Departure Date for Canadian Tax Calculation

[babuk]

Dear All

I moved to US on Feb 2015 , and while my Wife/Kids joined me only by Sep. In US I filed 1040 as married filling jointly for whole year and showed 2 months Canadian wages as world income and paid the required taxes.

Now when I am filing my Canadian tax , will I be treated as a resident of Canada until Sep bcos of my wife (never worked) moved to US by Sep .
If it is Sep then I need to show US income from Mar to Sep as world income and need to pay the tax -minus the foreign tax credit I paid in US. Given the US/Canada disparity in tax I need to pay a substantial amount I believe.
or
Should I show my departure date as Feb 2015 based on my W2 and T4 and US tax return 1040 and only show my 2 months Canadian income for tax purpose.



Thx

[nelsona]

First, when you included the Cdn wages on your return, did you also exempt them using form 2555. You are supposed to do this. All other Cdn income, including yours and your spouse, can use form 1116 for the tax credit.

As to when you became non-resident would depend on what you did between Feb and Sept in terms of returning to Canada. As I've consistentlt advised, if SHE would vist YOU instead of YOU visiting HER, this would establish your home in US as the center of your family, rather than your old home.
Otherwise, as you seem to now realize, you don't become non-resident until SHE does, and you end up paying Cdn tax rate on your US income.

[babuk]

Thanks Nelsona.
yes I did and understand your point on the departure date.
In Canadian returns -foreign tax credit I showed the fed/state tax I paid in US , but my tax consultant said though FICA taxes are also can be added , social security tax cannot be counted in by a new rule. Can you give your feedback on this please

[nelsona]

FICA is another word for social security tax. The person is not knowledgeable in this area obviously.

[babuk]

Thanks Nelsona
The consultant referred this link which explains this was not supported and also confirmed he checked with the CRA.

http://www.cra-arc.gc.ca/E/pub/tp/itnew ... ml#P24_866

We have recently reviewed the treatment of social security taxes as income or profits taxes for the purposes of the foreign tax credit and we concluded that the position in IT-122R2 is not supportable in law, because the social security taxes reviewed do not qualify as taxes. Consequently, the CRA is revising its position on this point. As a rule, social security taxes will no longer be accepted as non-business income taxes for the purposes of the foreign tax credit.

[nelsona]

But it also states....

As provided in the Canada-U.S tax convention however, Canada has specifically agreed to give a foreign tax credit for payments under the Federal Insurance Contributions Act, more commonly known as FICA taxes. In accordance with our tax treaty with the U.S., the CRA will continue to allow a foreign tax credit for FICA taxes.

So, these are considered foreign tax creditable BY TREATY, which overrides CRA regs. It applied only to the OTHER Countries which collect thsioe taxes and are not addressed in treaties.

Your person is absolutely wrong on this. he is looking at an old statement out of context and only partially reading. FICA = US social security.

and T2209:
Contributions made under the U.S. Federal Insurance
Contributions Act (FICA), including Social security and Medicare
taxes, qualify for this credit.
.

[babuk]

Thanks very much Nelsona.
My bad , i didnt look at this very closely and totally relied on the consultant
I overpaid 6K to CRA , any advise how to claim this back.
Should i resend a amended tax forms explaining the situation

Tx

[nelsona]

T1-ADJ is used to amend returns.

Once you file with a certain departure date, you would no doubt need to file an NR73 along with your adjusted tax return to PROVE when you left.