Hi All,
I will be moving to Boston, MA on June 7 for work under a TN-1 visa. I believe I will be a resident of both the US and Canada (>183 days in US + residential ties to Canada). I will have CDN income prior to the move, and will have US income after the move.
I have a joint mortgage, joint home equity line of credit, and joint investment account in Canada with my common-law spouse (who is staying in Canada). The home equity line of credit is used solely to fund the investment account, so the interest is tax deductible. The investment account contains two US stocks that pay dividends. Each dividend has had 15% withheld by the US thus far. The 2008 tax year is the first year of having carrying charges and dividends.
I will also have a pension amount transferred into a locked RRSP. Some of this amount will be taxable as Canadian income. This will likely occur after I leave Canada.
Based on the advice from this forum, I will prepare a 1040 in the US on my world income, then prepare my T1 and send to CRA, then adjust my 1040 for the taxes paid in Canada and send to IRS.
I am looking for the following advice:
1. is there anything I can do to take advantage of the US/Canada tax treaty? When preparing my US tax return, what forms do I need to fill out?
2. Should me or my spouse claim the dividends and carrying charges?
Note that my world income is almost double that of my spouse. If I am claiming the deduction and dividends, how should my dividend withholding be setup?
3. Are there any tax implications for my RRSP?
Thanks!
Dan
TN Visa & Taxes - Resident of Canada / US
Moderator: Mark T Serbinski CA CPA
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dbinontario
- Posts: 10
- Joined: Tue May 27, 2008 11:55 am
- Location: Toronto / Boston
The first thing you will need to determine is if you are resident of US or Canada BY TREATY.
The treaty allows that you be considered the resident in only one country, and then allows you to elect to be treatedas resident of the other (as well) if it benefits you.
Under the trwaty, the days in each country hardly matters: it will be the ties you have. In your case, because you will have spouse and house in canada, and will not even have a spouse in US (since you are not married), you are in an intersting situation. It would come down to what living arrangent you have in US (to balance your house in canada) and then how many days you come back to Canada.
There is very little advantage, from a US tax poinbt of view, to be considered a US non-resident, other than simplifying your tax return. You would be filing a 1040 or 1040NR singly. With 1040NR, you would only report US earnings to IRS.
Witha 1040, you would report world income, including the taxable portion of your pension. But you would then al;so be entitled to take tax credits for any Cdn tax you paid.
It is not as simple as your statement: "I will prepare a 1040 in the US on my world income, then prepare my T1 and send to CRA, then adjust my 1040 for the taxes paid in Canada and send to IRS" since not all the Cdn tax can be credited on your 1004, and not all the US tax can be credited on your T1, so there are a myriad of calculations to make, with little tax benefit in the end.
My guess is that you are better off remaining a Cdn resident (the simplest way to do this is by not buying a house in US), filing a simple 1040NR with only your US wages , and then taking credit in canada for the IRS/state and FICA tax you pay. This would worjk for the first year at least, and then you can decide if you want to make the move more permanent.
The treaty allows that you be considered the resident in only one country, and then allows you to elect to be treatedas resident of the other (as well) if it benefits you.
Under the trwaty, the days in each country hardly matters: it will be the ties you have. In your case, because you will have spouse and house in canada, and will not even have a spouse in US (since you are not married), you are in an intersting situation. It would come down to what living arrangent you have in US (to balance your house in canada) and then how many days you come back to Canada.
There is very little advantage, from a US tax poinbt of view, to be considered a US non-resident, other than simplifying your tax return. You would be filing a 1040 or 1040NR singly. With 1040NR, you would only report US earnings to IRS.
Witha 1040, you would report world income, including the taxable portion of your pension. But you would then al;so be entitled to take tax credits for any Cdn tax you paid.
It is not as simple as your statement: "I will prepare a 1040 in the US on my world income, then prepare my T1 and send to CRA, then adjust my 1040 for the taxes paid in Canada and send to IRS" since not all the Cdn tax can be credited on your 1004, and not all the US tax can be credited on your T1, so there are a myriad of calculations to make, with little tax benefit in the end.
My guess is that you are better off remaining a Cdn resident (the simplest way to do this is by not buying a house in US), filing a simple 1040NR with only your US wages , and then taking credit in canada for the IRS/state and FICA tax you pay. This would worjk for the first year at least, and then you can decide if you want to make the move more permanent.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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dbinontario
- Posts: 10
- Joined: Tue May 27, 2008 11:55 am
- Location: Toronto / Boston
Thanks! That helps clear things up a lot.
I will be renting, sharing a small appt with four other people. Other than the job, I will have a car that I have purchased there. All my ties are in Canada (girlfriend, family, most of my friends, house, bank accounts & investments, and "stuff").
Based on the above and the treaty, it seems I can safely say that I am a resident of Canada only. As you said, preparing only a 1040NR simplifies my return greatly.
[b]
I do have the option of contributing to a 401K and having my employer match it. Is there any benefit to doing this, especially considering the upcoming implementation of the 5th version of the treaty?[/b]
Thanks again!
I will be renting, sharing a small appt with four other people. Other than the job, I will have a car that I have purchased there. All my ties are in Canada (girlfriend, family, most of my friends, house, bank accounts & investments, and "stuff").
Based on the above and the treaty, it seems I can safely say that I am a resident of Canada only. As you said, preparing only a 1040NR simplifies my return greatly.
[b]
I do have the option of contributing to a 401K and having my employer match it. Is there any benefit to doing this, especially considering the upcoming implementation of the 5th version of the treaty?[/b]
Thanks again!
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dbinontario
- Posts: 10
- Joined: Tue May 27, 2008 11:55 am
- Location: Toronto / Boston
No. Your filing of the tax form for your province of residence will be sufficient for Cdn purposes.
On the 1040NR, there is spce to indicate on what basis you consider yourself non-resident of US (which would be article 4 of the treaty, if applicable). If you do not meet SPT for the tax year then this is moot.
On the 1040NR, there is spce to indicate on what basis you consider yourself non-resident of US (which would be article 4 of the treaty, if applicable). If you do not meet SPT for the tax year then this is moot.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best