Now that the weather is changing I thought it would be a good idea to share a couple IRS tax relief tips regarding the snowbirds flying south for the winter. Click here to read or watch more IRS Help resources.
IRS Tax Relief Tip #1 – No Fluff or Flab, Just Drab Facts
At one time, snowbirds could tell white lies to Canadian Border Services personnel with slight revised versions of lengthy visits in Sun & Fun, USA, for a clean getaway. But high-tech advances have closed that escape route via easily tracked fiscal traces by historically documented physical places in real-time.
IRS Tax Relief Tip #2 – Crunch Numbers Right
The foregoing revelation begs an obvious subsumed query of how long a vacation can last without tax calculation red flags. A 183-day limit to pack bags for return trip no longer applies to all Canadians across the border. Instead, each figure is unique but must be derived from a ‘substantial preference’ standardized test devised by the U.S. Internal Revenue Service as thus:
• Minimum 31 days’ U.S. presence during present year
• Above figure + two prior years must = grand total ≥ 183
• Last sum must = every day in present CY + 1/3 prior year + 1/6 final year
Although nonsensical at first blush, a sensible translation is to rush back home before expiration of 120-day tax-free vacation. Two more factors to take into full account are partial days get full credit and a year = exactly 12 months. Thus, don’t ‘forget’ a two-hour layover in Seattle last year or take two round trips to Miami in December and February.
IRS Tax Relief Tip #3 – Perform Dual Tax Due Diligence on One Form
A Canadian-U.S. treaty gives no fear of robbery by two greedy federal governments in one tax year. However, it’s vital to calculate each tax rate on the same two-page IRS Form 8840 to avoid duplication by computerized verification error.
IRS Tax Relief Tip #4 – $299,999.99 = Vacation Home Borderline Value
As the CAD grows weak and U.S. realty markets peak, Canadian snowbirds may seek refuge in vacation home liquidation. But this deed can repay extreme grief the same day when deed transfer recordation triggers 10 percent taxation. However, a huge loophole exists in IRS tax-exempt home sales below $300,000 USD to U.S. citizens with plans for primary residence.
IRS Tax Relief Tip #5 – Part-Time CAD Landlords Pay Two-Time Taxes
Along same lines above, snowbirds who’d love to lease U.S. vacation homes for extra cash during part of each year back home in Maple Leaf land are in for a nasty surprise. Foreign landlords must file a U.S. tax return and report CAD-equivalent rental income via CRA T1 Form T776. Properties valued at $100,000 or higher may also require a T1135 Foreign Income Verification Statement. Noncompliance functionally equates to open invitation for CRA-assessed tax penalization of up to $2,500 CAD.
IRS Tax Relief Tip #6 – Don’t Mess With THE+IRS!
Speaking of tax penalties, please note CRA soft-heartedness as opposed to IRS hard-nosed Assessments. Besides fully vested power to seize valuable private assets without prior notice or hearing as always otherwise required by due process of law, the IRS is a bureaucratic villain that violates U.S. citizens’ legal rights to fullest extent of void practical benefit for victims. Typical ‘toll-free’ IRS hotline hold time is two hours of long touch-tone menus, followed by listening to gaudy music during lengthy waits for multiple transfers between call centers in states with unknown distant location across an entire nation. Meanwhile, allow at least a full quarter until reply to written inquiries finally arrive – if you’re lucky.
Thus, don’t trust IRS taxes to random chance of second glance best guess by any given fool. Instead, keep a cool head to do a thorough cost-benefit analysis that may reveal greater net yield from U.S. tax expert fees of $1,000 USD vs. IRS/CRA total penalties. If all other words of advice to the wise fail as sufficient warning for fools, note one final detail before setting sail for a trip to Fool’s Paradise in blissful ignorance.
Why would an author write the immediately preceding subsection title with a pair of three-letter words separated by a math symbol that reads like this?
Answer = THEIRS