Non resident tax

ruib77 · Post by **ruib77** » Wed Mar 23, 2016 7:48 pm

I have few questions:

Regarding foreign income:

I moved to usa in Aug 2015
My family moved to usa in sept 2015

I guess I become non resident from sept 2015 because that is later date.

Do I need to pay tax to CRA on my foreign income for the month of Aug 2015?

If yes, How do I avoid dual taxation by both CRA and IRS on that months salary?

Regarding capital gain:

My house became rental property after I moved. If I send a election 45(2) request letter with my 2015 tax return, can I avoid capital gain in future?

Regarding Rental income:

My property manager did not withhold 25% from rent. I guess we need to get NR6 approved. Then he needs to provide me NR4 and then I can do S.216 (1159). Am I right? We want to pay tax on net income not on gross income.

Please help.

nelsona · Post by **nelsona** » Thu Mar 24, 2016 9:56 am

You will include the US income for that month, and take credit for the US tax portion for that income as a tax credit.

Don't bother with 45(2). You will owe tax on your FORMER principle residence if you sell after more than one year, on a pro-rated basis. Non-residents don't benefit from section 45.

Yes, you need to begin submitting 25% now until your Nr6 gets approved, and will have to send a check along with your separate 216 return for 2015, along with your departure return.

You will probably benefirt from filin ga ful year 1040 reporting all world income for the entire year for you and spouse, and then exempt your wages using 2555. That or a 1040NR.

ruib77 · Post by **ruib77** » Thu Mar 24, 2016 10:48 am

For 2015, I need to pay 25% on net or gross? Is there any way to pay 25% on net rental income for 2015 in this scenario?

Thanks.

nelsona · Post by **nelsona** » Thu Mar 24, 2016 12:51 pm

for ALL years, including 2015, you need to PAY 25% on NET, as calculated on your 216.

But until you get an approved NR6, you need to have 25% of GROSS withheld every month.

So, right now, you need to (a) start 25% withholding, (b) submit NR6 to reduce withholding, (c) take care of 2015 rental income tax by filing a 216.

ruib77 · Post by **ruib77** » Thu Mar 24, 2016 3:35 pm

Thanks. So, I will go ahead without NR4 and submit the s.216. I will attach all applicable receipts for any deduction( expenses) and the check.

Ask my property manager to open NR account with CRA and withhold and submit 25% of Gross for now till the NR6 is approved.

My property is owned by both me and my wife. So, I guess, we both need to submit separate s.216 and split all numbers. Am I right?

If we don't go for NR6 then we can pay 25% on Gross and then claim the expenses by s.216 every year. Am I right?

nelsona · Post by **nelsona** » Thu Mar 24, 2016 4:13 pm

All correct.

But, I don't know when an NR6 would not be beneficial for a small scale landlord such as yourself.
Besides NR6's can take a while to process, so the sooner you submit the better.

You will probably have some US tax to pay on this income too, so you want to have the money at your disposal rather than waiting MONTHS for 216 to be processed, which typically doesn't occur until august/September. Don't give CRA your money for 20 months.

ruib77 · Post by **ruib77** » Thu Mar 24, 2016 7:01 pm

Thanks again.

- How do I know if I have to pay U.S tax on Canadian rental income in U.S? Which form needs to be used?

- My wife and kids don't have Social security or ITIN. Do I have to file as single? because tax SW don't go forward without spouse Social security number or ITIN. Even though I select file separately. Do I have to get ITIN for them before I can do tax return?

nelsona · Post by **nelsona** » Fri Mar 25, 2016 7:10 am

Rental income is reported on schedule c of 1040. You do have to report it.

You may have tp finish your 1040 manually. I would contact the sw help to see how they proceed without ITIN, which you apply for when sending in your 1040.

ruib77 · Post by **ruib77** » Fri Mar 25, 2016 6:02 pm

Which form I should use for foreign tax credit on canadian rental property? I don't see any field for it in Schedule C of 1040.

Do both me an my wife needs to do Section C of 1040 by spliting numbers?

nelsona · Post by **nelsona** » Sun Mar 27, 2016 8:29 am

nelsona · Post by **nelsona** » Sun Mar 27, 2016 8:29 am

1116.
You are filing jointly in US

ruib77 · Post by **ruib77** » Sun Mar 27, 2016 9:03 am

Pls clarify one more time,

We are filing jointly both in Canada an U.S,

- I assume we both need to fill s.216 (1159) separately and
Split numbers? Am I right?

- I assume we both need to fill section c of 1040 separately and split numbers. Am I right?

- For foreign tax credit, do we both need to file 1116 separately?

nelsona · Post by **nelsona** » Sun Mar 27, 2016 10:16 am

Canada doesn't have joint filing, US does.
1 schedule C suffices.

and 1116 is for each TYPE of income. They reflect the income jointly reported.

ruib77 · Post by **ruib77** » Fri Apr 01, 2016 12:04 pm

Do we need to send all receipts for rental expenses, foreign income w2 etc with paper tax filing? Or only when it is audited and CRA asks for receipts?

Thanks.

nelsona · Post by **nelsona** » Fri Apr 01, 2016 1:16 pm

Read the guide.