Hi everyone
I am new here, and I have tried searching for this information, but with little success.
A little background: My wife and I are both Canadian citizens, but she is also an American citizen (by birth abroad). We got married last November, and I moved from Canada on October 1st, 2013. We did a K1 Fiance visa, and I am now a Permanent Resident (2 year)!
For taxes, I worked in Canada, and she worked in the USA, but I didn't work in the USA after I moved. I am currently getting EI from Canada, which is nice while I am looking for work.
For taxes, is any able to offer advice on how to maximize our returns in both countries? Also, anything we should know to do or watch out for?
Also, I have looked around for a comprehensive tax guide for this situation, but have yet to find one. Does anyone know where/if such a thing exists? A list of things to do/forms to file would be amazing(especially in the US, it's very helpful the CRA agents can offer advice) but I know each persons taxes are unique.
Thanks!
Mark
2 Canadians living in the USA
Moderator: Mark T Serbinski CA CPA
I'll answer what I can, as nelsona is very tied up through the tax season.
Did your wife also live in Canada until Oct 1, 2013? I don't want to do much "if/then, else if/then". But if she was a Canadian resident until then, both you and she will have to prepare departure returns from Canada (see CRA web site). You'll both pay Canadian taxes up until Sep 30. I hope she was current on her US tax returns, 8891 (for RRSPs if any), FBAR, etc. TFSA, hers or yours?
You can file a joint 1040 for the whole year 2013 if you wish, and this may be best (certainly easiest).
To avoid double taxation, and assuming you file a joint 1040 for the US, you prepare a departure tax return for Canada (and your wife too, is she was resident there in 2013) up to Sep 30. There will be a deemed disposition of assets (e.g. investments) at that time possibly subject to capital gains tax. You prepare a full year 1040 for the US. You can get a foreign tax credit in each country for income sourced in the other country and taxed there. Form 2555 (Foreign Earned Income) could certainly be used for you (and also your wife if she was resident in Canada until Sep 30) to exclude earned income in Canada.
You will need to file an extension as there is no way you are going to get this done in six days.
You are now subject to all reporting requirements for the US, FBAR, 8891 for RRSPs, 3520/3520a for any TFSAs, etc. You wife always has been.
Did your wife also live in Canada until Oct 1, 2013? I don't want to do much "if/then, else if/then". But if she was a Canadian resident until then, both you and she will have to prepare departure returns from Canada (see CRA web site). You'll both pay Canadian taxes up until Sep 30. I hope she was current on her US tax returns, 8891 (for RRSPs if any), FBAR, etc. TFSA, hers or yours?
You can file a joint 1040 for the whole year 2013 if you wish, and this may be best (certainly easiest).
To avoid double taxation, and assuming you file a joint 1040 for the US, you prepare a departure tax return for Canada (and your wife too, is she was resident there in 2013) up to Sep 30. There will be a deemed disposition of assets (e.g. investments) at that time possibly subject to capital gains tax. You prepare a full year 1040 for the US. You can get a foreign tax credit in each country for income sourced in the other country and taxed there. Form 2555 (Foreign Earned Income) could certainly be used for you (and also your wife if she was resident in Canada until Sep 30) to exclude earned income in Canada.
You will need to file an extension as there is no way you are going to get this done in six days.
You are now subject to all reporting requirements for the US, FBAR, 8891 for RRSPs, 3520/3520a for any TFSAs, etc. You wife always has been.
hey guys,
thanks for the help!
My wife has not been a resident of Canada since 2003, so she won't have to do an exit return. Thanks for supplying that info without waiting for my response - very wise of you!
CRA told me to file normally, but to include the date that I left Canada, and print and mail it. They also said to convert her income into Canadian dollars, and include that for dependency reasons. I am hoping to get a significant return, as I will be filing as married for the first time.
For RRSP's, TFSA's, etc, we don't have any of those. Basically I have no money or any other wealth left in Canada (maybe $100?), but that is just to keep my accounts open temporarily. I didn't own any property either, except a car.
For the US return, you mentioned Form 2555 for foreign earned income - can we file that online, through turbotax? Or TaxAct?
Also what would be the equivalent tax form in Canada, and can we use this form to report my wife's earnings in the USA? Or would that be claiming double credits?
Thanks so much!
thanks for the help!
My wife has not been a resident of Canada since 2003, so she won't have to do an exit return. Thanks for supplying that info without waiting for my response - very wise of you!
CRA told me to file normally, but to include the date that I left Canada, and print and mail it. They also said to convert her income into Canadian dollars, and include that for dependency reasons. I am hoping to get a significant return, as I will be filing as married for the first time.
For RRSP's, TFSA's, etc, we don't have any of those. Basically I have no money or any other wealth left in Canada (maybe $100?), but that is just to keep my accounts open temporarily. I didn't own any property either, except a car.
For the US return, you mentioned Form 2555 for foreign earned income - can we file that online, through turbotax? Or TaxAct?
Also what would be the equivalent tax form in Canada, and can we use this form to report my wife's earnings in the USA? Or would that be claiming double credits?
Thanks so much!
Just to clarify - all Canadian returns are individual returns, no such thing as married filing jointly as in the US. So your wife has no Canadian return to file. There are certain things that couples do need to consider jointly. The CRA wants your wife's income in order to see whether you can claim her as a dependent, I expect. If she has too much income, she will be of little or no benefit on your T1 for 2013, and it won't much matter if you are "filing as married for the first time".
CRA is essentially telling you to file an exit return. Since you have no assets to speak of, this will be extremely simple. But I'd suggest you skim through the CRA web info on departure returns to be sure.
Forget the car. If you had a total of more that USD 10,000 in Canada at any time during 2013 (even before you left and you took it with you), and you and your wife decide to file jointly in the US for 2013, you will need to file FBAR by June 30. It is done only electronically now, through FinCEN.
Form 2555 can be done through TurboTax, and I am sure also through TaxAct. I have only used the PC version of TurboTax. When your return is done, you can file electronically right through TurboTax.
You will not report to Canada your wife's earnings in the US, at least as income, because she will not be filing in Canada. You will report her total income (convert her US income to Canadian dollars using the average exchange rate for the year) in just one place on your T1, to determine family eligibility for certain social benefits and whether she is your dependent. You can do this in uFile, or the Canadian edition of TurboTax.
I final note. I am not entirely sure the CRA gave you the right guidance on including your wife's income. Did you make it very clear to them that your departure date from Canada was ** before ** your marriage?
CRA is essentially telling you to file an exit return. Since you have no assets to speak of, this will be extremely simple. But I'd suggest you skim through the CRA web info on departure returns to be sure.
Forget the car. If you had a total of more that USD 10,000 in Canada at any time during 2013 (even before you left and you took it with you), and you and your wife decide to file jointly in the US for 2013, you will need to file FBAR by June 30. It is done only electronically now, through FinCEN.
Form 2555 can be done through TurboTax, and I am sure also through TaxAct. I have only used the PC version of TurboTax. When your return is done, you can file electronically right through TurboTax.
You will not report to Canada your wife's earnings in the US, at least as income, because she will not be filing in Canada. You will report her total income (convert her US income to Canadian dollars using the average exchange rate for the year) in just one place on your T1, to determine family eligibility for certain social benefits and whether she is your dependent. You can do this in uFile, or the Canadian edition of TurboTax.
I final note. I am not entirely sure the CRA gave you the right guidance on including your wife's income. Did you make it very clear to them that your departure date from Canada was ** before ** your marriage?
"she will be of little or no benefit on your T1 for 2013, and it won't much matter if you are "filing as married for the first time". "
In fact, she may cost you some credits. That is why they want to know her world income (on page 1) ebven though she isn't filing.
You are what CRA terms a Emigrant. So you should, for your Cdn taxes, look at the Emigrant guide. There is more to depature from canad athan simply putting a departure date on your return. You need to stop any GST payments to you, your EI MUST have flat 25% tax withheld, etc.
In fact, she may cost you some credits. That is why they want to know her world income (on page 1) ebven though she isn't filing.
You are what CRA terms a Emigrant. So you should, for your Cdn taxes, look at the Emigrant guide. There is more to depature from canad athan simply putting a departure date on your return. You need to stop any GST payments to you, your EI MUST have flat 25% tax withheld, etc.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
For US, since a GC holder cannot file A 1040NR even if they got GC on the last day of the year, your only choices are dual status and full year.
Dual-status, in your case would be punitive to your wife, since her income would be taxed at the MFS level rather than joint. So forget this.
Use 1040 full year, reporting all world income and then using 2555 for wages and 1116 for anything else to mitigate doulbe taxation.
full year 1040MFJ has the added benefit of requiring nothing more than off-the shelf tax software.
Now as a Cdn wih Cdn accounts (at least in 2013) you have a LOT of extra filing to do, which has been covered ad nauseum here. But since you had these accounts when you moved/married/got your GC, you cannot avoid these. Nor can you avoid these for 2014 either, since you appear to still ahve these Cdn accounts.
Dual-status, in your case would be punitive to your wife, since her income would be taxed at the MFS level rather than joint. So forget this.
Use 1040 full year, reporting all world income and then using 2555 for wages and 1116 for anything else to mitigate doulbe taxation.
full year 1040MFJ has the added benefit of requiring nothing more than off-the shelf tax software.
Now as a Cdn wih Cdn accounts (at least in 2013) you have a LOT of extra filing to do, which has been covered ad nauseum here. But since you had these accounts when you moved/married/got your GC, you cannot avoid these. Nor can you avoid these for 2014 either, since you appear to still ahve these Cdn accounts.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Not really, although you didn't get your GC, you were married, and were in processing, so while you *might* be able to file a 1040NR, this would still punish your spouse's taxes. SHE will want to file joint.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Hi
One more question - could you tell me where exactly to report my foreign income? I have been using TaxAct, and reporting it as foreign earned income, but it is telling me it could be subject to self employment tax. Also I was self employed in Canada, do I need to report this? I had 3 employers in 2013, do I lump them together, or report them all separately?
Also I had it in my mind that I could just report the income off of my T4's, but now that I think about it should I be reporting the total income off of my tax return? (income minus taxes, minus deductions in Canada)?
Thanks so much, hope you are able to get some sleep in this home stretch!
Mark
One more question - could you tell me where exactly to report my foreign income? I have been using TaxAct, and reporting it as foreign earned income, but it is telling me it could be subject to self employment tax. Also I was self employed in Canada, do I need to report this? I had 3 employers in 2013, do I lump them together, or report them all separately?
Also I had it in my mind that I could just report the income off of my T4's, but now that I think about it should I be reporting the total income off of my tax return? (income minus taxes, minus deductions in Canada)?
Thanks so much, hope you are able to get some sleep in this home stretch!
Mark
If you are asking about the mechanics of how to get the information into TaxAct, I can't help you, as I have not used that program (I use TurboTax).
You are confusing, did you have 3 employers in Canada, or were you self-employed? Perhaps TaxAct lets you enter each employer separately, and totals them on an attached schedule or something.
Foreign earned income should be placed on line 19 of form 2555, and the software should post the total (together with US earned income) to line 7 on your form 1040.
You will need to report the total of your foreign income (say T4's, and converting CAD to USD), not the amount after taxes and deductions in Canada. You're going to able to exclude the total anyway using form 2555.
I hope TaxAct is just giving you the information that you "might be" subject to self employment tax (i.e., for social security and Medicare), because you won't pay these on Canadian earned income while you were a Canadian resident. After all, you paid CPP on that, right?
You are confusing, did you have 3 employers in Canada, or were you self-employed? Perhaps TaxAct lets you enter each employer separately, and totals them on an attached schedule or something.
Foreign earned income should be placed on line 19 of form 2555, and the software should post the total (together with US earned income) to line 7 on your form 1040.
You will need to report the total of your foreign income (say T4's, and converting CAD to USD), not the amount after taxes and deductions in Canada. You're going to able to exclude the total anyway using form 2555.
I hope TaxAct is just giving you the information that you "might be" subject to self employment tax (i.e., for social security and Medicare), because you won't pay these on Canadian earned income while you were a Canadian resident. After all, you paid CPP on that, right?
Hey Rib
Sorry to be confusing, I had 3 employers (1 full time job, 1 part time job that the company was bought out, so 2 T4's) AND I had my own business..
For the actual return, FEI will be on line 19 of 2555, and then it will exclude it in the calculation? Or if I am wrong on this, how will be be excluded?
Good to note that I should convert CAD to USD. Is there an average rate I could find somewhere?
I did pay CPP, and yes, TaxAct is saying I "might be" subject to self employment tax. How would the US government know though?
Thanks so much, I apologize for all of the questions, I didn't realize this would be so complicated!
Mark
Sorry to be confusing, I had 3 employers (1 full time job, 1 part time job that the company was bought out, so 2 T4's) AND I had my own business..
For the actual return, FEI will be on line 19 of 2555, and then it will exclude it in the calculation? Or if I am wrong on this, how will be be excluded?
Good to note that I should convert CAD to USD. Is there an average rate I could find somewhere?
I did pay CPP, and yes, TaxAct is saying I "might be" subject to self employment tax. How would the US government know though?
Thanks so much, I apologize for all of the questions, I didn't realize this would be so complicated!
Mark