Hi All,
I am looking for confirmation that my late night reading has paid off :-)
[b]Canadian Residency Status[/b]
My wife (L2) and I (L1B) moved to Houston on October 28. We have have no significant ties to Canada and I only have a few secondary ties (bank accounts, GIC maturing Mar 2010, credit card, RRSP/DCPP). On those secondary ties I already updated our address and set us as non-resident where their computers allowed. I have additionally called CRA to inform them of my departure date and non-residency status and my wife will be doing this later or with her 2009 T1. [i]I chose not to file NR-73 as I don't expect there to be any issues in determining our status and I believe tax treaty covers us anyways, but do you suggest we send a NR-73 just to be safe?[/i]
[b]US Residency Status[/b]
In skimming IRS publication 515 and 519, it sounds like we have First Year Choice of declaring ourselves resident/non-resident for 2009. [i]Are there any benefits of declaring myself non-resident for 2009?... or by tax treaty are we automatically residents?[/i]
[b]Wife's Status in US[/b]
My wife does not plan to apply for an EAD under her L2 hence she will not be working. When I was at the SSA office applying for my SSN, they also let her apply for a card and we received the letter, so hopefully that will not complicate anything.
She wants to do some volunteering, but I don't think that has any implications; please correct me if I am wrong. We have also added her as a joint account holder on my US Bank accounts so that she would have access to the funds, etc. They are both interest bearing.
[b]2009 and 2010 W-4[/b]
I am required to submit a 2009 W-4. [i]Per the questions above, I am now considered a Resident Alien, correct (even though I am on non-immigrant visa)? Since i have a clear break in residency/non-residency will I have any tax credits to worry about? Anything else you suggest I worry about?[/i]
[b]2009 T1/1040 Filing[/b]
Since we have a simple, clear break in residency, we will be filing T1's for January 1 to October 28 and 1040 for October 29 to December 31, correct? Will my wife I have to file any kind of tax return in the US, due to the interest bearing accounts, etc?
It is also my understanding that I will not have to file any kind of CRA paperwork in 2010, is that also correct?
Thank you very much in advance!
Moved to US... Have I done everything right? (+ questions)
Moderator: Mark T Serbinski CA CPA
1. There was no real need to inform CRA that you had left (unless you were getting CCTB or GST payments). Filing your T1 departure return next spring is sufficient, following the instructions in the Emigrants guide. You do need to infomr immediately any investment firms in canada that deal with you, that you are now a US resident. I agrre that NR73 should not be sent unless requested, but you will have no problem. You are non-resident from what you describe.
2. As Cdns who did not meet the Substantial presence test in 2009, you actually have 3 choices in doing your 2009 US tax returns.
a) you could simply file 1040NR, reporting only your US income for the year. Filing 1040NR having left canada so late in the year does NOT jeopardize your Cdn non-residency claim.
b) you could file dual-status (part 1040NR/Part 1040) using the first-year choice that you mentionned. Trouble with this is that you can't file jointly and don't get standard deduction.
c) your third choice is to simply file a full-fledged 1040 joint return, reporting world income, just like any american would do. You would then use the foreign tax credit (Form 1116) and.or the foreign earned income exclusion (Form 2555) to reduce/eliminate your US tax on any of your Cdn income. This would allow joint filing, the standard deduction and any other deduction/credit available any US filer. This is by treaty article XXV. whuile this is a more complex return, it typically yields the lowest US taxrate.
One would typically run all three scenarios above and simply choose the one that yields least tax.
3. As long as she gets her SSN, then she need only apply for EAD when she wants to work. Technically SSA should not approve her getting SSN since she doesn't have EAD, so be aware. One thing though, EADs take 2-3 months to get, and without she she absolutely cannot work. You never know when some small job might come up where she might want to work...$300 well spent in my opinion -- especially if that is the only way to get SSN
4. Without EAD, L2's can only volunteer for organizations that typically use volunteers and in positions that they typically staff with volunteers. Simply refusing payment from an organization that usually pays for the service she provides is NOT volunteering.
5. The w-4 you submit for 2 months of work is of little importance. Its only to determine withholding, not your final tax. You won't be far off regardless of what you put on that form. Just make it simple. married resident.
6. See 1 and 2 above. Once non-resident, you only file in Canada if you have Cdn source income that is not subject to NR tax. Tha twoudl be basically wages or incoem from Cdn real estate
2. As Cdns who did not meet the Substantial presence test in 2009, you actually have 3 choices in doing your 2009 US tax returns.
a) you could simply file 1040NR, reporting only your US income for the year. Filing 1040NR having left canada so late in the year does NOT jeopardize your Cdn non-residency claim.
b) you could file dual-status (part 1040NR/Part 1040) using the first-year choice that you mentionned. Trouble with this is that you can't file jointly and don't get standard deduction.
c) your third choice is to simply file a full-fledged 1040 joint return, reporting world income, just like any american would do. You would then use the foreign tax credit (Form 1116) and.or the foreign earned income exclusion (Form 2555) to reduce/eliminate your US tax on any of your Cdn income. This would allow joint filing, the standard deduction and any other deduction/credit available any US filer. This is by treaty article XXV. whuile this is a more complex return, it typically yields the lowest US taxrate.
One would typically run all three scenarios above and simply choose the one that yields least tax.
3. As long as she gets her SSN, then she need only apply for EAD when she wants to work. Technically SSA should not approve her getting SSN since she doesn't have EAD, so be aware. One thing though, EADs take 2-3 months to get, and without she she absolutely cannot work. You never know when some small job might come up where she might want to work...$300 well spent in my opinion -- especially if that is the only way to get SSN
4. Without EAD, L2's can only volunteer for organizations that typically use volunteers and in positions that they typically staff with volunteers. Simply refusing payment from an organization that usually pays for the service she provides is NOT volunteering.
5. The w-4 you submit for 2 months of work is of little importance. Its only to determine withholding, not your final tax. You won't be far off regardless of what you put on that form. Just make it simple. married resident.
6. See 1 and 2 above. Once non-resident, you only file in Canada if you have Cdn source income that is not subject to NR tax. Tha twoudl be basically wages or incoem from Cdn real estate
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
Thank you nelsona!
A few follow-up questions if you don't mind helping out still :D :
2) If I end up making less than $11,400 in US 2009 income, will I see much of a difference between either of the 3 choices?
a) If I file a 1040NR doesn't that mean my company should have withheld additional taxes? Can we file 1040NR jointly?
b/c) Are there any tax treaty benefits I will be missing out on if I go 1040?
3) I understood the technicalities too, which was why I was surprised when the agent asked if she wanted one. Even though SSA office allowed her to apply for SSN and we have the letter, you're telling me to expect it to be denied still, right?
A few follow-up questions if you don't mind helping out still :D :
2) If I end up making less than $11,400 in US 2009 income, will I see much of a difference between either of the 3 choices?
a) If I file a 1040NR doesn't that mean my company should have withheld additional taxes? Can we file 1040NR jointly?
b/c) Are there any tax treaty benefits I will be missing out on if I go 1040?
3) I understood the technicalities too, which was why I was surprised when the agent asked if she wanted one. Even though SSA office allowed her to apply for SSN and we have the letter, you're telling me to expect it to be denied still, right?
2) Yes, since options 1 and 2 do not give you the standard deduction, you would owe tax depending if you have kids, or other deductions. Obviously if 1040NR yields no tax, stop there. Option 3 would likely result in no tax.
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
b) withholding doesn't matter. You will not owe ebnough tax for anyone to be liable. 1040NR cant be joint, not can dual status.
c) No.
3. Probably. Then apply for EAD. It is so much easier if you both have SSN
c) No.
3. Probably. Then apply for EAD. It is so much easier if you both have SSN
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
Hi nelsona,
Now that it's about that time of year, I've had a chance to read some more and have a few more questions, if you do not mind answering:
1) I am attempting to use QuickTax for my Canadian return and it wants me to attach a Schedule A for Worldwide Income. If my wife and I left Canada (became non-resident) on October 29, we do not have to list any US income I made afterwards, correct?
2) By doing the full-fledged 1040, I presume I would need to claim all our Canadian T1, T5, and RRSP deductions right? I list income from T1 in same spots as US Income (using conversation rate) and then file Form 1116 to claim the Income Tax, CPP, and EI I paid on it already. Same would apply for T5 to 1099-INT? What about RRSP's?
I've been trying to use H&R Deluxe 2009 to do our US return and I don't think it's handling our situation properly either.[/code]
Now that it's about that time of year, I've had a chance to read some more and have a few more questions, if you do not mind answering:
1) I am attempting to use QuickTax for my Canadian return and it wants me to attach a Schedule A for Worldwide Income. If my wife and I left Canada (became non-resident) on October 29, we do not have to list any US income I made afterwards, correct?
2) By doing the full-fledged 1040, I presume I would need to claim all our Canadian T1, T5, and RRSP deductions right? I list income from T1 in same spots as US Income (using conversation rate) and then file Form 1116 to claim the Income Tax, CPP, and EI I paid on it already. Same would apply for T5 to 1099-INT? What about RRSP's?
I've been trying to use H&R Deluxe 2009 to do our US return and I don't think it's handling our situation properly either.[/code]
1.The reason for schedule A is to determine if you can claim FULL Cdn tax credits, or if you have to prorate by days. QT is correct to have you fill this, as you would have seen if you read your Emigrants guide form CRA.
2. If you file a full 1040, you must report all income. The deductions you would get would only be those allowed by IRS. Your RRSP contributions cannot be deducted unless they were made thru your employer.
As to using 1116, a better approach might be to use 2555 to exclude your Cdn wages, and 1116 on all other income.
2. If you file a full 1040, you must report all income. The deductions you would get would only be those allowed by IRS. Your RRSP contributions cannot be deducted unless they were made thru your employer.
As to using 1116, a better approach might be to use 2555 to exclude your Cdn wages, and 1116 on all other income.
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
Remember that filing full year will mean that you pay some US tax on your Cdn income. However, it will result inalowerr taxrate for your US income, which is the purpose of filing 1040.
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
Hi nelsona,
Sorry to keep bugging you and I am very gracious for all your help, thank you. I keep confusing myself though after reviewing the threads on this site and you appear to be the tax genious.
So I have figured out my Canadian Taxes using Emigrant guide (will be getting a refund, yay). Now I am dealing with the US fun.
1) I am using Form 4852 to represent my T4 as W-2. Is this the right choice? If so, should I be entering in my Income Tax (Box 22), CPP (16), EI (18), Pension (52), or Box amounts using 2009 Average Exchange Rate? Or do I leave them out for 1116 or 2555?
I remember you mentioning something about having to repay Social Security if I don't show EI, I didn't understand it though.
2) Am I able to just plug in my T1 Box 435 (Total Payable Taxes) into 1116 or 2555? This includes taxes paid from employment income and on the amounts I owe from T5. What about my FICA (CPP/EI) and any other boxes I listed in #1?
3)Are these still valid actions I have to do with my RRSP? I only contributed to it last year, I have not withdrawn or collapsed any monies.
a) Check "Yes" on Schedule "B" (Form 1040) under Part III - Foreign Accounts and Trusts
b) Check "No" immediately below if you did NOT collapse any of your RRSP account (otherwise, check "Yes" if you DID collapse, or cash out on or more accounts)
c) File Form TD F 90-22.1 listing ALL your foreign bank accounts, trusts, pensions, checking accounts that are held outside the USA - including your RRSP accounts. The following box is a quote from the IRS Website:
d) For each RRSP or Pension account, file an "Election to Defer Interest". There is no set government form for this election - example "elections" are shown below
(per http://www.canadatotwincities.com/rrsp-old.html)
4) Also, do I have to file Form TD F 90-22.1 for my chequing and savings accounts in Canada?
Sorry to keep bugging you and I am very gracious for all your help, thank you. I keep confusing myself though after reviewing the threads on this site and you appear to be the tax genious.
So I have figured out my Canadian Taxes using Emigrant guide (will be getting a refund, yay). Now I am dealing with the US fun.
1) I am using Form 4852 to represent my T4 as W-2. Is this the right choice? If so, should I be entering in my Income Tax (Box 22), CPP (16), EI (18), Pension (52), or Box amounts using 2009 Average Exchange Rate? Or do I leave them out for 1116 or 2555?
I remember you mentioning something about having to repay Social Security if I don't show EI, I didn't understand it though.
2) Am I able to just plug in my T1 Box 435 (Total Payable Taxes) into 1116 or 2555? This includes taxes paid from employment income and on the amounts I owe from T5. What about my FICA (CPP/EI) and any other boxes I listed in #1?
3)Are these still valid actions I have to do with my RRSP? I only contributed to it last year, I have not withdrawn or collapsed any monies.
a) Check "Yes" on Schedule "B" (Form 1040) under Part III - Foreign Accounts and Trusts
b) Check "No" immediately below if you did NOT collapse any of your RRSP account (otherwise, check "Yes" if you DID collapse, or cash out on or more accounts)
c) File Form TD F 90-22.1 listing ALL your foreign bank accounts, trusts, pensions, checking accounts that are held outside the USA - including your RRSP accounts. The following box is a quote from the IRS Website:
d) For each RRSP or Pension account, file an "Election to Defer Interest". There is no set government form for this election - example "elections" are shown below
(per http://www.canadatotwincities.com/rrsp-old.html)
4) Also, do I have to file Form TD F 90-22.1 for my chequing and savings accounts in Canada?
You're pretty much wrong on every point. Yopu need to read some more or consult a professional.
Thiswill be my only response to your post:
1. Your foreign income is not reported on any IRS form. You put it straight on 1040 in correct box.
2. You don't reprt foreign taxes if you use 2555. If you use 1116 you need one for each type of income, and split the tax that way; CPP/EI are considered taxes against your wages.
3, In all your reading have you never come accross form 8891 for RRSP. That is the deferral form. It's only mentioned abouy 1000 times on this site, so I question if you actually doen much reading of it.
when you see something that says "old" procedure, I'd be looking for the new.
4. What do the words "foreign bank account" mean to you.
Seriously, you are in way over your head.
Thiswill be my only response to your post:
1. Your foreign income is not reported on any IRS form. You put it straight on 1040 in correct box.
2. You don't reprt foreign taxes if you use 2555. If you use 1116 you need one for each type of income, and split the tax that way; CPP/EI are considered taxes against your wages.
3, In all your reading have you never come accross form 8891 for RRSP. That is the deferral form. It's only mentioned abouy 1000 times on this site, so I question if you actually doen much reading of it.
when you see something that says "old" procedure, I'd be looking for the new.
4. What do the words "foreign bank account" mean to you.
Seriously, you are in way over your head.
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
Hi nelsona,
Thank you very much for your feedback. I spent most of the weekend reading and re-reading (Pub 54 was what I was needing, I had just been using 519). I had also been following incorrect instructions for TurboTax by fellow Canadians.
Anyways I think I'm at the point now where I am stressing about the little things, one of which was brought on by reading this thread (http://forums.serbinski.com/viewtopic.p ... ht=payroll), could you please steer me in the right direction.
I left Canada on October 29 (Thursday). I was on vacation pay for the Thursday and Friday and my final pay day was October 30 (for a October 31 period end)
1) Should I be adjusting my departure date for October 30 or can I leave it October 29?
2) Since I arrived in US on October 29, do i have to worry about the pay I would have earned on October 30, or am I better off showing I became resident on October 31 or even November 1 (first day of new job) ? I realize this would also affect box 38 of my 2555.
Thank you for any guidance you can give.
Thank you very much for your feedback. I spent most of the weekend reading and re-reading (Pub 54 was what I was needing, I had just been using 519). I had also been following incorrect instructions for TurboTax by fellow Canadians.
Anyways I think I'm at the point now where I am stressing about the little things, one of which was brought on by reading this thread (http://forums.serbinski.com/viewtopic.p ... ht=payroll), could you please steer me in the right direction.
I left Canada on October 29 (Thursday). I was on vacation pay for the Thursday and Friday and my final pay day was October 30 (for a October 31 period end)
1) Should I be adjusting my departure date for October 30 or can I leave it October 29?
2) Since I arrived in US on October 29, do i have to worry about the pay I would have earned on October 30, or am I better off showing I became resident on October 31 or even November 1 (first day of new job) ? I realize this would also affect box 38 of my 2555.
Thank you for any guidance you can give.