US Canada Taxes Help

v19 · Post by **v19** » Tue Feb 08, 2011 6:57 pm

I worked for several years in US(H1B) and I moved to Canada(PR) in Feb 2010 and worked(Incorporated) upto mid dec 2010. I have no earnings in US for dec 2010 but got paid thru Jan to May 2010 some salary dues. There is tie breaker rule in my situation ie has to file as resident in US and also in canada. Based on the treaty, I decided to file Taxes as Resident in Canada and non resident in US. Please share your opinion if my decision is right. And I would need to know if I have to report my incorporated income in US taxes. I have not taken anything like salary in US but just transferred from bus acct to persoanl acct for day to day expenses. Now I am planning to report already used money as divident income in my canada taxes. However I am not sure how to report this dividends and also some money left in business acct in candada on my US taxs returns. I appreciate any help here as well

nelsona · Post by **nelsona** » Tue Feb 08, 2011 8:36 pm

Well, there is no doubt that you became Cdn resident in feb 2010, so you file a newcomer reurn from that date. You don't have any choice on that.

For US, regardless of your resident status, you can also file full year 1040 in US if you wish, or as a departing dual-status, 1040 combined with 1040NR. Most try both ways, and pick the one that yields lowest US tax bill.

Filing full year maens reporting ALL world income, and then either exempting your Cdn wages, or taking credit for Cdn taxes on your US return.

v19 · Post by **v19** » Wed Feb 09, 2011 12:03 pm

Thank you so much for your response. Can you let me know, if we have to report my US income(which is actually back dues for work done before moving to canada) but paid while I was in Canada (feb 2010 to may 2010)

nelsona · Post by **nelsona** » Wed Feb 09, 2011 1:41 pm

Unfortunately, yes. Any income recieved after arriving in canada is taxable there.

v19 · Post by **v19** » Thu Feb 10, 2011 11:55 am

Thanks Nelsona for your inputs. Actually, I did have my home(rental apt) thru April 30 2010 in US, and I rented a new apt and incorporated in Feb 2010. - will I have choice that I was resident in canada only from May 1st 2010 and all earnings upto april 30 - will report to US and after april 1st report to Canada. Is my assumption right - help with your thoughts

nelsona · Post by **nelsona** » Thu Feb 10, 2011 1:36 pm

No. You "moved" to canada (your word) and worked there since feb. That is when you started residing in canada and not US.

v19 · Post by **v19** » Fri Feb 11, 2011 3:57 pm

due to tiebreaker rules - habitual abode.. per the treaty, I want to file only 1040NR in US - as I picked up Canada to file as resident status - but one of your suggestions says dual status return ie departing NR retrun in US - Can you suggest i I am right or need to file dual status return. I am confused as I left us in feb 2010 and came back to US in dec 2010

nelsona · Post by **nelsona** » Fri Feb 11, 2011 4:25 pm

So, you merely went to work in canada temporarily? That was not clear from your original post. What are you dodng in US now?

If that is the case, and you live in US at both the beginning and end of last year, thne you must file in US as a full-year resident. You will have to report Cdn income, and use foreign tax credits to reduce your US tax. You cannot exclude your Cdn wages because you were not out of US long enough.

v19 · Post by **v19** » Fri Feb 11, 2011 5:02 pm

In canada, i incorporated(as a corporation) to work for a client and in us i am on h1b visa

that was the reason for tie breaker rule - US rules says I have to file as resident and also canada rules also say i have to file as resident - hence per treaty/habitual... i picked up to file in canada where i lived 286 days as resident and will file iin US as non resident. After I came to US in Dec,, I didn't get paid anything in US in Dec 2010 but my corporation in canada got dues paid which i usually transfer to my personal acct for my use and ofcourse will later report that as dividends

Hope my assumptions are right

nelsona · Post by **nelsona** » Sat Feb 12, 2011 8:13 am

No, you were resident in US at beginning of year, and at end of year, so you cannot file as a non-resident of US. At best you might be able to file a part year resident, but this is worse than filing as resident.

For canada you were only residnt for those days, you can't file as full-year resident.

Since you are resident of US, you are considered non-resident of cnada by treaty. You habitual abode, if you want to use that, is the US.

v19 · Post by **v19** » Sat Feb 12, 2011 5:38 pm

will it be possible to file as resident in US and also resident in Canada - otherwise if non resident in canada the taxes on incorporation will be very high

nelsona · Post by **nelsona** » Sat Feb 12, 2011 7:22 pm

You are not resident in canada, this filing in cxanad must be as non-resident, at least for the potion gbefore feb and after december.

v19 · Post by **v19** » Mon Feb 14, 2011 10:43 am

when you say atleast before feb and after dec file as non resident - does that mean I can file as resident from feb thru mid december for my stay in canada - does canada allow dual status returns

nelsona · Post by **nelsona** » Mon Feb 14, 2011 10:50 am

Canada has arrival and departure dates.

v19 · Post by **v19** » Mon Feb 14, 2011 5:00 pm

sorry Nelsona, I couldn't understand what that mean.. I am asking just that can i file as resident in canada for the period of my stay or dual status return ie feb thru dec as resident and rest of the period as non resident