Non-Resident in Both Canada and United States?

[canadiandeserter]

I moved from British Columbia, Canada to California, United States in September 2014. I expect to stay and work in the United States for the foreseeable future.

From what I have read, I must file as part-year resident for the California state return.

For the US federal return, I have the option to file as either dual-status alien or non-resident alien.

For the Canadian return, I would be a resident until September and non-resident thereafter.

If I choose to file the US federal return as a non-resident alien for the whole tax year, I would be non-resident for both countries from September to December. Is this acceptable?

Thank you for any information or suggestions!

[nelsona]

For US federal you also have the option of full year return. Use whichever gives you lowest US tax.
Your choice in US has no effect on how you file in Canada, as this will be departing resident (emigrant).
You are resident of US since September, it is just that you have not been resident long enough to be forced to file a 1040,

From my experience dual-status is not usually better than the other 2 options.

[canadiandeserter]

Thank you nelsona for the quick and helpful reply!

I had read about tax treaty tie-breaker rules and was confused as to whether I can be non-resident of both countries for part of the year.

I do not think I can file as full-year US resident because I meet neither the green card test nor the substantial presence test? I do expect to file as resident for the 2015 US federal tax return; would my filing status for 2014 create any hidden advantages or disadvantages for 2015?

If I file as non-resident for the 2014 US federal tax return, would I be exempt from filing Forms 3520, 3520A, 8938 and FBAR for all of 2014?

If I file instead as a dual-status resident, would I have to file Forms 3520, 3520A, 8938 and FBAR? If so, would they be based on all of 2014, or only the days I am considered resident?

[nelsona]

Cdns have the right to file full year 1040 in any case, regardless of days in US, by treaty.

If you file 1040NR you are exempt from all the extra filing like fbar, 3520, PFIC etc.
For someone arriving late in year like you this is often the best, esp, if you are single. You will be subject to all these for 2015,

Dual-status would require you to file all these, and doesn't buy you any better tax treatment.

That is why I said your choices really are 1040 full year and 1040NR

[canadiandeserter]

Thank you for letting me know about this treaty benefit! May you point me to where I can read more about it?

You have convinced me filing as dual-status has no substantial advantages. :)

The main advantage to filing as full-year resident and non-resident is the ability to claim exemptions, correct? The disadvantages would be having to report foreign accounts and be taxed on worldwide income, which would also bump up the tax bracket?

As a theoretical scenario (since it is too late for me), if I withdrew my RRSP entirely in 2014 after leaving Canada, the only tax due would be the non-resident 25% withholding. If I file as full-year resident in the US for 2014, would I be able to claim the foreign tax credit against the Canadian (salary) income earned in 2014 before leaving Canada? From what I have read on this forum, you indicate that RRSP distributions are considered general limitation income.

[canadiandeserter]

P.S. You mentioned filing as 1040NR would remove the requirement to file Form 8938. With the elimination of Form 8891 this year, is the deferral of undistributed RRSP income now automatic, even without filing Form 8938 or 8891?

[nelsona]

If you file 1040NR, your are not subject to FinCEN, FBAR, FATCA, and your RRSP income is not subject to tax. Didn't I say that?

LOTS of info on this alrady on this site. Happy browsing, please.