Tax Implications of Dual Residence

Andrew1974 · Post by **Andrew1974** » Tue May 08, 2012 11:38 am

Hello,

I am a Canadian, two plus years ago I took a transfer to our US head office and declared myself a non-resident in Canada.

I now have a Green Card, 401K, investments, etc. To be closer to family, I'm thinking of returing to Canada and moving back into my house which I had rented out.

My job will require frequent travel back to the US office. Thus I want to keep my residence in the USA and split time between the two offices. Ideally want to keep my Green Card

Should I declare myself a dual residence, stay on US payroll or see if I can transfer back to Canadian payroll.

What will be the tax implications of being a dual residence.

Andrew

nelsona · Post by **nelsona** » Tue May 08, 2012 11:58 am

You cannot be "dual" resident. You will either be Cdn resident or US resident. To keep your GC, you need to live in US ,or you need to convert to commuter GC.
When you re-establish your home in canada, you will be taxable in canada on your world income. If you live in canada, you should be on Cdn payroll.

Since you will have to file a US tax return regardless, you may just be better off staying in US and visiting Canada.

It sounds however that you would not really be needing to work in canada, but are simply wanting to live there and commute to work in US. It will depend if your firm is willing to pick up the tab for yoru trips to Canad or not.

Andrew1974 · Post by **Andrew1974** » Tue May 08, 2012 1:24 pm

Thanks,

The frequent trips back can be paid on my expense so that is not an issue.

I like the idea of staying "based" in the USA but will have wife, home in Canada and thought this establishes residential ties, my wife will also be working.

What would be the tax implications for both of us?

nelsona · Post by **nelsona** » Tue May 08, 2012 4:42 pm

You didn't mention you ahd family. You origianlly said you had moved to US and gotten GC, which no doubt would have included your spouse and children, but you said you were moviong back to be closer to family, sp I assumed you had no family with you in US.

You will be Cdn resident for tax purposes.

Andrew1974 · Post by **Andrew1974** » Tue May 08, 2012 5:20 pm

Thanks,

and if I don't switch payrolls, able to deduct any taxes paid in the USA through a tax treaty?

nelsona · Post by **nelsona** » Tue May 08, 2012 7:23 pm

It will be difficult to co-ordinate.

Andrew1974 · Post by **Andrew1974** » Wed May 09, 2012 11:09 am

Thanks very insightful.

Lets say I go the commuter green card route.

I continue to work in the US, make contributions to my companies 401K and defer a % of my income to the companies "non-qualified deferal plan". In the US I pay taxes on net amount after these two pretax deductions.

Will Canada look to tax my gross income or my income net of these pretax deductions?

Also will I be able to claim credit for all taxes paid in the US: Federal, State, Social Security, Medicare and Local?

nelsona · Post by **nelsona** » Wed May 09, 2012 11:57 am

canada will allow 401(k) contributions to be deducted from your wages, but nothing else. Moreover, the 401(k) contributions you make will affect your RRSP contribution room.

CRA grants credit for Fed, state, local, and FICA.
What you ahve to be careful of is US tax that you pay on income that is sourced in canada, which is the income you earn while working here. That will not be credited, setting up a situation where you may have poor reconciliation of your credits. CRA does not generally like residents working in Canada to be paid as foreign employees.

Andrew1974 · Post by **Andrew1974** » Wed May 09, 2012 12:37 pm

That is not an issue, as under this scenario 100% of my work and income will be out of the US. If I transfer back to Canada it would most likely be in a different role with different pay.

My wife would surrender her green card work from Canada and file only in Canada. I would convert to a commuter green card, file in the US as an individual and in Canada on world income?