Serbinski Accounting Firms

You make a valid point regarding EI benefit claw-backs for individuals employed pert-time. However, it is my understanding that in order to be eligible for collecting EI benefits, an individual has to be (i) available to work and (ii) be physically present in Canada (Employment Insurance Act - Part I – paragraph 37), aside for temporary trips overseas for valid reasons. If you have lived and worked in the US for all of 2010, I don’t see how your absence from Canada would be considered “temporaryâ€￾.

I, along with nelsona, seem to be concerned that due to some miscommunication between you, your accountants and the CRA, your facts and circumstances were not properly communicated resulting in you being paid income benefits to which you were not entitled. My suggestion is that you revisit the EI benefits paid in prior year. CRA is slow, but eventually they do catch on to these things. Hopefully my understanding of your situation is not accurate, but if it is, you may be exposing yourself to major penalty and interest risk from the CRA’s side. As well, there is the issue of how any future repayment would be treated on the US side, presumably claim of right.

CrunchyFrog, You really had me stumped for a while. The debt-forgiveness provisions in section 80 of the Income Tax Act would not apply, as the debt is of personal, non-commercial nature. The test for determining personal, non-commercial nature is interest deductibility. Interest expense on a princi...

I tend to agree with your approach. US Federal -> Full-year MFJ, reporting world-wide income and claiming FTC for any Canadian taxes on Form 1116. Canada -> Part-year departure return, with a departure date of March XX. You will be reporting your world-wide income for the period January 1 to March X...

Even though you are spending more than 183 days in the US, you are nevertheless considered a non-resident for US Federal tax purposes under Article IV of the Canada-US Tax convention. (Perhaps you are a “commuterâ€￾, in which case your days do not count for the physical presence test.) In any event, you are subject to US federal tax on your employment income attributable to services performed in the US.

You also have to consider tax implications at the State and local level, if applicable. For example, Washington state does not levy income tax, but if you are in Michigan, there are various localities that have income tax.

Ensure you claim foreign tax credit for any US tax liability on your Canadian resident T1 return to alleviate double taxation.

Best regards,

HGA