Is the IRS chasing our Canadian snowbirds away?

A large percentage of the winter seasonal residents and tourists in Lake Worth and neighboring communities is from Canada. Canadians have been flocking to Florida since the 1920s, giving rise to the popular term “snowbirds.” Canadian tourism makes up more than 60% of Florida’s tourism economy, according the Florida Tourism Commission.  Our Canadian snowbird friends provide a welcome boost to the local economy this time of year.

A few days ago, I saw a couple of familiar faces in front of Starbuck’s on Lake Avenue, a friendly couple from Ontario who ocassionaly buy a book or two from my BOOKCYCLE. As we were talking about the unusually warm weather up north this fall, I asked them if that was why there seemed to be very few Canadians in Lake Worth so far this season. They said that may be part of it, but Canadians can only spend less than six months here, and may be delaying their arrival in South Florida so that they don’t have to return to Canada until May or June. I asked them if this was because of limits on their health insurance coverage. They said not; and in fact Canada now provides health insurance coverage for up to seven months.

The six-month limitation on their stay here is because of our IRS. If Canadians stay six months in the USA, our IRS now requires that Canadians pay US income tax on all of their income while they are staying here, in addition to the high taxes that they already pay in Canada.

I was stunned, and asked them if they were sure about this. With a pained expression, they said it was a fact. Most of these Canadian snowbirds are retirees, living on fixed incomes from their pensions and government retirement benefits – and our IRS wants to take a big chunk out of what that they could otherwise be spending to benefit our economy…and we wonder why our economy is stalled in the doldrums!

I checked out this IRS issue on-line, and it’s sadly true: “The Canadian Snowbird Association states that snowbirds wintering in the southern US stay an average of 4.7 months. The duration of stay for Canadian snowbirds in Florida is influenced by regulatory factors in both countries. The US Internal Revenue Service requires tax declarations (under the “Substantial Presence Test”) from Canadians who stay longer than allowed by a moving-average formula that allows 180 days in one year, but only about 120 days per year for snowbirds who visit every year.”  There’s even a book about it:

http://www.amazon.ca/Canadian-Snowbird-America-Professional-Financial/dp/1550228048

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