Hi,
I will be moving to California on TN visa. My wife and kids will be staying back in Canada and we will be keeping our house in Canada.
Because of this I would be taxed as resident both in USA and Canada.
I would be liquidating my TFSA before the move.
My question is whether I would be accumulating TFSA contribution room while I am in USA as I would be treated as a resident for Canadian Tax.
Here is what CRA says[i][color=black] "Even if you no longer live in Canada, you may have residential ties in Canada that are sufficient for you to be considered a factual or deemed resident of Canada. In these cases, the regular rules for opening a TFSA still apply.
Residential ties include:
a home in Canada;
a spouse or common-law partner or dependants in Canada;
personal property in Canada, such as a car or furniture; or
social ties in Canada."[/i][/color]
"
thanks
Rakesh[color=black][/color]
TFSA contribution room while in USA on TN
Moderator: Mark T Serbinski CA CPA
The CRA wording is pretty clear, IF you remain a CDn resident, you will continue to amass TFSA contribution room (added to what you will have once you collapse your TFSA).
The question becomes if you really are going to be a Cdn resident. By treaty, if you live and work in US, and have "more" ties in US than Canada, then you will be a US resident, regardless of the ties you have in Canada. The ooposite is also true.
So, if you do remain a Cdn residnet (this would only be if you make FREQUENT visits to Canada, then you can avoid being taxed as a US resident (normally one does want to be taxed as a US resident, but there are now advantages to not be considered as such) then you would file a 1040NR (even using the special treaty provison for married folks) and then not have to bother collapsing TFSA, reporting RRSP elections, etc. You would be taxable. in Canalifornia on world income however as they dp not follow the treaty.
But lets say you don't mind CHOOSING to filea 1040 (while maintaining your Cdn residency also), then collapsing TFSA, and electing RRSP deferral, etc would be the way to go.
The question becomes if you really are going to be a Cdn resident. By treaty, if you live and work in US, and have "more" ties in US than Canada, then you will be a US resident, regardless of the ties you have in Canada. The ooposite is also true.
So, if you do remain a Cdn residnet (this would only be if you make FREQUENT visits to Canada, then you can avoid being taxed as a US resident (normally one does want to be taxed as a US resident, but there are now advantages to not be considered as such) then you would file a 1040NR (even using the special treaty provison for married folks) and then not have to bother collapsing TFSA, reporting RRSP elections, etc. You would be taxable. in Canalifornia on world income however as they dp not follow the treaty.
But lets say you don't mind CHOOSING to filea 1040 (while maintaining your Cdn residency also), then collapsing TFSA, and electing RRSP deferral, etc would be the way to go.
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So, you kinda have a choice in your case, as to treatment, but in either case you will want to collapse TFSA, before year-end 2013, and you will want to bump-up the value of your RRSP holdings by swapping your holdings, to be on the safe side, again be fore you leave for US.
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The only problem you will have is that you will come up against all the issues that US citizens living in Canada face, like PFIC rules, and will have all that other reporting that USC's are complaining about.
So, I would really be suggesting to you, since your family is CLEARLY remaining in Canada, that you make the treaty claim to be a Cdn residnet (with the IRS) and file a 1040NR. This can be done regardless of the number days spent in US, so long as you can clearly show that your center of vital interests is indeed in Canada.
So, I would really be suggesting to you, since your family is CLEARLY remaining in Canada, that you make the treaty claim to be a Cdn residnet (with the IRS) and file a 1040NR. This can be done regardless of the number days spent in US, so long as you can clearly show that your center of vital interests is indeed in Canada.
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Thanks Nelsona.
I am under the impression that for tax filing you can be resident of both. USA because of time you spend and Canada because of ties you keep (house, spouse, kids etc..).
so, the question really is whether the TFSA room accures because of physical residency or tax residency.
If I can figure out a way to just be taxed in USA while keeping the family here, that would off course be nice. I guess time to book an appointment with a tax accountant.
thanks.
I am under the impression that for tax filing you can be resident of both. USA because of time you spend and Canada because of ties you keep (house, spouse, kids etc..).
so, the question really is whether the TFSA room accures because of physical residency or tax residency.
If I can figure out a way to just be taxed in USA while keeping the family here, that would off course be nice. I guess time to book an appointment with a tax accountant.
thanks.
The CRA wording is quite clear on TFSA, and I repeat, If you are considered a Cdn resident, your contribution room continues to grow, "even if you do not live in Canada". I can't be any clearer than that. When yo uare done with US life, you will be able to put back the money you took out in the collapse, PLUS any past and future contribution rom that you accrue.
The OTHER issue, completely unrelated to TFSA, is your US residency status. By treaty, and by CRA rules, you can only be considered a resident of one treaty country at a time. The subtle difference is that any Cdn can elect to file a US tax return as idf they were a US citizen or residnt, even if they do not live there. This can have advantages, but in recent years, these advatages have vanished because of the excessively burdensome reporting that IRS forces on those living or, in your case, holding assets abraod (Just read about some of the IRS issues faced by US citizens living in Canada).
So, while, yes, you have every right to file a 1040 in US, you ALSO, if you can prove that you are maintaining Cdn tax residency status (which I've already explained that you probably can) you get the best of both worlds, under a special provision in the treaty, of being able to get the preferential tax rates that US residents get over non-residents, and at th same time avoid all the issues that US citizens who live in Canda face. You may be called upon to ALSO prove to Canada, that you are still a Cdn resident (this would be triggered by the huge foreign tax credit you will be requesting from CRA, which will indicating that you work in US).
So, as I've explained, to keep your options open (and to protect against a possible decison by CRA/IRS that you are in fact a resident by treaty of US and not Canada), you will want to collapse your TFSA, and rework your RRSP just before leaving for US, or before jan 1/2014, which ever is SOONER.
The only fly in the ointment is that you will be moving to California, which taxes your RRSP if you reside there, and they may not accept that you are a Cdn resident for Cali tax purposes if you exceed THEIR definition of presence (which is not the same as the treaty, which they ignore).
The OTHER issue, completely unrelated to TFSA, is your US residency status. By treaty, and by CRA rules, you can only be considered a resident of one treaty country at a time. The subtle difference is that any Cdn can elect to file a US tax return as idf they were a US citizen or residnt, even if they do not live there. This can have advantages, but in recent years, these advatages have vanished because of the excessively burdensome reporting that IRS forces on those living or, in your case, holding assets abraod (Just read about some of the IRS issues faced by US citizens living in Canada).
So, while, yes, you have every right to file a 1040 in US, you ALSO, if you can prove that you are maintaining Cdn tax residency status (which I've already explained that you probably can) you get the best of both worlds, under a special provision in the treaty, of being able to get the preferential tax rates that US residents get over non-residents, and at th same time avoid all the issues that US citizens who live in Canda face. You may be called upon to ALSO prove to Canada, that you are still a Cdn resident (this would be triggered by the huge foreign tax credit you will be requesting from CRA, which will indicating that you work in US).
So, as I've explained, to keep your options open (and to protect against a possible decison by CRA/IRS that you are in fact a resident by treaty of US and not Canada), you will want to collapse your TFSA, and rework your RRSP just before leaving for US, or before jan 1/2014, which ever is SOONER.
The only fly in the ointment is that you will be moving to California, which taxes your RRSP if you reside there, and they may not accept that you are a Cdn resident for Cali tax purposes if you exceed THEIR definition of presence (which is not the same as the treaty, which they ignore).
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Nelsona,
when you say collapse the TFSA BEFORE leaving Canada,
-collapsing means, liquidating my positions and keeping the money in the TFSA account, or liquidating and withdrawing all money and closing account?
-The "BEFORE Leaving Canada", is it before I head to the border to apply for TN Status, or before I head to the US to live after selling and shipping everything? I am thinking to go and apply for TN status, if I get it, I will start looking for a place to live in the US and then come back to Canada to sell my home and ship my items to the US and then fly again to the US with my family. So which one you mean "BEFORE leaving Canada"
when you say collapse the TFSA BEFORE leaving Canada,
-collapsing means, liquidating my positions and keeping the money in the TFSA account, or liquidating and withdrawing all money and closing account?
-The "BEFORE Leaving Canada", is it before I head to the border to apply for TN Status, or before I head to the US to live after selling and shipping everything? I am thinking to go and apply for TN status, if I get it, I will start looking for a place to live in the US and then come back to Canada to sell my home and ship my items to the US and then fly again to the US with my family. So which one you mean "BEFORE leaving Canada"
Collapsing the tfsa means extracting all the money and closing the account.
Before leaving Canad means before becoming a tax resident of US, which is typically on the same day, but not always.
Given the time of year, you will probably become a tax resident on Jan 1 2015.
Before leaving Canad means before becoming a tax resident of US, which is typically on the same day, but not always.
Given the time of year, you will probably become a tax resident on Jan 1 2015.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing