Hi all! I'm writing to ask if Article XXV applies to allow me to file 1040 for the whole year (as I have been reading in other threads). Long story short, I believe I would otherwise be a single dual-status alien. My goal would be to file 1040 for the standard deduction and education credit.
I have been US non-resident alien for 8 yrs as a student (After year #5 I filed Closer Connection Exceptions.) I've graduated and moved to California for work in June 2016, and will file as non-resident of Canada as of June. For 2016 I was first physically present in the US on January 5, 2016 (I was in Canada on holiday Dec 2015-Jan 2016, now regretfully). I easily meet the Substantial-Presence Test though as I wasn't here on Jan 1, I believe this would technically make me dual-status. I am single.
I have been reading other threads about Article XXV hoping to file 1040 for the year, but the IRS writes (https://www.irs.gov/irm/part3/irm_03-038-147r.html):
"Article XXV, paragraph 1, does not provide a basis for Canadian national who is a U.S. non-resident alien to claim a standard deduction or extra personal exemptions on the hypothetical Form 1040. If the deductions and exemptions on Form 1040 or statement are greater than the Form 1040NR deductions and exemptions, recalculate the Form 1040 taxable income using the Form 1040NR deduction and exemption amounts."
I have read several times on this forum that Canadians can file 1040 if present in the US at year-end, but I've been trying to figure out what Article of the Tax Treaty would apply to me.
Thanks so much, happy new year all!
-J
1040 for whole year (otherwise dual-status), Article XXV?
Moderator: Mark T Serbinski CA CPA
After year 5, if you spent more than 183 days in US in the calendar year, you were ineligible to file closer connection, you needed to file a treaty exemption, but that is unimportant at this point.
Cdns are ALWAYS allowed to file as an American citizen would. Year-end physical place is immaterial.
So, file a 1040 single. Not a hypothetical one, but a real one, re[porting world income Only non-resident married couples can file a hypothetical 1040 using 1040NR, and report only US-sourced income.
Cdns are ALWAYS allowed to file as an American citizen would. Year-end physical place is immaterial.
So, file a 1040 single. Not a hypothetical one, but a real one, re[porting world income Only non-resident married couples can file a hypothetical 1040 using 1040NR, and report only US-sourced income.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Thanks nelsona,
I am happy to hear that. I assume this is a treaty benefit, so I would expect to file Form 8833 Treaty-Based Disclosure-- in which case do you or anyone happen to know which article applies? (Obviously happy to not bother filing this form if that is common practice)
-J
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Also-- as mentioned it doesn't matter to the current situation but to anyone else who might be reading, while it is true in general that you cannot file the closer connection if you spend more than 183 days in the US, there is the special case for foreign students:
"The Closer Connection Exception to the Substantial Presence Test for Foreign Students"
https://www.irs.gov/individuals/interna ... n-students
(though if an equivalent benefit applies by treaty, then I suppose again-- doesn't matter)
I am happy to hear that. I assume this is a treaty benefit, so I would expect to file Form 8833 Treaty-Based Disclosure-- in which case do you or anyone happen to know which article applies? (Obviously happy to not bother filing this form if that is common practice)
-J
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Also-- as mentioned it doesn't matter to the current situation but to anyone else who might be reading, while it is true in general that you cannot file the closer connection if you spend more than 183 days in the US, there is the special case for foreign students:
"The Closer Connection Exception to the Substantial Presence Test for Foreign Students"
https://www.irs.gov/individuals/interna ... n-students
(though if an equivalent benefit applies by treaty, then I suppose again-- doesn't matter)
Yes, if you want to rely on a treaty position that overrides US domestic tax law you generally must file Form 8833. There is a $1,000 penalty for not filing the form when required to file.
Also, some advisors would disagree with nelsona's advice that a joint return can be filed for nonresidents under the treaty.
Also, some advisors would disagree with nelsona's advice that a joint return can be filed for nonresidents under the treaty.
Oh, and nothing in what stewartho listed denied the use of 1040, it merely said that SINGLE taxpayer can't use the same provision that a couple can for filing a 1040NR based on 1040 taxrate -- whicjh is an absolute right in the treaty: XXV(3)
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
We have already debated the issue of whether an individual who is not a U.S. citizen or U.S. resident can choose to file a Form 1040 (as opposed to a Form 1040NR) under the nondiscrimination article (Article XXV) of the Canadian-U.S. Income Tax Treaty. (viewtopic.php?t=11273&highlight=)
We continue to disagree. I don’t think the nondiscrimination article allows for this. You do. As stewartho points out, the IRS also seems to agree that "Article XXV, paragraph 1, does not provide a basis for Canadian national who is a U.S. nonresident alien to claim a standard deduction or extra personal exemptions on the hypothetical Form 1040." If a nonresident alien cannot claim a standard deduction on a hypothetical Form 1040, I don’t see why the nonresident alien would be able to claim the standard deduction on an actual Form 1040. The statute is clear that nonresident aliens cannot claim the standard deduction. Code §63(c)(6)(B).
In any case, stewartho wanted to know whether he should file Form 8833 and what Article of the treaty would apply to him. You did not answer which article of the treaty would apply. I assume that you are applying Article XXV (nondiscrimination).
The regulations provide that “every nonresident alien individual * * * who is engaged in trade or business in the United States at any time during the taxable year or who has income which is subject to taxation under Subtitle A of the Code shall make a return on Form 1040NR.†Treas. Reg. §1.6012(b)(1)(i).
Since stewartho will be a dual status alien and he will be a U.S. resident at the end of 2016, he “must make a return on Form 1040†and “a separate schedule is required to be attached to this return to show the income tax computation for the part of the taxable year during which the alien was neither a citizen nor resident of the United States * * *.†Treas. Reg. §1.6012(b)(2)(ii)(a).
If stewartho wants to not attach the “required†separate schedule because he is claiming that the treaty overrides this requirement, and if he wants to claim the standard deduction, the question is whether Form 8833 must be filed. The instructions to Form 8833 state “See Regulations sections 301.6114-1(a) and (b) for more details and for examples of treaty-based return positions taken by taxpayers for which they must make disclosure.â€
Treas. Reg. §301.6114-1(b) states “[r]eporting is required under this section except as expressly waived under paragraph (c) of this section. The following * * * is a list of particular positions for which reporting is specifically required. These positions are as follows: (1) That a nondiscrimination provision of a treaty precludes the application of any otherwise applicable Code provision * * *.â€
The FIRST ITEM listed as requiring a Form 8833 is a position relying on the nondiscrimination provision in a treaty. Unless paragraph (c) waives the requirement to file, a Form 8833 would be required.
Paragraph (c)(2) of the regulation provides that "[r]eporting is waived for an individual if payments or income items otherwise reportable under this section * * *, received by the individual during the course of the taxable year do not exceed $10,000 in the aggregate * * *.â€
While this exception is not crystal clear, it appears to only apply to amounts received by an individual not exceeding $10,000. It does not appear to apply to which form to file or to which deductions may be claimed. Consequently, it would appear that the exception would not apply to stewartho, and a Form 8833 would be required by him. Further, it would appear that Form 8833 is required for any nonresident alien who is claiming nondiscrimination under a treaty as a reason for filing a Form 1040 and claiming the standard deduction.
The treaty does not refer to claiming a nondiscrimination position as an “election.†Further, the only exception to disclosing a treaty position for an election is with respect to a Code §897(i) election. A Code §897(i) election is not relevant here.
We continue to disagree. I don’t think the nondiscrimination article allows for this. You do. As stewartho points out, the IRS also seems to agree that "Article XXV, paragraph 1, does not provide a basis for Canadian national who is a U.S. nonresident alien to claim a standard deduction or extra personal exemptions on the hypothetical Form 1040." If a nonresident alien cannot claim a standard deduction on a hypothetical Form 1040, I don’t see why the nonresident alien would be able to claim the standard deduction on an actual Form 1040. The statute is clear that nonresident aliens cannot claim the standard deduction. Code §63(c)(6)(B).
In any case, stewartho wanted to know whether he should file Form 8833 and what Article of the treaty would apply to him. You did not answer which article of the treaty would apply. I assume that you are applying Article XXV (nondiscrimination).
The regulations provide that “every nonresident alien individual * * * who is engaged in trade or business in the United States at any time during the taxable year or who has income which is subject to taxation under Subtitle A of the Code shall make a return on Form 1040NR.†Treas. Reg. §1.6012(b)(1)(i).
Since stewartho will be a dual status alien and he will be a U.S. resident at the end of 2016, he “must make a return on Form 1040†and “a separate schedule is required to be attached to this return to show the income tax computation for the part of the taxable year during which the alien was neither a citizen nor resident of the United States * * *.†Treas. Reg. §1.6012(b)(2)(ii)(a).
If stewartho wants to not attach the “required†separate schedule because he is claiming that the treaty overrides this requirement, and if he wants to claim the standard deduction, the question is whether Form 8833 must be filed. The instructions to Form 8833 state “See Regulations sections 301.6114-1(a) and (b) for more details and for examples of treaty-based return positions taken by taxpayers for which they must make disclosure.â€
Treas. Reg. §301.6114-1(b) states “[r]eporting is required under this section except as expressly waived under paragraph (c) of this section. The following * * * is a list of particular positions for which reporting is specifically required. These positions are as follows: (1) That a nondiscrimination provision of a treaty precludes the application of any otherwise applicable Code provision * * *.â€
The FIRST ITEM listed as requiring a Form 8833 is a position relying on the nondiscrimination provision in a treaty. Unless paragraph (c) waives the requirement to file, a Form 8833 would be required.
Paragraph (c)(2) of the regulation provides that "[r]eporting is waived for an individual if payments or income items otherwise reportable under this section * * *, received by the individual during the course of the taxable year do not exceed $10,000 in the aggregate * * *.â€
While this exception is not crystal clear, it appears to only apply to amounts received by an individual not exceeding $10,000. It does not appear to apply to which form to file or to which deductions may be claimed. Consequently, it would appear that the exception would not apply to stewartho, and a Form 8833 would be required by him. Further, it would appear that Form 8833 is required for any nonresident alien who is claiming nondiscrimination under a treaty as a reason for filing a Form 1040 and claiming the standard deduction.
The treaty does not refer to claiming a nondiscrimination position as an “election.†Further, the only exception to disclosing a treaty position for an election is with respect to a Code §897(i) election. A Code §897(i) election is not relevant here.
You completely misinterpreted the the irs quote from stewart. It simply said that they could not use the 1040 calculation (which includes standard deduction and all other aspects of 1040). and then use this on a 1040NR, like a married couple can. I agree with IRS completely on this and have never suggested anyone do this.
Anyone whio is a non-resident with US-source income that is not treaty-rate specified, has to file a 1040NR, to eith recoup or pay extra tax. This is not a treaty matter. His UI income, is not treaty-covered. and is US sourced.
There is NO TREATY ISSUE in his case.
This is the same as one selling a vacation home in US.
Anyone whio is a non-resident with US-source income that is not treaty-rate specified, has to file a 1040NR, to eith recoup or pay extra tax. This is not a treaty matter. His UI income, is not treaty-covered. and is US sourced.
There is NO TREATY ISSUE in his case.
This is the same as one selling a vacation home in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks so much to both of you for your comments in this thread-- I do feel that you've aired the debate I've had in my mind. And thanks to testone for reviving
Testone, are you of the opinion that the IRS would not share my treaty position (XXV) to claim the standard deduction and file 1040 for the year? I was also hoping to claim credit on tuition paid in early 2016 while I was still a student-- the link to the tax court document described a somewhat similar person who wanted to claim education tax credits during a dual status year and was ruled against.
What's frustrating to me is that I have been physically present in the US for the vast majority of 8+ years, and left only temporarily, and it seems my big mistake is returning Jan 5 instead of Jan 1.
Testone, are you of the opinion that the IRS would not share my treaty position (XXV) to claim the standard deduction and file 1040 for the year? I was also hoping to claim credit on tuition paid in early 2016 while I was still a student-- the link to the tax court document described a somewhat similar person who wanted to claim education tax credits during a dual status year and was ruled against.
What's frustrating to me is that I have been physically present in the US for the vast majority of 8+ years, and left only temporarily, and it seems my big mistake is returning Jan 5 instead of Jan 1.