IRS Form 8840 - Canadian Skippers in US Inland waters

[REAL MOUNTIE]

Canadian skippers doing the GREAT LOOP face challenges when cruising in United States inland waters. The IRS (the American Internal Revenue Service) wants to know about you, and wants you to show them that you have a closer connection to Canada than to the US.

If you do not file the required 8840 forms, then the IRS has the right to request you to file an actual US tax return. You don’t want that because you are subject to US tax on your worldwide earnings. First, you have to do a three-year calculation that determines whether or not you have a “substantial presence” in the US, based on the IRS rules.

What most Canadians don’t realize is that when they visit the US, they are travelling on a visitor’s visa, and they are there by permission of the US government. If a person stays there 121 days and does that for three years in a row, then that person has established a “substantial presence” in the US, and should therefore be taxed as an American, unless that person has a “closer connection” to another country, like Canada. The IRS and Border Service are becoming more closely connected themselves, so it is best to comply voluntarily, before they ask...
There is an Action plan named “Beyond the Border” is jointly implemented by the Customs Agency and Border Protection, Citizenship and Immigration Canada and the Agency of Canada Border Services Agency (CBSA) so integrate data from all the people who cross the border entry, North or South. Until now, U.S. border agents could you check in the United States, but they had little unified way of knowing when you are returned to the country. Therefore, a pilot system tracking has been tested at the busiest border crossing to see if it was possible to obtain reliable data.

As of June 30, 2014, the input / output program will be implemented in full. U.S. border agents and Canadian Border agents to share information on Canadians traveling south. They exchange data and create a profile entry / exit exacts your

People with such a “closer connection” are provided an exemption from filing a full US tax return if they file Form 8840 on time. However, failure to file can result in denial of the exemption, and the resulting requirement to file a US return.

Vessels more than 30 feet (9.144 meters) must display a DECAL from Decal and Transponder Online procurement (27.50$ USD) each year.
CBP has implemented the Small Vessel Reporting System (SVRS). It is a free, easy-to-use, voluntary program that we enrolled for online. We had to meet a CBP officer with our boat registration and passport. We obtained our (BR Number) Boater Registration Number.

Cruising licenses are compulsery as they exempt Canadian pleasure boats from having to undergo formal entry and clearance procedures such as filing manifests and obtaining permits to proceed as well as from the payment of tonnage tax and entry and clearance fees **at all** but the first port of entry.

Before leaving Lake Champlain, NY. we had obtained our cruising license from Rouses Point U.S. Customs and Border Protection (CBP) Port of entry.

SVRS enabled us to report quickly and easily to CBP.

Important Note: When our Canadian vessel left Lake Champlain at Whitehall, the Master shall have a Cruising license and shall report to a Call 1 (800) 432-1216 or 1 (800) 451-0393 its location when anchored or at a different port of call.

We reported 37 times during cruised in Cape Cod during summer 2012. We got used to it and the morning after the 37th reported call, we were boarded just before Albany, NY on our return trip. Everything was OK and they were courteous and very professional.

Please note the following amendment received from Dennis McMurtry on 7th April 2009: QUOTE
The requirement for reporting movement only applies to vessels moving from one customs reqion to another, i.e.from Ft Lauderdale to Miami, Miami to Ft Myers or Key WEST ETC.
Verified by official who issued annual cruising permit from Ft Lauderdale office.

Original Report
Published: February 4, 2008

The situation described below will be a real burden for all foreign flagged vessels cruising in USA waters. Our thanks to Captain Brenda Matzner for researching this developing situation, and allowing me to paraphrase our telephone conversastion!
The long and short of this is, that if you are from any foreign country, including Canada, and your vessel is flagged in that country,
YOU MUST NOTIFY US CUSTOMS - HOMELAND SECURITY EVEN IF YOU SIMPLY MOVE YOUR VESSEL FROM ONE MARINA TO ANOTHER, IN THE SAME PORT OF CALL! Otherwise, you might just be slapped with a $5,000.00 fine!
Note that this requirement does NOT apply to US flagged vessels!
Today, I called Maria (954-761-2034) at the office of US Customs and Homeland Security in Port Everglades [Fort Lauderdale], and got a clarification of the requirements for foreign flagged vessels to announce their movement from one port or call, or one berth, to another. Recently, I had a buddie who was recently hit with this rule, and suffered a $5,000.00 fine in Jacksonville.

Even if a foreign flagged vessel, including those from Canada, have entered the USA legally, and cleared customs properly, THEY MUST NOTIFY US CUSTOMS - HOMELAND SECURITY if they move their vessel from one place to another. Officer Maria said that even if the vessel is moved just from Port Everglades to Miami, for example, or even from the city of Fort Lauderdale berths on New River to Bahia Mar, the boat owners MUST notify US Customs - Homeland Security IMMEDIATELY, OR BE SUBJECT TO A $5,000.00 FINE!

Note: There appears to be some confusion over whether this rule does apply if the vessel has a cruising licence. It is advisable to obtain a written copy of the procedure to be followed when initially clearing in or being issued with a cruising licence. See Documents for the list of countries whose boats are eligible for a cruising permit.

Source: www dot noonsite dot com/Members/val/R2009-02-28-2 UNQUOTE

So this is the reality in cruising the GREAT LOOP for a Canadian vessel and crew.

 

[REAL MOUNTIE]

UPDATE Beyond the Border - Canadian Snowbird Association

US Tax Forms - IRS Forms W8-BEN and 8840 - Canadian Snowbird Association

 

[sunchaser]

The same situation exists for those from BC when cruising in Alaska. Funny what transpires when security concerns from North of the border get enforced whereas those from South of the border get ignored by the U.S.

 

[psneeld]

Having been involved in suggesting legislation to secure our borders from illegal aliens to drugs to fisheries, some LE suggestions come from the angle of enforcement and make no sense to the user...and some make it user friendly but impossible to enforce.

I think in this case there is a better solution..but the easy answer made it difficult on our friends cruising from Canada. A real shame as there should be nothing but close friendship there and cooperation.

 

[GFC]

I think in this case there is a better solution..but the easy answer made it difficult on our friends cruising from Canada. A real shame as there should be nothing but close friendship there and cooperation.

I don't know about that. You know those rascally Canadians are always smuggling things into the US and are needing to be watched every moment. They bring in good Canadian Whiskey and other things and that needs to be stopped.

This whole thing doesn't make sense to me. They leave our southern border wide open for anyone who wants to walk into the US, but they monitor our northern friends like they're all a bunch of boat owning criminals, and they want them to pay US taxes to boot.

My guess is they do that for two reasons. #1 is it's easier to monitor and control a few hundred Canadian boaters than it is the millions of illegal Undocumented Democrats who sneak across our border, and #2, they don't want to take action against the people from south of the US because they don't want to lose that hispanic vote.

 

[ddalme]

I don't think the IRS can track a Canadian; if the Canadian doesn't report himself. They have enough trouble stopping payments to dead people and collecting payments from people like al sharpton. col

 

[mbevins]

Yes they can track anybody. They're already doing it. The two governments have agreements. It's all about the money.

 

[REAL MOUNTIE]

Yes they can track you... Especially if you have money and assets.

Why Canada's snowbirds are under U.S. scrutiny | Reuters

Spend much time in the U.S.? Beware. | All Point Bulletin

 

[SCOTTEDAVIS]

No voting block coming from the north and they don't need "free stuff" so they can't be bought.

It's all about staying in power, and keeping the voting plantations fed with new voters.

Not being political, just stating the facts.

 

[koliver]

The legislation for the IRS to get taxes from Canadian visitors begins with the word "If".
Conditions precedent to the collection of taxes are 3, first, you have to have "earned income" in the US. Second, you have to be unable to establish a "residence for tax purposes" in Canada. If both of those conditions exist, then third, you will need to start counting your days. Counting all of your days in the current year, 1/3 of the days in the previous year and 1/6 in the year before that, if your total is greater than 1/2 a year, you are required to file the form 8840, or pay.

The more important limitation on a Canadian staying in the US for an extended period come from his medical insurance. In BC, the time away from BC has been extended to 7 months, after which you may still return and have your BC medical plan continue. Other provinces may differ.

 

[JDCAVE]

I don't think the IRS can track a Canadian; if the Canadian doesn't report himself. They have enough trouble stopping payments to dead people and collecting payments from people like al sharpton. col

Not true, unfortunately. A neighbour has the misfortune of having been born in the US. The rest of his life and earnings history has been as a Canadian, paying Canadian taxes. But the Canadian Banks, all of whom operate in the US, have been compelled to report to the IRS, "US nationals" who have banking accounts in Canada. It has become a nightmare for him, and his family. Over his earning years, he received none of the tax benefits of being a US citizen, but now has to engage US accountants to resolve his situation, not just for him but others. And while personal income taxes for Canadians are almost certainly higher than for Americans, the details differ between countries. For example, mortgage payments on a principal residence, in Canada are not tax deductible and the opposite is true in the US. Capital gains on the sale of a principal residence in Canada are not taxed, whereas I believe they are in the US. There are probate fees on deceased's estate in Canada but no death duties whereas I believe there are death duties in the US. I'm not an accountant but that is my understanding, so there are huge implications to all of this. Very sad.


Jim
Sent from my iPad using Trawler Forum

 

[REAL MOUNTIE]

FORM 8840 - Page 3 Provide guidance on the subject

If You refer to the General Instructions On page 3 of Form 8840 to claim the closer connection to a foreign country(ies) exception to the substantial presence test.

The exception is described later and in Regulations section 301.7701(b)-2.

http://www.irs.gov/pub/irs-pdf/f8840.pdf

 

[REAL MOUNTIE]

Canadian Health insurance - QUÉBEC PROVINCE

To remain covered by the Québec Health Insurance Plan, all persons who have taken up residence in Québec must be present here more than half of the year.

The Régie conducts checks to ensure compliance. Specifically, your total number of days of absence in a given calendar year Calendar year.

A year running from January 1 to December 31 of the same year. must be less than 183 (absences of 21 days or less do not count).

Persons who do not observe this rule lose their Health Insurance Plan coverage for all the calendar years during which they were absent 183 days or more. The Régie will require that they repay the cost of the healthcare services received during that time.

Here is an example of how the number of days of absence is calculated.

Here is an example of stays outside Québec totalling at least 183 days.

Exceptions to the rule

Certain persons may remain covered by the Health Insurance Plan despite an absence of 183 days or more in a given calendar year Calendar year
A year running from January 1 to December 31 of the same year., if they are in one of the following situations:

They qualify for the once-every-7-years exception;
They will be working, studying or taking training outside Québec;
They qualify for coverage under a social security agreement;
They are unable to return to Québec because they are hospitalized or are assisting a person who is hospitalized. (In the former case, the persons must send the Régie a medical certificate indicating the start date and expected duration of their incapacity to return to Québec).

 

[Conrad]

Not true, unfortunately. A neighbour has the misfortune of having been born in the US. The rest of his life and earnings history has been as a Canadian, paying Canadian taxes. But the Canadian Banks, all of whom operate in the US, have been compelled to report to the IRS, "US nationals" who have banking accounts in Canada. It has become a nightmare for him, and his family. Over his earning years, he received none of the tax benefits of being a US citizen, but now has to engage US accountants to resolve his situation, not just for him but others. And while personal income taxes for Canadians are almost certainly higher than for Americans, the details differ between countries. For example, mortgage payments on a principal residence, in Canada are not tax deductible and the opposite is true in the US. Capital gains on the sale of a principal residence in Canada are not taxed, whereas I believe they are in the US. There are probate fees on deceased's estate in Canada but no death duties whereas I believe there are death duties in the US. I'm not an accountant but that is my understanding, so there are huge implications to all of this. Very sad.


Jim
Sent from my iPad using Trawler Forum

Yes, he is a victim of FATCA. As was my American born son in law, who was raising Canada and continues to live here as a well paid MD. His solution, just prior to the FACTA implementation, was to renounce his American citizenship. I gather that he was part of a stampede.

10 Facts About FATCA, America's Manifest Destiny Law Changing Banking Worldwide - Forbes

 

[REAL MOUNTIE]

Why Canadian snowbirds face more U.S. scrutiny this year — and how to avoid running afoul of rules | Financial Post

 

[Capt Kangeroo]

Sigh

Can someone please stop this crazy planet, I need to get off.

I really don't need all this hassle. A log cabin in the woods of Northern Canada to spend my retirement free from this avalanche of bureaucratic nonsense is looking better all the time.

I'm not necessarily a Star Trek fan but the phrase "You will be assimilated, resistance is futile" comes to mind.

 

[REAL MOUNTIE]

 

[REAL MOUNTIE]

 

[koliver]

The legislation for the IRS to get taxes from Canadian visitors begins with the word "If".
Conditions precedent to the collection of taxes are 3, first, you have to have "earned income" in the US. Second, you have to be unable to establish a "residence for tax purposes" in Canada. If both of those conditions exist, then third, you will need to start counting your days. Counting all of your days in the current year, 1/3 of the days in the previous year and 1/6 in the year before that, if your total is greater than 1/2 a year, you are required to file the form 8840, or pay.

The more important limitation on a Canadian staying in the US for an extended period come from his medical insurance. In BC, the time away from BC has been extended to 7 months, after which you may still return and have your BC medical plan continue. Other provinces may differ.

Reposting, as it seems some don't look back before posting their thoughts.

 

[rjwilliams11741]

I don't know about that. You know those rascally Canadians are always smuggling things into the US and are needing to be watched every moment. They bring in good Canadian Whiskey and other things and that needs to be stopped.

This whole thing doesn't make sense to me. They leave our southern border wide open for anyone who wants to walk into the US, but they monitor our northern friends like they're all a bunch of boat owning criminals, and they want them to pay US taxes to boot.

My guess is they do that for two reasons. #1 is it's easier to monitor and control a few hundred Canadian boaters than it is the millions of illegal Undocumented Democrats who sneak across our border, and #2, they don't want to take action against the people from south of the US because they don't want to lose that hispanic vote.

Maybe the issue is not the hispanic vote but rather the Canadians have more money that can be tapped.

 

[Donsan]

Let's flip this around here a little. How many days can a U.S. citizen stay in Canada without the Canadian revenue collectors coming after him/her/them?

 

[mbevins]

Let's flip this around here a little. How many days can a U.S. citizen stay in Canada without the Canadian revenue collectors coming after him/her/them?

As long as he/she doesn't move lock,stock,and barrel into Canada I'm willing to bet they can stay as long as they please.
Visa vi a cottage or such.
CDN customs allows US registered boat owners to bring the boat into Canada for seasonal dockage from April 1 to Nov 1 . They're on their honor to remove it by that date as it it not checked for compliance.
As such many never leave.

 

[koliver]

As long as he/she doesn't move lock,stock,and barrel into Canada I'm willing to bet they can stay as long as they please.
Visa vi a cottage or such.
CDN customs allows US registered boat owners to bring the boat into Canada for seasonal dockage from April 1 to Nov 1 . They're on their honor to remove it by that date as it it not checked for compliance.
As such many never leave.

Travellers - Temporary Importation and Retention of Foreign Vessels in Canada by Non-residents

 

[sunchaser]

As long as he/she doesn't move lock,stock,and barrel into Canada I'm willing to bet they can stay as long as they please.
Visa vi a cottage or such.
CDN customs allows US registered boat owners to bring the boat into Canada for seasonal dockage from April 1 to Nov 1 . They're on their honor to remove it by that date as it it not checked for compliance.
As such many never leave.

As Keith posted, there are requirements for US flagged vessels, different than MB posted above.

No, on a personal basis, you can't stay in Canada as long as you want. The Customs forms ask for duration of stay. Write down one year and see what happens. All sorts of personal restrictions whether taxation past 6 months or applying for Landed Immigrant status come into play. Then do you have relatives legally living in Canada? It gets intricate.

Unlike the US, Canada views past criminal history as a big red flag. If only the US had as strict a set of immigration laws which were enforced.

 

[mbevins]

As Keith posted, there are requirements for US flagged vessels, different than MB posted above.



The document above pretty well agrees with my "real world" translation. Living on a border city I see this all the time. I personally have been told by CCRA that they don't check the boats leaving.

 

[Donsan]

How about attempts by Canada to collect income taxes from boaters?

 

[koliver]

How about attempts by Canada to collect income taxes from boaters?

Maters not whether you are here as a boater or in any other guise. What matters is: Did you earn income in Canada. If so, you will need to file a tax return and pay the applicable taxes.
No, we don't charge income tax on your boat, unless it is here earning income, then the tax is payable by the owner of the boat, wherever he/she resides.

So bottom line, same as in the US: Where you earn the income will need to receive the income tax.

 

[waddenkruiser]

And I thought it would be complicated here in Europe ...

 

[waddenkruiser]

... so it's even easier between the Danish and the Swedes!

 

[boatpoker]

The requirement for reporting movement only applies to vessels moving from one customs reqion to another, i.e.from Ft Lauderdale to Miami, Miami to Ft Myers or Key WEST ETC.
Verified by official who issued annual cruising permit from Ft Lauderdale office.

On our recent trip from Toronto to Lakeworth. it was our understanding that we only had to report in at each CG District. We cleared in Oswego and were given a "Notice of Violation" further down the Hudson a few days later for not reporting each stop within the same District. We were then told we had to report in at each Port and were given a list of phone numbers to call. We received a second Notice of Violation in South Carolina for not reporting when we anchored and were told we had to call in each time we stopped whether we went ashore or not.

Most of the phone numbers given were wrong and we spent hours on the phone with people who didn't give a damn. ...
"Why are you calling us " was heard on several occasions.
"This number cannot be reached from your area" was a frequent recording.
"Our office doesn't handle that" was common and they would give us another number that was also .... wrong !

Most often we got voice mail so left a message and went on our way (hope that was ok). We are now in the Bahamas and dreading re-entry to the US. Thousands of Canadian cruisers who spend our retirement funds in the US appear to be not wanted anymore. We are seriously considering storing our boat in Bahamas this summer just to avoid the nonsense of buying multiple phones and phone packages so we can call in to a completely disinterested party whenever we stop to spend money on fuel.

I've been traveling the US East coast since 1994 and never experienced anything like this before, The American people are awesome but the system is beyond help and I may not be back.