income on nr return

v19 · Post by **v19** » Sun Mar 25, 2012 9:36 pm

Hi

I have closed my CCPC on june 2011 after I received my dues from dec 2010 and also from some remote work in jan 2011 and paid self as T5 for all balance in my corp account and filed all corp taxes as resident corporation. I have lived in US all year 2011

Can I file as non resident while I filed corp taxes as resident. if yes, do I have to report US income on my Canadian NR return or just the T5 income is sufficient.

FYI - i have filed as resident in both US and Canada for 2010

Thanks for your help

JGCA · Post by **JGCA** » Mon Mar 26, 2012 8:51 am

Corp tax filing has no bearing on your pers tax return, you are claiming to still be a resident of Canada then you file your tax return with the T5. If you have left Canada you need to file a departure return and take into income what dividends you earned prior to departure and thereafter only witholding tax should have been paid on any subsequent dividends. In the US if you are a resident you include the dividends into income and get a credit fro the witholding tax. If you are a non resident of US filing a 1040NR then you only show income that is US source this would not be US source.

It depends on how you are determining residence.

If you do file that you left Canada then you are deemed to have disposed of your CCPS shares at that time for FMW which would have been reduced had you paid out a large dividend prior to departure.

v19 · Post by **v19** » Mon Mar 26, 2012 9:31 am

If I don't have to report my US income on Canada NR return, then I don't worry about being claimed as resident of canada without filing departure return.

Otherwise, I will file departure return. Does the departure date should be exactly the date we left canda or can we choose a date after we paid out the dividends to self while living in US

After filing departure tax return, Can my closed corporation pay the tax now as withholdding tax for the dividends paid self. This means I don't have to file personal taxes in this case, right

JGCA · Post by **JGCA** » Mon Mar 26, 2012 4:09 pm

If you do not file a CND departure return then you are still a resident of CND so you can not file a CND NR return, the date of departure is when you left with the family.

v19 · Post by **v19** » Tue Mar 27, 2012 12:32 pm

thank you so much for the inputs. Do have any idea where I should udpate my dividend income on my us 1040. As I have already paid corp taxes(closed ccpc) for this amount, and hence want to know how I can get reduced rate in us returns

JGCA · Post by **JGCA** » Tue Mar 27, 2012 2:30 pm

US does not have a dividend tax cr amount to compensate you for the corp tax as we do in Canada. You show the dividends as ordinary taxable dividends NOT Qualified since they are CND.

v19 · Post by **v19** » Tue Mar 27, 2012 3:09 pm

this is now making my worried as i have already filed all my ccpc returns last year when I closed that - now reporting as dividends in us is putting me with higher tax even though the ccpc is operated just for my job and paid ccpc taxes in canada -any other options for me please that you would suggest

JGCA · Post by **JGCA** » Wed Mar 28, 2012 9:54 am

Running a private corp, taking inicome out as dividend in Canada is a good tax statergy as long as the CCPC income is subject to small business tax rate and you the shareholder get advantage by the built in dividend tax credit mechanism. However leaving Canada these dividend do no long allow you the tax cr in US and the diov are subject to witholding tax.

You will definitely be at a disadvantage now, what you should have done besides geting profession tax advise was to take the deemed dividend in Canada before leaving on the disp of the shrs pay tax to Canada on this with the tax credit allowed add this to your sharholder loan account and draw this out tax free while in the US as loan repayment.

Now its probably too late, you may have to take it out as consulting fee in order for the CCPC to get a deduction from income to offset the tax you pay because as a dividend the CCPC get no tax shield, REALLY YOU NEED A TAX PRO TO LOOK THIS OVER. whenever there is a corp you need to look at both tax aspects.