Form 8840 Closer Connection Exception: How Snowbirds Avoid US Tax Residency

Every winter, hundreds of thousands of Canadians head south to Florida, Arizona, Texas, and other warm US states. If they spend enough days in the US, the IRS considers them US tax residents under the substantial presence test, which would require them to file a US return reporting their worldwide income and pay US tax on it. Form 8840 (Closer Connection Exception Statement for Aliens) is the form a snowbird files to claim an exception to the substantial presence test, preserving their status as a nonresident alien and avoiding US tax on non-US-source income.

How does the substantial presence test work?

The test uses a three-year weighted formula:

• Days present in the US in the current year: count at full value (1 day = 1 day)
• Days present in the US in the prior year: count at one-third value (1 day = 1/3 day)
• Days present in the US in the year before that: count at one-sixth value (1 day = 1/6 day)

If the weighted total is 183 or more, and the individual was in the US for at least 31 days in the current year, they meet the substantial presence test.

A Canadian who spends the same number of days in the US each year crosses the threshold at approximately 122 days per year (122 + 122/3 + 122/6 = 122 + 40.7 + 20.3 = 183). If a snowbird spends 4 months (about 120 days) in the US each winter, they are close to the line but likely below it. At 5 months (about 150 days), they are well over.

What counts as a day of presence? Any part of a day in the US counts as a full day, with limited exceptions: days of transit between two points outside the US (connecting flights), days when the individual is unable to leave the US due to a medical condition that arose while in the US, days commuting from Canada to work in the US (for certain border workers), and days present as a crew member of a foreign vessel.

What is the closer connection test?

To claim the closer connection exception, the individual must demonstrate that they have a “closer connection” to Canada than to the US. The IRS evaluates this based on the location of:

• The individual’s permanent home (if they maintain a home in both countries, the closer connection test considers which home is the primary one)
• Family (spouse, children, dependents)
• Personal belongings (furniture, cars, clothing, jewelry)
• Social, political, cultural, and religious affiliations (club memberships, church membership, voting registration)
• Business activities (other than the activities that constitute the individual’s tax home)
• The jurisdiction where the individual holds a driver’s license
• The jurisdiction where the individual votes
• The jurisdiction where the individual banks
• Professional and personal correspondence address

No single factor is decisive. The IRS looks at the totality of the circumstances. A snowbird who maintains a permanent home in Canada, keeps their belongings in Canada, has a Canadian driver’s license, votes in Canadian elections, has Canadian bank accounts, and belongs to Canadian organizations has a clear closer connection to Canada, even though they spend 5 months per year in Florida.

The exception can be lost if the individual takes affirmative steps to change their residency to the US: applying for a US driver’s license, registering to vote in the US, applying for US government benefits, or stating to a US bank or institution that they are a US resident.

What are the requirements for Form 8840?

Form 8840 is a one-page form (plus instructions) that asks for:

• The individual’s personal information (name, address, country of citizenship)
• The number of days present in the US in the current year, prior year, and the year before
• The country to which the individual claims a closer connection
• A description of the closer connection ties (permanent home, family, personal property, social ties, driver’s license, voting, banking)
• Whether the individual has applied for or taken steps toward becoming a lawful permanent resident (green card holder)

The form must be filed by the due date of the individual’s US return. For nonresidents with no US wages subject to withholding, the filing deadline is June 15. An extension to October 15 is available by filing Form 4868.

Important: Filing Form 8840 is not the same as filing a US tax return. It is a statement attached to (or filed in lieu of) the return. If the snowbird has no US-source income and is claiming nonresident status via the closer connection exception, Form 8840 may be the only document filed with the IRS.

When does the closer connection exception NOT work?

The exception is unavailable in several situations:

1. The individual was present in the US for 183 or more actual days in the current year. The closer connection exception only applies if actual current-year presence is fewer than 183 days. If the individual was physically in the US for 183 or more days in the current year, the exception does not apply, regardless of their ties to Canada. The individual must use the treaty tiebreaker (Article IV of the US-Canada treaty) instead.

2. The individual has applied for, or taken steps toward, adjusting their status to lawful permanent resident (green card). Filing Form I-485 or taking similar steps toward permanent residency makes the closer connection exception unavailable.

3. The individual has a “tax home” in the US during the current year. The tax home is the general area of the individual’s main place of business or employment. If the snowbird has a US business or US employment, their tax home may be in the US, which defeats the closer connection exception.

How does Form 8840 differ from the treaty tiebreaker?

Form 8840 and the treaty tiebreaker (Article IV of the US-Canada treaty) serve different purposes:

Form 8840 (closer connection exception): A statutory exception under IRC 7701(b)(3)(B). Available when the individual is present in the US for fewer than 183 actual days in the current year. If successful, the individual is treated as a nonresident alien under US domestic law.

Treaty tiebreaker (Article IV): A treaty-based mechanism available when the individual is a tax resident of both countries under each country’s domestic law (for example, the individual met the substantial presence test and cannot use the closer connection exception, but is also a Canadian resident under Canadian domestic law). The tiebreaker rules (permanent home, center of vital interests, habitual abode, nationality) determine which country’s resident the individual is for treaty purposes. Claimed on Form 8833 (Treaty-Based Return Position Disclosure) filed with a US return.

For most snowbirds, Form 8840 is the correct form, because they are present in the US for fewer than 183 actual days. The treaty tiebreaker is needed only when the closer connection exception is unavailable (for example, the snowbird spent 183+ actual days in the US in the current year).

What happens if you do not file Form 8840?

Failure to file Form 8840 does not automatically make the individual a US tax resident. The substantial presence test is a factual test, and the closer connection exception is a statutory provision that applies whether or not the form is filed. However, failure to file removes the procedural record of the claim and makes it harder to defend the position if the IRS inquires.

In practice, the IRS rarely contacts individual snowbirds about their US presence. But if the IRS does inquire (for example, if the snowbird applies for a US credit card, opens a US bank account, or is otherwise flagged), having Form 8840 on file demonstrates that the individual proactively claimed the exception and documented their closer connection to Canada.

The best practice is to file Form 8840 annually if the weighted day count exceeds 183. The filing cost is minimal (the form takes 30 minutes to prepare), and the protection it provides is substantial.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.