Dual citizen moving from Canada to USA for work

vtcdgf · Post by **vtcdgf** » Wed Jul 01, 2015 11:25 am

Here's my situation:
-Born in USA, lived in Canada from age 5 to present (now age 24), retained both citizenships
-Soon to be moving to USA for one-year work contract, and probably will continue to work in the US after that
-Getting paid by employer
-I have a US passport and social security number, and will be paying US taxes
-I will be earning under $50,000 USD before tax for the foreseeable future
-I have no property, spouse, car, or dependents in Canada
-I would ideally like to retain my Canada passport and driver's license for ease of visiting family
-I have $25,000 CAD in a TFSA and $30,000 in student loans to pay off

What is the path of least resistance for me in regards to filing Canadian taxes?

Would being a resident or non-resident for tax purpose of Canada have a big effect on how much tax I pay, or how complicated it is to file?

Thank you for reading!

nelsona · Post by **nelsona** » Wed Jul 01, 2015 11:56 am

Your DL will not be any good anymore, so no point holding onto it. Geta local DL when you move, like everyone else.
I would keep bank account and Cdn credit card. THAT will make thisngs easier, not your old DL.
You will obviously "reatin" your Cdn citizenship, although you wouldn't need a Cdn passport to visit Canada. You will be using your US onne predominantly.

1. have you been reporting your income and foreign accounts to IRS every year? You may wnat to addrses this before you are subject to IRS tax on US-sourced money (rather than foreign income like you have so far).
2. You need to close your TFSA. You proably have not been reporting it correctly to IRS (see #1), but now will also be subject to tax on it. You can always re-fund it when/if you return to canada.
3. You can pay off the student loans from US.
4. You will be considered non-residnt from the day you get a "hoe" in US (ie anything other than a hotel room is a home). That will be your departure date from canada. If you do this before starting work, then none of your US incoem will be taxable in canada., That would be the simplest and cheapest. next spring, you file a 'departure return' for canada with departure date, and take car of any exit tax you might have (likely none).
For US you continue to file 1040 as you ahve in the past. You will now pay IRS and state tax on your world income.

vtcdgf · Post by **vtcdgf** » Wed Jul 01, 2015 12:16 pm

Thanks for your response, nelsona!

1. I've never filed US taxes before. Is that a problem? This will be my first full-time job.
2. So if I close my TFSA now, I won't have to pay US tax on it? Can I move that money to an American savings account?
4. I will have a 'home' in the US prior to starting work. So is becoming a Canada non-resident for tax purposes my only option? Other sites gave me the impression I had the option of remaining a resident.

nelsona · Post by **nelsona** » Wed Jul 01, 2015 2:01 pm

1. Yes, it is a problem, not so much for income tax (you proabably didn't owe any), but for foreign reporting issues (FBAR, FATCA, 3520, PFIC) which would all arise out of your holding a TFSA.
2. It is never subjest to Cdn tax whenever you pull it out, but it has alawys been subjest to US tax and foreign reporting. You want to close it now to stop the problem that aready exists.
4. Curious about thos other sites, since they would be incorrect. The treaty states quite clearly that if you live and work in one country and not the other you are resident for tax purposes of that other country only.

vtcdgf · Post by **vtcdgf** » Wed Jul 01, 2015 2:39 pm

The other sites I was speaking of - I was searching in reddit.com/r/personalfinancecanada recently.

For #1, if I close the TFSA now, do I still have to include it in my next US tax reutrn?

For #4, will I be considered a non resident of Canada even if I keep my Cdn bank account and credit card?

Folks on reddit have said that I'll have to hire a very expensive cross-border tax specialist. I honestly didn't expect this - there are tons of dual citizens.

nelsona · Post by **nelsona** » Wed Jul 01, 2015 3:47 pm

1. Yes, because it is 2015;
4. of course, these are not residential ties.

As I've said, its not the income tax that is the problem, it is the failure to report both the existence and the income in the TFSA. This was a very big deal for the past 3-4 years.

I'd ignore reddit; it's not for cross-border issues.

vtcdgf · Post by **vtcdgf** » Wed Jul 01, 2015 3:50 pm

Oh! I only opened the TFSA two months ago. They said my maximum contribution included all those years I was over 18 but didn't have a TFSA, so I was able to drop in $25,000 right away. So I've never actually failed to report, I think?

nelsona · Post by **nelsona** » Wed Jul 01, 2015 3:59 pm

Correct, but you will have to in 2015. And you have other Cdn accounts as well. these all have more or less reporting requirements that you have not done for 2014 and before.