Canadian working in US Tax Issues

lgbgbt88 · Post by **lgbgbt88** » Wed Jan 25, 2017 1:12 pm

Hello,

I am a Canadian working full time in the US on a TN status. For tax year 2015, I paid almost 30% of my income to various taxes in the US (Fed, SS, Medicare, State, and City) but the Canadian Revenue Agency didn't recognize most of them when I filed my Canadian tax return.

I shared Form 1040 with CRA but they seem only consider SS + Medicare as foreign tax credit. What else can I do in this case?

Regards

nelsona · Post by **nelsona** » Wed Jan 25, 2017 1:34 pm

First, can I ask why you are still filing your Cdn taxes as a cdn resident? Unless you are commuting daily/weekly, living and working in US is sufficient by treaty to make you non-resident of Canada for tax purposes.

But, to specifically answer your question, CRA has become more stickler for actual tax transcripts or assessments (from IRS, state, etc) showing how much you ACTUALLY paid in taxes for the year (and not merely a copy of your 1040 which you sent in) before they grant your credit. the reason they accepted the SS and medicare is because it appears on your W-2 which you submitted. I presume CRA told you this on your assessment.

But you really should be looking at not having to report the income in Canada at all.

lgbgbt88 · Post by **lgbgbt88** » Wed Jan 25, 2017 1:44 pm

Thanks nelsona.

I only come back 3-4 times a year. The reason I'm still paying my Cdn tax is because I have a condo in Toronto and I am not sure if I want to lose my residency in Canada yet. Also, if I stop paying my income tax now, what will happen when I come back? I will be considered as a new comer instead of a resident at that time right? I am not sure, never really thought through this question in my mind...

lgbgbt88 · Post by **lgbgbt88** » Wed Jan 25, 2017 1:54 pm

Also, nelsona, may I ask what it takes to establish non-residency in Cdn. Do I need to close all my bank account,trading account, etc.?

nelsona · Post by **nelsona** » Wed Jan 25, 2017 2:22 pm

By treaty, all you needed to do was move to US, geta a place to live (owned or rented) and live legally in US. the fact that you have a condo, but are clearly not living in it means it is not enough to keep you resident. clearly you aren't going back anytime soon.

You simply inform CRA with a departure date (the date you moved) on that year's tax return, pay the exit tax and you are done. the problem with waiting to declare non-residency is that you really won't have any event you can pointy to to say: this is the day I left. And it puts off things that you should be doing in any event to make your atx life in US simpler (TFSA, condo, foreign accounts, etc). and technically, CRA could decide to FORCE you into non-residency to get the exit tax, at a time when it does not suit you.

You would have to close your trading account, transferring what you could to US.

lgbgbt88 · Post by **lgbgbt88** » Wed Jan 25, 2017 5:38 pm

In my case, I took the job close to 2 years ago, but filed my income tax in Cdn both 2014 and 2015. Is it possible for me to declare non-residency now? to indicate I moved out of Cdn 2 years ago? what about my 2014 and 2015 tax returns then?

nelsona · Post by **nelsona** » Thu Jan 26, 2017 12:14 pm

See what I mean? You need to fix your old taxes. Be aware that now you are liable for gains on some of the profits from the condo when you sell, since it ceased to be your prioncipal residence in 2014.

lgbgbt88 · Post by **lgbgbt88** » Thu Jan 26, 2017 12:38 pm

Just wanted to be more specific, I own a pre-sale condo, the actual condo won't be ready in another year or so. I guess there is no capital gain or so related to me. but to your point, I will probably need to fix my 2015 tax, right? I started working in the US around Nov. 2014 so I guess I don't need to fix my 2014 since I was still a Cdn resident at that time.

nelsona · Post by **nelsona** » Thu Jan 26, 2017 1:31 pm

Well there will be gains on the condo when you sell it, which will always be taxed in Canada first, US second, with IRS giving credit for Cdn tax paid.
Yes, you should be fixing 2014, and in essence cancelling your 2015 Cdn return.

lgbgbt88 · Post by **lgbgbt88** » Mon Jan 30, 2017 10:41 am

so if I am going to file as non Cdn residence and US residence. how should I declare my TFSA, RRSP (I have a mutual fund), Canadian trading account and my deposit for my pre-sale condo?

lgbgbt88 · Post by **lgbgbt88** » Mon Jan 30, 2017 10:42 am

just to clarify, it's declare these assets to the IRS as foreign assets

nelsona · Post by **nelsona** » Mon Jan 30, 2017 11:08 am

Your TFSA has been taxable in US since you moved (that means the internal gains, dividends, interest). You should be closing this account.

Your trading account needs to be closed too, since you should not be trading in it as a US resident. You would have been subject to deemed disposition when you left.

Your RRSP remains as is, no special reporting.

Your deposit doesn't have any impact.

ALL foreign accounts need to be reported using FBAR, and FATCA. These have been discussed at length in other posts.

These are all related to you being a US resident, which you are by the number of days you spend in US every year. That has nothing to do with your Cdn tax residency, but given that you now live in US and don't live in Canada, you should be Cdn non-resident to simplify this.

lgbgbt88 · Post by **lgbgbt88** » Mon Jan 30, 2017 11:17 am

Thanks Nelsona.

Just to clarify, did you mean that I should disclose my TFSA, trading account and bank accounts to IRS but don't need to disclose my RRSP and condo deposit?

I didn't do a good job in disclosing these foreign assets when I filed my 2014 and 2015 tax returns (though when I filed my 2014, I was only in the US for 1.5 months). Am I subject to any penalties if I amend my tax returns for those two years now?

nelsona · Post by **nelsona** » Mon Jan 30, 2017 11:43 am

You need to dicalose all ACCOUNTS that you have control over. Not sure your condo deposit is an "account" that you control.

Your TFSA is ALSO a trust, which requires trust reporting AND it is a fully taxable account in US. So, the advice here is to close it when you move to US.

For 2014 ,since you filed a 1040NR, you are probably fine. 2015 was not filed correctly in US (nor in Canada s earlier pointed out).

You will have to do research to fix those. Look for FBAR, FATCA.