be significant penalties for not filing your US tax forms on time!!
http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test
For more information please call Focus LLP at (403) 509-3290