After over four years in the US, I chose to return to Canada in May. I will need to file both US and Canadian taxes for 2010 after having found a new job in this summer. I intend to file Form 1040 for the period from January to May and a NR-1040 covering the remainder of the year (I have rental property in the US). I will allocate the property expenses/mortgage interest deduction by month between the two returns. Is this the correct way of doing this? The property is located in a state that I was never resident in. Hence I will file just one non-resident return for the whole year.
Unfortunately, I only found out about the Form 1040-C recently despite undertaking exhaustive research about the tax implications of leaving before I left. Do I still need to file one after coming back?
Finally, the property I own and rent out is co-owned with a US citizen. He collects the rent and deals with the tenants therefore acting as the property manager/rental agent. I gave him a Form 4224 so the 30% withholding won't apply. I intend to elect to be taxed on a net basis as part of my US non-resident tax filing I will submit with my 2010 tax filing. I have read this cannot be revoked without permission from the IRS. If I move back to the US and become a tax resident again - does it just automatically revoke itself?
Thanks!
Return to Canada
Moderator: Mark T Serbinski CA CPA
Don't worry about 1040-C. Its never enforced on Cdns.
You might want to file a full year 1040, as this will probably yield a lower US taxrate, and you can exclude your Cdn wages by form 2555 instead of 1040-NR.
4224 will lapse if you return, no problem.
You might want to file a full year 1040, as this will probably yield a lower US taxrate, and you can exclude your Cdn wages by form 2555 instead of 1040-NR.
4224 will lapse if you return, no problem.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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william502
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- Joined: Sun Jan 02, 2011 4:21 pm
Thanks so much nelsona.
From Publication 519:
Nonresident at end of year. You must file Form 1040NR or Form 1040NR-EZ if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. Write “Dual-Status Return†across the top of the return. Attach a statement to your return to show the income for the part of the year you are a resident. You can use Form 1040 as the statement, but be sure to mark “Dual-Status Statement†across the top."
It appears I will need to file a Form 1040 NR. I assume your suggestion to file a Form 1040 for the whole year has to do with the ability to claim certain itemized deductions (yielding low tax) not allowable in the 1040 NR Is it still wise to do so in light of the above info?
Sorry, I forgot to mention I'm not a green card holder so would not be taxed on worldwide income. The 2555 is tailored to US citizens and residents. Needless to say, the US has no claim on my Canadian income I earned upon returning so I see no need to report it on the 1040 NR.
From Publication 519:
Nonresident at end of year. You must file Form 1040NR or Form 1040NR-EZ if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. Write “Dual-Status Return†across the top of the return. Attach a statement to your return to show the income for the part of the year you are a resident. You can use Form 1040 as the statement, but be sure to mark “Dual-Status Statement†across the top."
It appears I will need to file a Form 1040 NR. I assume your suggestion to file a Form 1040 for the whole year has to do with the ability to claim certain itemized deductions (yielding low tax) not allowable in the 1040 NR Is it still wise to do so in light of the above info?
Sorry, I forgot to mention I'm not a green card holder so would not be taxed on worldwide income. The 2555 is tailored to US citizens and residents. Needless to say, the US has no claim on my Canadian income I earned upon returning so I see no need to report it on the 1040 NR.
As i said, in the year you leave US, you are allowed to consider yourself a resident for the entire year. That is also in Pub 519. Additionally, Cdns are allowed to use anything that a US citizen would use in similar situation, which includes 2555.
Were you here for advice, or to quote me IRS pubs?
Were you here for advice, or to quote me IRS pubs?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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william502
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- Joined: Sun Jan 02, 2011 4:21 pm
Remember that Cdns get overrides beyond Pub. 519. Cdns are treated like americans, by treaty, when it is beneficial.
As with the dozens who have posted your situation here before you, filing 1040 with 2555 against your Cdn wages will most always be preferable.
Save yourself the trouble of reading a publication that, by and large, doesn't apply to you.
As with the dozens who have posted your situation here before you, filing 1040 with 2555 against your Cdn wages will most always be preferable.
Save yourself the trouble of reading a publication that, by and large, doesn't apply to you.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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william502
- Posts: 10
- Joined: Sun Jan 02, 2011 4:21 pm
Nelsona,
Thanks again. I appreciate your help. This is good info. Forgive me for asking, but the option for filing a full year return during the year of departure is indeed mentioned (albeit) buried somewhere in Pub 519 right? If not, where were you able to find out about this? Not challenging the expert at all, just curious where this info can be found.
I intend to file a Canadian return declaring only the income I earned starting from the day I arrived. But when I go about claiming the foreign tax paid to the US and to the state where my property is located, the only foreign earnings in question should be US income allocable to the period following my return since I am not declaring any US source income on a full year basis?
Thanks again. I appreciate your help. This is good info. Forgive me for asking, but the option for filing a full year return during the year of departure is indeed mentioned (albeit) buried somewhere in Pub 519 right? If not, where were you able to find out about this? Not challenging the expert at all, just curious where this info can be found.
I intend to file a Canadian return declaring only the income I earned starting from the day I arrived. But when I go about claiming the foreign tax paid to the US and to the state where my property is located, the only foreign earnings in question should be US income allocable to the period following my return since I am not declaring any US source income on a full year basis?
Your analysis of the taxable portion of your US income in canada is correct.
You also want to make sure that you take as much of any discretionary US incoem BEFORE moving back.
Also, have you looked at converting your IRA and pensions to Roth before returning. This is important.
You also want to make sure that you take as much of any discretionary US incoem BEFORE moving back.
Also, have you looked at converting your IRA and pensions to Roth before returning. This is important.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing