Canadian snowbirds who need to stay in the U.S. longer than anticipated due to the COVID-19 outbreak are being provided with some relief by the IRS when determining their U.S. tax residency status under the Substantial Presence Test.
Canadians who meet the Substantial Presence Test are considered U.S. residents for tax purposes and may be required to pay tax in the U.S.
On April 21, 2020, the IRS released Revenue Procedure 2020-20 (RP 2020-20), which provides for a “COVID-19 Emergency Period” of up to 60 days that can be excluded when calculating the number of days you spent in the U.S. under the Substantial Presence Test.
The COVID-19 Emergency Period is defined as:
“a single period of up to 60 consecutive calendar days selected by an individual starting on or after February 1, 2020 and on or before April 1, 2020 during which the individual is physically present in the United States on each day”
The COVID-19 Emergency period is not available to U.S. citizens or U.S. green card holders.
You can get more details about this tax residency relief program here.
Important Notes About Tax Residency Relief Offered under RP 2020-20:
- RP 2020-20 ONLY provides relief to Canadians who rely on the Substantial Presence Test to determine their U.S. tax residency status.
The Substantial Presence Test formula determines whether or not you are considered a U.S. resident for tax purposes based on the number of days you spend in the U.S. over a rolling period of the three previous calendar years.
Canadians can generally spend up to 121 days in the U.S. in each calendar year before they would meet the Substantial Presence Test and be considered a U.S. resident for tax purposes.
- RP 2020-20 does NOT provided any additional relief for Canadians who rely on the Closer Connection Exemption to avoid being considered a U.S. resident.
The Closer Connection Exemption generally allows Canadians to spend up to 182 days in the U.S. each calendar year if they have a “tax home” in a country other than the U.S., have a closer connection to such country and file a Form 8840 with the IRS annually.
- RP 2020-20 ONLY offers tax residency relief. It does not provide any relief from immigration issues, i.e. if you spend more time in the U.S. than you are allowed under U.S. immigration laws and regulations.
At this time, the U.S. has not offered any specific relief for Canadian snowbirds who violate U.S. immigration laws and regulations by spending too much time in the U.S. We will provide updates if this changes in the future.