Does a citizen of Canada who has a working Visa in the US files a 1040 just like other us Citizens?

It depends on whether you meet the Substantial Presence Test.

While many Canadians on working visas (like TN, H-1B, or L-1) do file Form 1040 just like U.S. citizens, this is not automatic. Your filing status depends on the number of days you are physically present in the United States.

If you meet the residency test, you are taxed on your worldwide income (just like a citizen). If you do not meet it (or claim a specific exception), you file as a nonresident and are taxed only on your U.S.-source income.

Core Explanation

For U.S. tax purposes, visa holders are generally classified as either Resident Aliens (file Form 1040) or Nonresident Aliens (file Form 1040-NR) based on the "Substantial Presence Test" (SPT).

1. The Substantial Presence Test (The Math)

You are considered a U.S. resident for tax purposes if you are physically present in the U.S. for at least:

• 31 days during the current year, AND
• 183 days during the 3-year period that includes the current year and the two preceding years, calculated as:
  • All days in the current year, plus
  • 1/3 of the days in the first preceding year, plus
  • 1/6 of the days in the second preceding year.

2. Scenario A: You Meet the Test (Resident Alien)

If you pass the SPT, you are treated exactly like a U.S. citizen for tax purposes.

• Form: You file Form 1040.
• Tax Scope: You must report worldwide income (including Canadian wages, interest, RRSP income, TFSA growth, etc.).
• Implication: You are subject to the same standard deductions and tax rates as U.S. citizens.

3. Scenario B: The "Closer Connection" Exception (Form 8840)

Many Canadians meet the SPT mathematically but still maintain their primary home and family in Canada. If you are in the U.S. for less than 183 days in the current calendar year, you may avoid being taxed as a U.S. resident by claiming a "Closer Connection" to Canada.

• Form: File Form 8840 (Closer Connection Exception Statement for Aliens).
• Result: You remain a Nonresident Alien and file Form 1040-NR. You are taxed only on U.S. income.

4. Scenario C: The Treaty Tie-Breaker (Form 8833)

If you are in the U.S. for more than 183 days in the current year, you cannot use the Closer Connection exception (Form 8840). However, if you are still considered a resident of Canada under Canadian law (e.g., you kept your house and family there), you are a "dual resident."

• Solution: You can use the U.S.-Canada Tax Treaty to "tie-break" your residency back to Canada.
• Form: You file Form 1040-NR supported by Form 8833 (Treaty-Based Return Position Disclosure).
• Result: You are treated as a nonresident for calculating U.S. tax liability, but you must still file as a resident for certain information reporting (like FBARs).

5. The Commuter Exception

If you live in Canada and commute to the U.S. for work (crossing the border daily), the days you commute do not count toward the Substantial Presence Test.

Audit and Practitioner Consideration

Because U.S.-Canada cross-border taxation is complex, the IRS frequently scrutinizes specific areas of non-compliance.

1. FBAR and FATCA Reporting:

   • Challenge: If you file as a Resident Alien (Form 1040), you must report your Canadian financial accounts (bank accounts, RRSPs, TFSAs) on FinCEN Form 114 (FBAR) if the aggregate value exceeds $10,000.
   • Risk: TFSAs (Tax-Free Savings Accounts) are not tax-free in the U.S. Income earned inside a TFSA is taxable on Form 1040, and the account often requires complex trust reporting (Form 3520), which carries high penalties for non-filing.

2. Departure/Arrival Years (Dual-Status):

   • Challenge: In the year you arrive or depart, you are often a "Dual-Status Alien"-taxed as a resident for part of the year and a nonresident for the other part.
   • Documentation: This requires filing a Form 1040 with a "Dual-Status Statement" (often a Form 1040-NR written as a statement) attached, or vice versa depending on your status at year-end.

3. State Tax Residency:

   • Trap: Even if you use a treaty tie-breaker to be a nonresident for federal purposes, specific states (like California or New York) may still consider you a resident if you live/work there, as they do not always follow federal treaty positions.

Summary

• Standard Rule: If you spend enough time in the U.S. (SPT), you generally file Form 1040 and pay tax on worldwide income.
• Closer Connection: If present < 183 days and your life is still in Canada, file Form 8840 to remain a nonresident.
• Treaty Tie-Breaker: If present > 183 days but your permanent home is in Canada, use Form 8833 to file as a nonresident.
• Commuters: Daily commuters from Canada do not count those days toward U.S. residency.

Suggested Next Steps

1. Calculate Your Days: Tally your days of presence in the U.S. for the current year and the two prior years to see if you meet the Substantial Presence Test.
2. Review Canadian Ties: Determine if you maintained a "permanent home" in Canada available to you at all times.
3. Check Account Balances: If filing as a resident, review all Canadian accounts (especially TFSAs and RESPs) to assess FBAR and Form 3520 filing requirements.
4. Consult a Cross-Border Specialist: If you hold a TFSA or mutual funds in Canada (PFICs), professional advice is strongly recommended to avoid punitive taxes and penalties.