I have a question about determining residency for spouses with differing departure dates. Both are Canadian citizens and have been residents of Canada their entire life. The husband just got a job in the US and will be moving there permanently in March. His wife and young child will be staying behind in Canada temporarily to sell the house and will join him several months later (likely in June). The wife and child will not go visit the husband in the US and the husband will not come back to visit them in Canada. In other words they will be completely separated from each other this entire time.
I’m familiar with CRA’s residency rules, the need to sever all of your ties, the departure rules, etc. I’m also fairly familiar with the treaty tie-breaker rules. CRA says the following:
In General, you become a non-resident of Canada on the LATEST of the following dates:
1) The date you leave Canada;
2) The date your spouse or common-law partner and dependants leave Canada to join you; or
3) The date you become a resident of the country to which you are immigrating
So based on CRA guidelines, would the husband and wife have the same departure date in June? I’m almost positive that I have seen other posts on this forum indicating otherwise. The one I remember in particular with a similar situation would suggest that the husband would have a departure date in March and the wife’s would be in June. If this is the case, I’m looking for an explanation of why this is. I’m assuming it must be because of the treaty tie-breaker rules, but I’m struggling to understand why.
Even if the husband bought a house in the US before the wife and child moved there, they would still tie the 1st tie-breaker test (permanent home) and would move on to the 2nd test (centre of vital interests). You would then basically weigh his job in the US vs. the fact that some of his secondary ties and two of his primary ties (wife and child) still remain in Canada. Not to mention the fact that he was born in Canada and has lived there all of his life. Do your wife, child and secondary ties hold more weight than his job in the US; thereby maintaining his residency status until the wife and child join him in the US?
I also recall Nelsona mentioning that if you want to try and maintain your residency status in Canada in similar situations like this, the husband should visit the wife and child on a regular basis in Canada instead of the wife and child coming to visit him in the US. But what about this case when the husband does not come back to visit them, does this make a difference or would he still be considered a resident of Canada until June?
Can anyone help me with this confusion? Sorry for the long post, but this was the only way I could explain this properly.
Determine Residency via Treaty Help!
Moderator: Mark T Serbinski CA CPA
The deciding factor of "centre of vital interests" for the spouse that leaves first, is -- once they have a permanent to live -- whether THEY visited back in Canada, or whether the remaining spouse visited US. If they didn't visit, then they can be considered non-resident form the day they left.
Remember that one does not have to buy a house to have a permanent abode (an apartment is fine).
While not having to pay taxes on the US-earned income and simplifying the departure return are attractive reason for the earlier departure date, there are compelling reasons why one would want the later one, like having failed to comply with CRA's non-resident sale of real estate rules, or to avoid IRS' onerous foreign reporting rules.
Canada WILL consider him resident until June if he wants to be.
besides, you will simply file a departure date, nothing else, Only if CRA comes back will one need to prove their whereabouts and situation during the period in question, which is rare.
Remember that one does not have to buy a house to have a permanent abode (an apartment is fine).
While not having to pay taxes on the US-earned income and simplifying the departure return are attractive reason for the earlier departure date, there are compelling reasons why one would want the later one, like having failed to comply with CRA's non-resident sale of real estate rules, or to avoid IRS' onerous foreign reporting rules.
Canada WILL consider him resident until June if he wants to be.
besides, you will simply file a departure date, nothing else, Only if CRA comes back will one need to prove their whereabouts and situation during the period in question, which is rare.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
This is extremely helpful, thank you so much Nelsona; you explained this extremely well!
I guess my only follow-up question is what would happen if it takes considerably longer to sell the house than planned? Like a year or even longer? Would he still be able to maintain his residency status in Canada during this period? I suppose as long as he continues to come back to Canada to visit his wife and child on a regular basis he might be able to? I also suppose his ability to maintain his Canadian residency would be strengthened if he had a specific contract with his US employer that said he was only under contract for “x†number of days; or would this even help him?
Does CRA have a certain time limit or rule of thumb they use in this type of situation; like number of days you are out of the country before they force you to be a non-resident?
I know none of this is a science and in the rare circumstance that CRA decided to challenge any of this in court, they would consider all of the factors and any two judges may come up with completely opposite decisions. I guess I was just looking for a rule of thumb if one even exists.
I guess my only follow-up question is what would happen if it takes considerably longer to sell the house than planned? Like a year or even longer? Would he still be able to maintain his residency status in Canada during this period? I suppose as long as he continues to come back to Canada to visit his wife and child on a regular basis he might be able to? I also suppose his ability to maintain his Canadian residency would be strengthened if he had a specific contract with his US employer that said he was only under contract for “x†number of days; or would this even help him?
Does CRA have a certain time limit or rule of thumb they use in this type of situation; like number of days you are out of the country before they force you to be a non-resident?
I know none of this is a science and in the rare circumstance that CRA decided to challenge any of this in court, they would consider all of the factors and any two judges may come up with completely opposite decisions. I guess I was just looking for a rule of thumb if one even exists.
I personally do not like anyone pretending to live in one place or another when they are physically not there.
the work contract is meaningless. These situations can even apply to tourists.
So, if this went longer than say, six months, I would be expecting REGULAR trips back to Canada. Like monthly.
But I would then be questioning why they are doing this (other than house sale). Are they trying to hold on to some Cdn benefit that they are no longer entitled to, for example.
Then, at some point, the might tire of this arrangement, and decide that they are no longer resident. Then, the problem is what "event" do they tie their departure date to? They left months years before and said they still resided in Canada. Now nothing has changed, and they are all of a sudden non-resident 9or worse, they back-date their non-residency?
the work contract is meaningless. These situations can even apply to tourists.
So, if this went longer than say, six months, I would be expecting REGULAR trips back to Canada. Like monthly.
But I would then be questioning why they are doing this (other than house sale). Are they trying to hold on to some Cdn benefit that they are no longer entitled to, for example.
Then, at some point, the might tire of this arrangement, and decide that they are no longer resident. Then, the problem is what "event" do they tie their departure date to? They left months years before and said they still resided in Canada. Now nothing has changed, and they are all of a sudden non-resident 9or worse, they back-date their non-residency?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
This is tremendous information Nelsona, thank you so much for the great insight! I recently came across a couple from Canada that moved down to the US with their two kids and have been living there for almost three years and are still claiming to be residents of Canada. The individual doing their taxes said that because they only had a temporary 3 year contract to work in the US they can still be considered Canadian residents. They don’t even have a house in Canada. I told them this was likely not true, but they didn’t want to hear it. Sounds like they have been illegally collecting the child tax benefit and universal child care benefit as well.
Just one last question for you if you don’t mind? If I’m the couple mentioned above with a temporarily contract, or even a single person with a temporary contract in the US and a house “available for use†back in Canada; in general, in both situations you would still become non-residents of Canada as soon as you move to the US, rent or buy a place and start working correct?
I also see a lot of similar situations when single teachers with do dependants move to China or North Korea to teach for a few years and they all try to maintain their Canadian residency; even know they have no assets that would be deemed to be disposed on departure and Canada has higher tax rates than the country they are moving to. Makes no sense to me, unless I’m overlooking something?
By the way, I have spent hours and hours researching cross border tax matters over the past few years and hands down this is the best place to come to for help. I’ve read hundreds of your posts, many of David Ingram’s posts and have spent time on Gary Gauvin’s and many other websites; but in my opinion you are the most knowledgeable cross border guy out there.
I live in Windsor Ontario Canada in a border town and no one seems to have a clue how to prepare cross border returns properly (aside from maybe one guy- Michael Kennedy; not sure if you have heard of him). I’m an accountant and financial advisor and have been trying to teach myself cross border taxation the last 2-3 years to help some of my clients impacted by this stuff. I’ve now taken 3 cross border courses, have read many books and of course searched all over the internet. I hope you don’t mind me coming to you for advice from time to time. I will only come to you when I’m absolutely stuck; I try to find answers to everything myself first.
In any event, thanks again and have a great night. Sorry for the rambling.
Just one last question for you if you don’t mind? If I’m the couple mentioned above with a temporarily contract, or even a single person with a temporary contract in the US and a house “available for use†back in Canada; in general, in both situations you would still become non-residents of Canada as soon as you move to the US, rent or buy a place and start working correct?
I also see a lot of similar situations when single teachers with do dependants move to China or North Korea to teach for a few years and they all try to maintain their Canadian residency; even know they have no assets that would be deemed to be disposed on departure and Canada has higher tax rates than the country they are moving to. Makes no sense to me, unless I’m overlooking something?
By the way, I have spent hours and hours researching cross border tax matters over the past few years and hands down this is the best place to come to for help. I’ve read hundreds of your posts, many of David Ingram’s posts and have spent time on Gary Gauvin’s and many other websites; but in my opinion you are the most knowledgeable cross border guy out there.
I live in Windsor Ontario Canada in a border town and no one seems to have a clue how to prepare cross border returns properly (aside from maybe one guy- Michael Kennedy; not sure if you have heard of him). I’m an accountant and financial advisor and have been trying to teach myself cross border taxation the last 2-3 years to help some of my clients impacted by this stuff. I’ve now taken 3 cross border courses, have read many books and of course searched all over the internet. I hope you don’t mind me coming to you for advice from time to time. I will only come to you when I’m absolutely stuck; I try to find answers to everything myself first.
In any event, thanks again and have a great night. Sorry for the rambling.
Residency is a treaty matter -- each countries treaty is slightly different.
For anyone, single or married, to break Cdn residency that must at least meet the IRS requirement for resident, which is the SPT. So a 3-6 month contract woukd hardly make one a non-resident, no more than a snowbird living in AZ for 5.5 months. There is still an element of intention.
Now a person who leaves for a PERMANENT job. divesting themselves of all thins Cdn, but who then 4 months later loses that job, could still claim NR for that period.
Curious as to what courses you might be taking?
For anyone, single or married, to break Cdn residency that must at least meet the IRS requirement for resident, which is the SPT. So a 3-6 month contract woukd hardly make one a non-resident, no more than a snowbird living in AZ for 5.5 months. There is still an element of intention.
Now a person who leaves for a PERMANENT job. divesting themselves of all thins Cdn, but who then 4 months later loses that job, could still claim NR for that period.
Curious as to what courses you might be taking?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Ok makes sense. So as suspected, each of these cases I mentioned would likely be considered non-residents then. And of course if you are in the US for less than 6 months on a SERIES of short term contracts over SEVERAL years, you can always file the closer connection exception form even if you meet the SPT over the 3 year rolling “4 month†average (as long as you are never over 183 days in one year; otherwise you will have to rely on the treaty).
Sorry, one last question to get the complete picture. So based on the SPT, what is the best way to handle someone that departed Canada late in the year and didn’t meet the SPT (Say Dec 5th or any time after the 183 day mark for that matter)? You would have no requirement to file a 1040 and report your WORLDWIDE income for the period of Dec 5th to Dec 31st. If I understand some of your other posts on this matter correctly, The IRS says you have to file a dual status (and file as a non-resident for this short period of time and are restricted on some of your exemptions), but have the OPTION to file a full 1040NR or 1040 for the entire year.
If the situation was reversed and I move from the US permanently and arrive in Canada on say December 5th; I file a tax return in Canada as a resident for Dec 5th until Dec 31st and report my worldwide income for this period (even know I’ve only been in Canada for 26 days during the year). I guess it just seems strange to me that I can’t just complete a 1040 for ONLY the period from Dec 5th to Dec 31st like you can on the Canadian side. I assume the reason this works in Canada and not the US is because Canada does not have the SPT or Greencard provision?
For the dual status I just include my US SOURCE income for the period of Dec 5th to Dec 31st on a 1040NR and write dual status at the top, but if I decide to file a full 1040NR or 1040 I have to include my income for the entire year correct (all US SOURCE income for 1040NR and all WORLDWIDE income for 1040)?
From strictly a tax point of view (not taking into consideration the advantages and disadvantages of US reporting requirements etc) if I only have US SOURCE income for the period of Dec 5th to Dec 31st, is there really a difference between the dual status reporting US Source income for the 26 days and electing to file a 1040NR reporting income for the entire year?
Based on some of your other posts on this matter, I know a dual status is rarely the best way to go, but in this case would it really make a difference? I suppose it might make a difference because the dual-status limits some of your exemptions; In which case I would be better off filing a full 1040NR for the entire year because I have no other US SOURCE income from Jan 1st to Dec 4th and would get to use all of the exemptions? Does this sound right?
I took the cross border courses from the Knowledge Bureau over the last 3 years. The company is based out of Winnipeg in Canada. They were just ok… I did learn a lot from them, but I have yet to find a course that REALLY goes into the details (probably because so few people actually understand this stuff). Do you have any suggestions for some better courses, books etc? I’m always looking for any new information I can get.
Agreed, I should definitely start answering a few questions when I feel confident about the subject matter. I’m fairly weak on the US side, but will try to offer some help from time to time on the Canadian side when I feel comfortable answering. I will let you correct me if necessary. Sorry for the long reply, I promise this is my last.
Sorry, one last question to get the complete picture. So based on the SPT, what is the best way to handle someone that departed Canada late in the year and didn’t meet the SPT (Say Dec 5th or any time after the 183 day mark for that matter)? You would have no requirement to file a 1040 and report your WORLDWIDE income for the period of Dec 5th to Dec 31st. If I understand some of your other posts on this matter correctly, The IRS says you have to file a dual status (and file as a non-resident for this short period of time and are restricted on some of your exemptions), but have the OPTION to file a full 1040NR or 1040 for the entire year.
If the situation was reversed and I move from the US permanently and arrive in Canada on say December 5th; I file a tax return in Canada as a resident for Dec 5th until Dec 31st and report my worldwide income for this period (even know I’ve only been in Canada for 26 days during the year). I guess it just seems strange to me that I can’t just complete a 1040 for ONLY the period from Dec 5th to Dec 31st like you can on the Canadian side. I assume the reason this works in Canada and not the US is because Canada does not have the SPT or Greencard provision?
For the dual status I just include my US SOURCE income for the period of Dec 5th to Dec 31st on a 1040NR and write dual status at the top, but if I decide to file a full 1040NR or 1040 I have to include my income for the entire year correct (all US SOURCE income for 1040NR and all WORLDWIDE income for 1040)?
From strictly a tax point of view (not taking into consideration the advantages and disadvantages of US reporting requirements etc) if I only have US SOURCE income for the period of Dec 5th to Dec 31st, is there really a difference between the dual status reporting US Source income for the 26 days and electing to file a 1040NR reporting income for the entire year?
Based on some of your other posts on this matter, I know a dual status is rarely the best way to go, but in this case would it really make a difference? I suppose it might make a difference because the dual-status limits some of your exemptions; In which case I would be better off filing a full 1040NR for the entire year because I have no other US SOURCE income from Jan 1st to Dec 4th and would get to use all of the exemptions? Does this sound right?
I took the cross border courses from the Knowledge Bureau over the last 3 years. The company is based out of Winnipeg in Canada. They were just ok… I did learn a lot from them, but I have yet to find a course that REALLY goes into the details (probably because so few people actually understand this stuff). Do you have any suggestions for some better courses, books etc? I’m always looking for any new information I can get.
Agreed, I should definitely start answering a few questions when I feel confident about the subject matter. I’m fairly weak on the US side, but will try to offer some help from time to time on the Canadian side when I feel comfortable answering. I will let you correct me if necessary. Sorry for the long reply, I promise this is my last.
Your course would have taught you to become completely familiar with IRS Pub 519, and with both emigrating and newcomer provisions from CRA. Obvioulsly it did not.
I'm here to help INDIVIDUALS who are planning or have recently moved in these matters, not providing free advice so that you can then charge 4-figures to give them my solutions. Start your own website if you have a business; I certainly would.
I'm here to help INDIVIDUALS who are planning or have recently moved in these matters, not providing free advice so that you can then charge 4-figures to give them my solutions. Start your own website if you have a business; I certainly would.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Ok understandable, thanks for all the advice up to this point; it has been invaluable. Unfortunately the courses did not cover this; this is why I was inquiring about some better courses out there. Just for the record I do not charge anyone for this service. I only offer it to a select few individuals (who have approached me for advice) as a value added service. This is more of a hobby for me. I’m extremely passionate about this area of taxation and I really am just trying to learn this stuff. It’s just unfortunate that there are so many other accountants out there that do charge a ridicules amount of money and really have no idea what they are doing. I REFUSE to be one of them and want to educate myself properly before I would ever provide this service for a fee. I’m a professional and have a fiduciary duty to do so.
I can’t thank you enough for taking the time to answer the few questions I did have. You have indirectly helped several individuals that could have just as easily posted the same questions on this forum had I directed them to it. I'm also sure that others in similar situations have surely learned from our previous discussions and you have answered many of their questions.
I really hope I have not offended you in any way and have the utmost respect for you. I was just trying to gain your respect. I really have looked up to you for years, and commend you on what you have done here. I’m sure there are many accountants over the years that have posted on this forum masquerading as individuals. I thought I would take the high road and be upfront with you.
I can’t thank you enough for taking the time to answer the few questions I did have. You have indirectly helped several individuals that could have just as easily posted the same questions on this forum had I directed them to it. I'm also sure that others in similar situations have surely learned from our previous discussions and you have answered many of their questions.
I really hope I have not offended you in any way and have the utmost respect for you. I was just trying to gain your respect. I really have looked up to you for years, and commend you on what you have done here. I’m sure there are many accountants over the years that have posted on this forum masquerading as individuals. I thought I would take the high road and be upfront with you.