I spent 150 days in the U.S. this year. Can Form 8840 save me from being taxed as a resident?

The substantial presence test determines whether a foreign national is treated as a U.S. tax resident based on physical presence. You meet the test if you were physically present in the U.S. for at least 31 days during the current year AND the sum of days present over a 3-year lookback period (using a weighted formula) equals 183 days or more. The formula counts 100% of current-year days, 1/3 of prior-year days, and 1/6 of the year before that. With 150 days this year, if your prior two years had similar patterns, you likely meet the substantial presence test and would be treated as a U.S. tax resident — subject to U.S. tax on your worldwide income.

Form 8840 allows you to claim the closer connection exception to the substantial presence test. If you can demonstrate that you have a tax home in a foreign country and have a closer connection to that foreign country than to the U.S., you can be treated as a nonresident alien even if you meet the substantial presence test. However, this exception only applies if you were present in the U.S. for fewer than 183 days during the current calendar year. With 150 days, you qualify for this exception (your days are under 183). If you had been present for 183 days or more in the current year, the closer connection exception would not be available.

The IRS evaluates a range of factors to determine whether your closer connection is to Canada or the U.S. These include: where your permanent home is located, where your family resides, where your personal belongings (furniture, clothing, jewelry, automobiles) are kept, where your current social, political, cultural, and religious affiliations are, where you conduct routine banking, where you hold your driver's license, where you are registered to vote, where you claim residence on official forms, and the country you designate on forms and documents as your residence. No single factor is determinative — the IRS looks at the totality of the circumstances.

Form 8840 must be filed by the due date of your income tax return (including extensions). For nonresident aliens with no U.S. filing obligation, the form can be filed by June 15. The form requires you to list all the factors demonstrating your closer connection to the foreign country, provide the address of your tax home, and certify under penalties of perjury that the information is accurate. Critical point: you must file Form 8840 timely. If you fail to file it (or file it late without reasonable cause), you cannot claim the closer connection exception and will be treated as a U.S. tax resident.

If the IRS determines that your closer connection is actually to the U.S. — for example, if you maintain a larger home in Florida than in Canada, have most of your banking and social activities in the U.S., and spend just enough time in Canada to technically keep your Canadian tax home — you would be treated as a U.S. tax resident for the entire year. This means worldwide income taxation, FBAR and Form 8938 reporting on all foreign accounts, and potential double taxation issues that would need to be resolved under the U.S.-Canada tax treaty. The stakes are high, so ensure your factual connections to Canada are genuine and well-documented.