The Canadian Snowbird in America: Professional Tax and Financial Insights Into Temporary Lifestyles in the U.S. - Softcover

Wruk, Terry F; Wruk, Brian D

Softcover

ISBN 10: 1550228048 ISBN 13: 9781550228045

Publisher: ECW Press, 2007

Synopsis

With thousands of Canadians heading south for the winter each year, many of these individuals, referred to as "snowbirds," face unique and challenging U.S. tax and financial planning considerations. Crossing the border, spending time in the U.S., and engaging in various financial transactions have legal and tax implications both in Canada and the U.S.

The Canadian Snowbird in America covers the U.S. tax filing requirements based on seasonal residency in the U.S. and the U.S. tax issues related to the renting and sale of U.S. real estate. Information related to the acquisition and financing of U.S. real estate is also covered.

The Canadian Snowbird in America provides a comprehensive overview on financial management issues including the implications of opening U.S. bank and investment accounts, the management of Canadian investment and registered accounts, cross-border retirement planning and foreign exchanges issues. Readers will learn strategies to deal with a fluctuating loonie. Snowbirds will gain valuable insight into how and what their provincial health plans cover while they are in the U.S. Understanding what to look for in a travel insurance policy is covered as well.

Incorporating recent changes in the Canada-U.S. Income Tax Treaty and U.S. income and estate tax rules, this book is an invaluable resource for Canadians who spend time or invest in the United States. If you are a Canadian looking at adopting a temporary lifestyle in the U.S., you cannot afford to head south for the winter without this book.

About this title

About the Author

Terry F. Ritchie is a financial advisor well versed in addressing snowbird issues. A resident of Canada and the U.S., he is the only financial advisor to hold the Canadian Registered Financial Planner (RFP), U.S. Certified Financial Planner (CFP) designations and to be enrolled to practise before the U.S. Internal Revenue Service (IRS) as an Enrolled Agent (EA). He is a partner in the firm of Transition Financial Advisors with offices in Canada and the U.S.

Excerpt. © Reprinted by permission. All rights reserved.

The Canadian Snowbird in America

Professional Tax and Financial Insights into Temporary Lifestyles in the U.S.

By Terry F. Ritchie, Brian D. Wruk

ECW PRESS

Copyright © 2007 Transition Financial Advisors Group, Inc.
All rights reserved.

ISBN: 978-1-55022-804-5

Contents

Preface, 
Introduction, 
I. Don't Worry, I'll Be Back: Crossing the U.S. Border, 
II. Welcome to the United States — Now Pay Up! U.S. Tax Issues for Snowbirds, 
III. A Home Away from Home: Purchasing U.S. Real Estate, 
IV. Money Doesn't Grow on Trees: Money Management for Snowbirds, 
V. Till Death Do Us Part: U.S. Estate Planning Issues for Snowbirds, 
VI. Help! I've Fallen, and I Can't Get Up: Risk Management for Snowbirds, 
VII. Mayday! Mayday! Finding Help, 
Appendices, 
Appendix A: Snowbird Resources and Relevant Websites, 
Appendix B: List of Canada-U.S. Border Crossings, 
Appendix C: Canada-U.S. Advisor Interview Checklist, 
Appendix D: Canada-U.S. Differences, 
Index, 

CHAPTER 1

Don't Worry, I'll Be Back

Crossing the U.S. Border

Entering the United States

With the events of September 11, 2001, the ease with which Canadian snowbirds cross the American border changed dramatically. With the passing of the U.S. Western Hemisphere Travel Initiative (WHTI) in April 2005, significant changes are being implemented and still debated. At the time of writing and despite implementation of the WHTI, a number of Canadian politicians suggested that seniors should be exempt from having to obtain a passport, much like the exemption provided for children under the age of 15 in late February 2007. Regardless of what ultimately occurs, the U.S. Departments of State and Homeland Security are moving forward with implementation of WHTI along the timetable they have proposed. Earlier in 2007, the American ambassador to Canada, David Wilkins, in a speech on U.S.-Canada relations, responded to questions about the border-crossing changes by saying, "I believe we need to get ready for it, and so, simply put, the message I try to give to Americans and to Canadians is 'Get a passport.' It's that simple." In this case, we agree with Ambassador Wilkins' statement and advice because of the changes 9/11 brought to our countries. This chapter addresses issues you will face when crossing the American border and reviews the guidelines to obtain and maintain your Canadian passport.

The B-2 Visa

Despite the close relationship between Canada and the United States, anytime you cross the border you mustn't forget you are crossing into another country. When entering the United States, you can do so without the issuing of a U.S. immigration visa if your purpose is simply to spend your winters in the United States.

Under U.S. immigration rules, spending your winters in the United States is referred to as a temporary pleasure trip. The American visa category automatically assigned to you for this purpose is the B-2 visa. It is available to temporary visitors only and does not allow you to work or establish long-term residence in the United States. There is no application to complete, nor will you receive a visa document or stamp in your passport.

Under current rules, B-2 visitors are automatically entitled to be in the United States for a maximum of six months in the calendar year. Under this visa category, your stay in the United States must be temporary, and you must demonstrate a clear intention to depart prior to the end of the authorized period of your stay. If you leave the United States and reenter later, the six-month period starts over. However, you can't keep leaving the United States at the end of each six-month period and assume that a new six-month period has begun. Again, this must be distinguished from the "one-time" period granted by U.S. immigration once you make your entry at a U.S. border point. Repeated crossings back into the United States start to show intent to reside there, which means you are in violation of the visa issued to you and are now required to pay taxes, as outlined in Chapter 2.

Upon your entry into the United States, you must have the proper documentation to prove your origin and identity. Although a U.S. Customs and Border Protection (USCBP) officer may accept an oral declaration of your citizenship, it is recommended that at minimum you carry your passport and perhaps additional documents that establish citizenship or Canadian residency such as a birth certificate or driver's license. Under current USCBP procedures, all travelers are required to present photo identification. If you are not a Canadian citizen but a Canadian resident — such as a landed immigrant of Canada — different guidelines and procedures will be required when you cross into the United States. Copies of your non-immigrant visa in Canada and your passport from your country of birth are required.

You have to understand that it is a privilege to enter the United States, not an entitlement. Therefore, U.S. immigration can refuse entry to you if you have a previous criminal record or cannot show a legitimate reason why you are entering the United States. In terms of a past criminal conviction, it does not matter how long ago or how serious the offence was. If you have a previous criminal conviction, you should seek qualified American immigration counsel and complete U.S. Citizenship and Immigration Service (USCIS) Form I-192 — Advance Permission to Enter as a Non-Immigrant. Note that it could take a few months to process this form and could compromise your plans to visit the United States.

If you are traveling through an airport, you are required to complete USCBP Declaration Form 6059B, the blue card you typically fill out at the airport. This form requires personal information, including the purpose of your visit to the United States, information about where you are staying, what flight you are taking, as well as financial information related to the value of all goods you are bringing to leave in the United States.

Documents Required to Cross the U.S. Border

Ideally, the best documentation to have when entering the United States is a Canadian passport. In April 2005, the U.S. Departments of State and Homeland Security announced the Western Hemisphere Travel Initiative, which requires travelers from Canada, Mexico, and Bermuda entering the United States to carry a passport or other accepted document. Starting January 23, 2007, all Canadian citizens traveling by air from Canada are required to present a valid Canadian passport to enter or reenter the United States. This requirement includes citizens of the United States, Mexico, and Bermuda — and the children of citizens of those countries — as well. Those traveling by land and sea will need a passport by January 1, 2008. However, with the passing of the Homeland Security Appropriations Act on October 4, 2006, the U.S. Departments of State and Homeland Security now have until June 1, 2009, to implement the whti. Nevertheless, it is strongly recommended that you carry your Canadian passport when you leave and reenter Canada.

If you attempt to enter the United States without a valid Canadian passport, you will likely be referred to secondary screening at the airport or port of entry to the United States. If you've ever had the occasion to spend time in the secondary screening "lounge," you likely saw a number of anxious and concerned folks — the-deer-in-the-headlights look comes to mind — who wait "patiently" to be further evaluated byUSCBP officers. These officers are not as concerned as you are about your flight or travel schedule and the like as they attempt to evaluate your evidence of citizenship and identification against their databases. It is for this reason that you should always carry a valid Canadian passport whenever you travel to the United States.

Obtaining a Canadian Passport

Canadian passports are valid for five years after the date of issue. They are not renewable. Therefore, it is important to keep track of the expiration date of your passport; you may be denied entry into the United States if your passport will expire during your time there. We recommend that, to avoid problems when entering the United States, you get a new passport before heading south for the winter.

The requirements to obtain a Canadian passport include

• completion of an adult passport application (Form PPTC 044),

• two identical photos taken within the past 12 months (no smiling),

• the application form and one of the photos signed by a guarantor, who can be a

• chiropractor

• dentist

• geoscientist

• judge

• lawyer (member of a provincial bar association), notary in Quebec o magistrate

• mayor

• medical doctor

• minister of religion authorized under provincial law to perform marriages

• notary public

• optometrist

• pharmacist

• police officer (municipal, provincial, or RCMP)

• postmaster

• principal of a primary or secondary school

• professional accountant (APA, CA, CGA, CMA, PA, RPA)

• professional engineer (P.Eng., Eng. in Quebec)

• senior administrator in a community college (includes CEGEPS)

• senior administrator or teacher in a university

• veterinarian,

• proof of Canadian citizenship,

• proof of any previous Canadian travel document issued within the past five years, and

• any document that supports your identity, such as a driver's license, social insurance card, or provincial health card.

The passport processing fee is $87 for a 24-page passport and $92 for a 48-page passport. We think this is the best deal you are going to get from the government: five more loonies for an extra 24 pages! Additional information on applying for a Canadian passport can be found at www.ppt.gc.ca or by calling 1-800-567-6868.

The Border Binder

If you make frequent trips to the United States, its immigration officials may question you about your residency intentions. To avoid this questioning, carry documented evidence to prove that your intention is not to establish permanent American residence. To that end, we recommend you carry a "border binder" with you to support your Canadian residency position. Let us explain the basis of this binder.

My family and I moved from Canada to the United States in 1979. My father, my siblings, and I were all issued green cards through the sponsorship of my mother, who is a U.S. citizen. I held my green card for 15 years and never expected that I would return to Canada. Although I could have and likely should have applied for American citizenship, I never got around to doing it. For unexpected personal reasons in 1995, my wife, my children, and I returned to Canada. When I returned to Canada with a U.S. green card, I was ultimately deemed to have abandoned my green card a few years later. From U.S. immigration's perspective, I had given up what to some was "the greatest gift in the world." As a result, every time I reentered the United States to visit family and friends, to attend or speak at a professional conference, or to develop business, I was given a harder time than others and was sometimes referred to secondary processing for further questioning. Given my past ties to the United States, the frequency of my visits and the fact that I had family and business dealings there, the officials wanted to make sure I was not trying to reestablish U.S. permanent residency again.

As a means of proving my Canadian residency ties and ultimately to "speed up" my American border processing, I decided to purchase a small three-ring binder and several clear plastic inserts. I then assembled all relevant original documents that confirmed my Canadian residency position and put them in the plastic pages. My own border binder contained my birth certificate, passport, most recently filed Canadian tax returns, land title certificate, annual property assessment from the City of Calgary, copy of my driver's license, and recent utility bills (gas, electricity, phone, etc.). The first time I took my binder with me, the officer was quite impressed about how well organized I was and put me right through. I continued to take my binder with me just in case I was ever scrutinized. Fortunately, with my border binder in hand, I did not have any further problems crossing the border.

To ease your border crossing each winter, you should consider creating your own border binder and include the following documents:

• a photocopy of your land title certificate to verify ownership of your Canadian principal residence or, if you rent, a copy of your rental agreement;

• recent utility bills (telephone, cable, power, gas);

• your property tax bill or annual assessment from the city or municipality;

• a valid provincial driver's license confirming your residential address;

• your vehicle registration if driving and return flight tickets if flying;

• a provincial health care card and/or copy of your travel insurance policy or certificate;

• copies of your most recently filed Canadian tax return and notice of assessment; and

• a previously filed IRS Form 8840 (see Chapter 2 for further information).

Automated Entry/Exit System?

In 1996, the U.S. Congress mandated an entry/exit system (as part of the Illegal Immigration Reform and Immigrant Responsibility Act or iiraira — the Americans love their acronyms!), but due to objections from the tourism industry, governors of many states bordering Canada, and others, full implementation of this system has been delayed. Over the past number of years, and particularly in light of the tragic events of 9/11, there has been ongoing debate about the implementation and effectiveness of an automated entry/exit system at Canadian-U.S. border crossings.

Attending a conference a few years ago, I questioned an official with one of the American consulates in Canada about the likelihood of such a system at the Canadian-U.S. border crossings. He suggested that it was only a matter of time before such a system would be implemented. Although there isn't a system in place specifically to track Canadian citizens into the United States, the country now has the U.S. visit (U.S. Visitor and Immigrant Status Indication Technology) system in place at many airports and seaports. This is an electronic check-in/check-out system for foreign visitors, including students, tourists, and business travelers, and requires the use of at least two biometric identifiers, such as fingerprints, when entering and leaving the United States.

At the time of writing, Canadian citizens were still exempt from this system. Interestingly enough, a COMPASS-National Post-Global National poll conducted in April 2003 found that Canadians themselves do not object to being included in a U.S. entry/exit system, while more than 70% indicated that the United States has the right to track the entry and exit of all foreign visitors, including Canadians.

Outside the practical reasons for having such a system, the information obtained by uscis can be used to further assist agencies in both Canada and the United States to ensure you are complying with U.S. income tax, immigration, and provincial health care rules. That is, such a system would track the number of days you are in the United States to ensure you are not staying there for longer than six months. The intent is also to ensure your compliance with IRS Form 8840 (see Chapter 2 for further information).

U.S. Retirement Visa?

Many countries around the world offer "retirement visas" that allow you to retire and live permanently in those countries. For example, my father, a dual citizen (Canada/United States), has lived in Mexico for the past 10 years on such a visa. To the extent that one can prove financial solvency and cover health care risks, retirement visas from certain countries are available. Many snowbirds have wondered if such a visa will ever be available in the United States.

A number of years ago, a former Florida Republican congressman, Bill McCollum, attempted to lobby support for such a visa. However, he was defeated in 2000 and further as a Senate candidate in 2004. As a result, the efforts toward such a visa have likely gone by the wayside for the foreseeable future. In fact, with other priorities occupying the American government at this time — Iraq, the war on global terrorism, curbing the tide of illegal immigration — we believe such a visa likely will never see the light of day. Of course, we were wrong, along with others, that the Canadian dollar would ever break through the U.S.80¢ level during our lifetimes.

Crossing the Border with More than $10,000

Canadian Rules

When crossing the border into the United States, you may be required to show that you have enough money to adequately provide for yourself while there. There are no restrictions on the amount of money you can take out of or bring into Canada (it is your money after all!). However, how you take your money out of and into Canada becomes the concern of the governments involved. We recommend you don't take any significant amounts of cash (greater than C$10,000), traveler's checks, money orders, stock or bond certificates, or other negotiable instruments with you.

For amounts in excess of C$10,000, or its equivalent in U.S. dollars, you must declare that amount at the Canadian border when you leave, and it just stands to reason that you will be detained and asked to explain its source and why you are carrying that much money with you. You will also be asked to complete Form E677 — Cross-Border Currency or Monetary Instruments Report — Individual and file it with the Canada Border Services Agency (CBSA).

(Continues...)

Excerpted from The Canadian Snowbird in America by Terry F. Ritchie, Brian D. Wruk. Copyright © 2007 Transition Financial Advisors Group, Inc.. Excerpted by permission of ECW PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Edition details

• Publisher: ECW Press
• Publication date: 2007
• Language: English
• ISBN 10: 1550228048
• ISBN 13: 9781550228045
• Binding: Paperback
• Number of pages: 200