Snowbirds may become an extinct species, at least within the borders of the United States. Few outsiders know this but Canadians live in igloos year round. Snowbirds are Canadians who seek warmer climate, especially during their retirement years. They have been a significant boon to the real estate markets in Southern states, especially Florida, but one should not forget places like my Dad’s trailer park in San Benito where numerous Winter Texans can play year-round golf and outdoor tennis. Mostly, they spend their enormous retirement wealth that it took many years working in Canada to earn. Expect the snowbirds to start flying further south, to places like Cayman Islands, Mexico, or Costa Rica, anywhere outside the reach of the IRS taxman.
It is no exaggeration to say that United States border guards now have had tax enforcement added to their list of duties. A few months back at the Expat Forum, Omater wrote a little anectdote (now apparently censored), still unverified:
I just got back from my local CGA who is doing our business tax return. He bought a house in the US at about the same time I did. I told him about my trip next week and he advised that I take copies of my last 6 tax returns, which I had already decided to do.
He said that last October a good friend of his who is a dual citizen as well as a CPA and CGA was headed to the US to visit family. They scanned his passport and told him that he could not board his plane for failure to file tax returns. The thing about this guy is that he had always filed his returns in a timely manner, every year since he had landed in Canada. He had to get his office staff to find 6 years of tax returns and fax them to wherever he was at the airport. By the time that happened he had missed his plane.
This is the only verifiable account I have heard of somebody being refused entrance to a plane headed for the states.
Numerous commenters considered the above story to be an urban myth. But Omater now offers a couple more stories of Canadians–not US citizens–who are planning to sell their US condos as a result of the recent crackdown and the hassles that they are receiving from border guards (emphasis mine):
The stories I am hearing first hand are not about United States Citizens, but about Canadians. I had taken a water aerobic class and was sitting in the hot tub afterwords when one woman talking to another woman got louder and louder about being stopped at the border on the way to Palm Springs and were told that they had to file a US tax return. She was very angry and said they would give the place away before they filed a tax return to the IRS when it was none of their business, taxes or no taxes.
A few weeks ago I took my dog to the vet and she asked where in the south I was from. She then told me she had done her residency in Memphis, my home town. I asked her if she had used a green card and she said no and, “Thank God”. She started telling me about her uncle who had a place in Arizona where he and his wife spent 6 months per year, mostly because of his allergies. This year they were headed down and were stopped at the border and told that they had been flagged as being required to file a tax return on their worldly income. When her uncle told them they never spend more than the 6 month allotted time, they were told that they could visit 6 months but would have to file a tax return based on a formula that would basically only allow them a few months per year otherwise. I once read that it worked out to around 120 days. (I am sure you know what I am talking about here.) However, the formula that these people were told about only allowed them a few months per year over a three-year period. Everybody is pretty livid that they will be required to pay tax and to expect no benefit in return. I asked the vet how the IRS knew about her uncle and she didn’t know.
People are talking about selling as soon as the economy allows them to. We just bought a place last April, before I heard of FATCA and FBAR and thankfully we bought cheap. I hate it but we will have to sell. We had hoped to have 6 months a year in our little villa for retirement. I am not sure what we will do now, but it will not be in the states. I can tell you, we spent a lot of money down there. It will be a loss to a depressed little community whose people are always grateful for our business.
I talked to several Real Estate brokers and agents there and I wonder why they are not flying off the handle about this! If they think things are bad now, just wait until the last Canadian leaves Florida, California and Arizona!
Thanks for all you do!
The words, “they had been flagged” provides further proof that this is a systematic usage of border guards to enforce taxes. I would like to track down when the border guards started doing the IRS’ dirty work. Which POTUS approved this crack down? Was it Obama, Bush, or did it start earlier than these two?
@Just me: Do I need to enter OVDI, if I am living in India for more than a decade and not filed taxes in the USA (but owe no taxes to IRS due to foreign tax credits)? I am concerned, if I have to enter OVDI.
I am not planning to use 2555 to exclude my salary, so can I claim tax credit for my child born in the USA and under 17 years to reduce my tax liability?
@Indian_Expat…
There is no quick and easy answer to that, as it is in the “it all depends” category. That would include a detailed examination of your facts, current circumstances, past income filing and FBAR reporting status and future plans as to your citizenship and residency. So, while I can’t really give you a comprehensive answer other than to say, I probably would not really consider it unless you are planning to live back in the States, and have been involved in egregious criminal tax evasion.
To help you determine if you should or not, will take a lot of drudgery in terms of self education, and if you are up to that, you might explore more. You could have a read here,
http://bit.ly/y8OjTe
That might help with some self identification, as to your Whale to Minnow status, which would bring you closer to a conclusion of whether or not that decision is right for you. If you are truly a Minnow, and still want a generalized answer that you should not consider as legal advice, I would generally say No to the OVDI. There are now other and better strategies for dealing with compliance failures, but again I stress caution in giving any weight to what I am saying, as I really do not know your facts, and I am not an attorney.
That is the best I can do for you. I don’t know if that is any help or not.
@justme, When I returned to the US from Brazil 35 years ago I had a good supply of unused foreign tax credits as well, which I “used up” quite quickly over the next 3 years because back in the US my job involved extensive foreign travel. These tax credits offset my US tax on my earnings while present at a foreign destination. I kept close track of my days working outside of the US in case of an audit, but never had one.
Had I stayed in Brazil they would have been used up very quickly because of the massive tax increase on overseas Americans in the Tax Reform Act of 1976 which pushed my combined US + Brazilian tax up to 81% more than any other non-American in Brazil with my same earnings and family dependent status.
@Roger…
That is interesting about the Foreign Tax Credits (FTC). I have a nice build up of them too, but assume with my income situation (in semi retirement) will mean I will never get to use them. Maybe they can be tallied next to my tombstone epitaph.
“He was FBAR Compliant FTC $XXXXXX”
@JustMe, I was really fortunate when I returned to the US to land in a position where I was doing a lot of foreign travel and thus able to use up these foreign tax credits.
I also left behind our personal residence home in Brazil where, with the exchange controls that existed at that time, I could not take the funds out of Brazil when I sold it. But since my business travels including going to Brazil I was able to purchase airline tickets in Brazil, in Braziian currency, for my travels to Latin America, Europe, Asia, etc, as long as the travel on the ticket started and ended in Brazil.
If not used,each flight coupon was stamped “refundable only in Brazilian currency,” but I was able to plan my trips so that the tickets included some 20 individual flight coupons, all with open reservations, and then make reservatiohs and use them as I actually traveled. The Brazil portions were on PanAm but the other portions were on whichever carriers served the countries I visited. Changing carriers was usually possible by having the carrier whose name was on the ticket endorse it to the other. And then I vouchered them as I used them. Over the course of several years I got my money out of Brazil this way. I used them all. Tickets then were valid for one year.
The coupons were not used in he order issued, but that did not matter. and each segment had a stated dollar value. That probably wouldn’t work today with today’s aif travel pricing policies, elecronic ticketing, etc., but it did back in the 1970s. Back then there was generally a single fare for travel between cities for all carriers, not the multiple fares we have today.
Really interesting proposal to allow Canadian snowbirds to stay much much longer in the US :
http://www.thestar.com/business/personal_finance/retirement/2013/02/11/avoiding_the_snowbirds_trap.html
…..”Canadians love to spend their winters in the U.S. sunbelt and they make their presence felt: spending $5 billion spent last year, just in the big-four sunshine states of Florida, Arizona, Texas and California (Canadian Snowbird Association).
Now it seems the snowbirds are on the brink of a significant change in U.S. laws that would allow them to stay even longer each winter – and presumably spend even more money.
Proposed legislation would create a Retirees Visa, increasing the current six-month limit on a winter stay for Snowbirds to eight months.
The Visit USA Act would allow Canadians over the age of 50, and their spouses, and their dependent children, to have a visit that lasts 240 days, and would be renewable every three years.
But the legislation tabled by two U.S. senators 16 months ago must first make it through the U.S. House and senate.
The Visit USA Act, along with a companion bill called the Jobs Originated through Launching Travel Act (JOLT), have bipartisan support in both the U.S. House and Senate.
“For the past year, we have been lobbying and making trips to Washington pitching the case for a Retirees Visa and it’s been met with extreme interest from Democrats and Republicans,” said Evan Rachkovsky, of the snowbird association. “It’s hard to gauge what will happen.”……..
So interesting that this proposed bill for snowbirds can get bipartisan support, but those of us who live permanently as Canadian citizens (duals or ex-US) and residents of Canada, who just want to live our lives in Canada without being hunted down and molested by the US IRS cannot.
The Toronto Star article above ‘Avoiding the Snowbirds’ trap’ was Published on Mon Feb 11 2013 By: Paul Dalby Special to the Star. Not sure what the status of the bills are currently, and whether they died in committee, and were reintroduced?
Guess who introduced these bills? One of our enduring favourite Senators, Schumer: http://www.schumer.senate.gov/Newsroom/record.cfm?id=336398
His webpage says ……….” Encouraging Canadian Tourism to the United States
Under current law, without a visa, Canadian citizens are not permitted to remain in the United States for longer than 180 days. Many Canadians would remain in the United States for a longer period of time during periods when Canadian weather is still cold if they had a legal ability to do so. In addition, Canadians who currently return to Canada after 180 days are unable to take day-trips across the border to northern-border-states in America.
This bill allows Canadians who are: (1) over age 50 (with derivative benefits to a spouse and minor children); (2) who can show that they own a residence in the United States or have purchased rental or hotel accommodations in the United States for the duration of their stay; and (3) are not otherwise inadmissible – to stay at least 240 days per year. These Canadians are not permitted to have work authorization for this visa or access to any government benefits. This visa will spur Canadian consumption in the United States.”…………….
http://www.govtrack.us/congress/bills/112/s2233
S. 2233 (112th): Jobs Originated through Launching Travel Act
See particularly this section naming Canadians specifically;
“SEC. 3. ENCOURAGING CANADIAN TOURISM TO THE UNITED STATES.
Section 214 of the Immigration and Nationality Act (8 U.S.C. 1184) is amended by adding at the end the following:
‘(s) Canadian Retirees-
‘(1) IN GENERAL- The Secretary of Homeland Security may admit as a visitor for pleasure as described in section 101(a)(15)(B) any alien for a period not to exceed 240 days, if the alien demonstrates, to the satisfaction of the Secretary, that the alien–
‘(A) is a citizen of Canada;
‘(B) is at least 50 years of age;
‘(C) maintains a residence in Canada;
‘(D) owns a residence in the United States or has signed a rental agreement for accommodations in the United States for the duration of the alien’s stay in the United States;
‘(E) is not inadmissible under section 212;
‘(F) is not described in any ground of deportability under section 237;
‘(G) will not engage in employment or labor for hire in the United States; and
‘(H) will not seek any form of assistance or benefit described in section 403(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1613(a)).
‘(2) SPOUSE- The spouse of an alien described in paragraph (1) may be admitted under the same terms as the principal alien if the spouse satisfies the requirements of paragraph (1), other than subparagraph (D).
‘(3) IMMIGRANT INTENT- In determining eligibility for admission under this subsection, maintenance of a residence in the United States shall not be considered evidence of intent by the alien to abandon the alien’s residence in Canada.
‘(4) PERIOD OF ADMISSION- During any single 365-day period, an alien may be admitted as described in section 101(a)(15)(B) pursuant to this subsection for a period not to exceed 240 days, beginning on the date of admission. Periods of time spent outside the United States during such 240-day period shall not toll the expiration of such 240-day period.’.”
and the companion piece is the ‘Visit USA Act’ (also co-sponsored by Senator Schumer):
http://www.business-standard.com/article/economy-policy/invest-500-000-in-property-and-stay-in-us-111102100173_1.html
….”Two American senators have introduced a bill that calls for the creation of a new homeowner visa that will allow foreigners who spend at least $500,000 on residential property in the US to obtain visas allowing them to live in the country.
The bipartisan proposal, part of a package that also would make it easier for international tourists to visit the US, is similar to an existing programme that puts foreigners on a fast track to a green card if they invest at least $500,000 in an American business that creates at least 10 jobs.
“Many people want to come and live in the United States,” said New York’s Republican Senator Charles Schumer, who introduced the legislation yesterday in the Senate along with Utah’s Republican Senator Mike Lee.
“They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”
The legislation would create a new homeowner visa that would be renewable every three years, but the proposal would not put them on a path to citizenship.”…..
See also;
http://www.advisor.ca/tax/tax-news/proposed-u-s-immigration-reforms-could-impact-older-clients-75911
Lots of discrimination baked into that bill in a upside down way. That meets up with Schumer’s persona
Non-Canadians not allowed.
Only rich people allowed who can afford 1/2 mil houses
Can’t bring your girlfriend (boyfriend)
Can’t have a younger wife (hubby)
“They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”
Out of the snow and into the lobster pot. I’m sure they’d be particularly pleased if some of those “extra supply of homes” those unsuspecting Canadians are meant to “sop up” are amongst the masses of sinkhole houses in Florida. Welcome to the greatest country on earth! 😉