Am I eligible for non-resident tax in Canada

[davidgray]

Hi Nelsona,
I am a Canadian working in US on TN visa since 2016. I am planning to file US tax resident, Canada tax non-resident for year 2017. I want to make sure I am qualified to do so.
Here is my Canadian background
1. My family and I are not and won’t stay in Canada in 2017.
2. I have a condo in Canada and have rented it since 2016 when I left Canada. I have rent income in 2017 in Canada
3. I have RRSP account, bank account in Canada. I don’t plan to contribute/withdraw any funds.
4. I don’t have driver license, but I have health card which I don’t use it.
5. I have a full time permanent position from my US employer
Here are my questions:
1. Do I still have to file Canada resident tax (because of the condo)? Or can I do US tax resident, Canada non-resident tax for year 2017?
2. If I can do Canada non-resident tax, I need to report my rent income to US IRS. But should I report it to Canada? Still use tax software (ufile) every year?
3. I updated my US address in CRA. But I don’t need to file NR73 unless I am told by CRA. Correct?

Thanks

[nelsona]

before filing as non-resident for 2107, you have to ensure that you took care of all emigrant/departure requirements for 2016, including filing a departure return for Canada for 2016, making sure that your Cdn rental income tax is being withheld every month, etc. Right now, I would agree that you are non-resident, but you are not in compliance with your obligations as a non-resident.

Please read over the information on
http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... g-eng.html

[davidgray]

Hi nelsona,
I am a Canadian and TN visa holder, working in US since last August. I thought I should always file 1040NR and Canada Resident Tax rest of my life just like I did last year. I am totally wrong. You just opened a whole new world to me (by this link). I think I (and my accountant) messed up my tax return last year. I never know there are such things like “NR6â€￾, “NR4â€￾, “Section 216â€￾ in this world.
There is my action plan:
1. I will mail NR6 immediately to report I rented my condo to my tenant. My tenant always does direct deposit to pay rent. I can leave “Section 4 - Canadian agent identificationâ€￾ blank, can’t I? In the other word, I don’t need a Canadian agent. Correct?
2. I have to wait CRA’s reply from my NR6. Then I can mail my NR4 and Section 2016. Correct? Otherwise how can I send 25% withhold to CRA?
3. I didn’t do the exit date in my 2016 tax return. Do I need to send “T1 Adjustment Requestâ€￾? I plan to put my exit date as 2016-08-30 (or 2016-12-31) under “Other details or explanationsâ€￾ section. Is it necessary to do?
4. I wrongly deposited $10k to my TSFA two month ago. I find I can’t do it if I am non-resident in Canada even I have the room carrying from previous year. I plan to withdraw it and pay $200 (1% per month) as interest by Form RC243.
That’s all my findings that I spend all Canada Day and US Independence Day doing the homework after you sent the link….
Many thanks

[nelsona]

1-3 look about right. You are swimming upstream on this. It may be too late to reduce the tax you owe on rent for 2016. I would be filing the 216 portion for 2016 NOW, not waiting for NR6, which will only apply to future payments. you can ask CRA how they want their 25% sent.


4. if your broker allowed you to deposit to TFSA that is fine (they probably should not by SEC regs). What you are not allowed to do is build any more contribution room as a non-resident. It looks like you were ok on that as long as you were using existing TFSA room . Trouble is that your TFSA is meaningless in US US, it is not tax-free there, and has reporting requirements as well that are onerous.

[nelsona]

Sorry, just to allay yoyr fears, you have TWO years to get your 216 filed. But since you may owe money on this, I would be sending it in sooner rather than later.

For info on agents, withholding, etc Read th guide:

http://www.cra-arc.gc.ca/E/pub/tg/t4144/t4144-16e.pdf

[davidgray]

Thanks. I can have a good sleep night.

[davidgray]

Hi nelsona,
Thanks for the reply. I find actually I can do these to avoid more mistakes.
1. I plan to use January 1, 2017 as the date when I become a non-resident in Canada. This is because for 2016, I filed tax resident for Canada and non-resident for US(1040NR). But starting from January 1, 2017, I am a US tax resident by filing 1040. Is my understanding correct?
2. I will send my NR6 ASAP. I’ve reported my whole year rental income, along with my global income in both Canada and US, as Canadian resident in 2016 already (and thus paid a lot of income tax). So I don’t have to do S216 for year 2016. Is my understanding correct?
3. Reading “Leaving Canadaâ€￾ section on the CRA website, I understand that I need to complete T1161, since I have real property in Canada. However, the deemed disposition section mentions that real property is one of the exceptions for deemed disposition, i.e., when the tax payer left Canada, holding a real property will not result in deemed disposition and potentially CGT payable. In such circumstances, do I still need to submit T1161? If so, how should I estimate the FMV (Fair Market Value)?

[nelsona]

1. When did you leave Canada to begin working? When did your family join you? CRA looks suspiciously at those who magically become non-resident on Jan 1.
2. Yes, if you were resident at end of year.
3. There is a difference between the asset report and the assets that need to be deemed sold. You need to report ALL property. Cdn real estate is not subject to deemed disposition, as it will be forever taxed in Canada.

In general, however, even if not subject to deemd dipso now, you should get a FMV (from a broker or assessor) for your records, as this will affect your US taxes, or the cap gains calcualtions when you eventually do sell.

[davidgray]

Thank you for your response. I understand your point of view on bullet 1 and where CRA is coming from. Here is my situation: My family have been living in the US. I left Canada, began working in the US, and joined my family in August 2016. I referred to the determination rules published on the CRA website.
http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... g-eng.html

When do you become a non-resident?
When you leave Canada to settle in another country, you usually become a non-resident for income tax purposes on the latest of:
• the date you leave Canada; (2016/08/23)
• the date your spouse or common-law partner and dependants leave Canada; or (2013/09/30)
• the date you become a resident of the country you settle in. (2017/01/01, I plan to file 1040 in USA)

For me, the latest of the three will be when I become a US tax resident, which is January 1, 2017. This is my thought process but certainly appreciate your advice.

[nelsona]

You became resident in August. And you shpuld be filing full year 1040 for 2016 in any event. This would save you LOTS of taxes, since (a) you would file jointy with your spouse on 1040, you would not owe Cdn taxes for your US income.
You are non-resident by treay, and by regulation, when you joined your family in US.

Its not the "planning to file a 1040" that decides if you are resident, it is your residential ties, which arer CLEARLY US since August. This is known as a deemed non-resident or treaty non-resident.

As as to exactly when you became US tax resident by US regs, I'm quite sure with them living in US, Auhg 2016 was not the first day in 2016 that you were present in US. You no doubt visted them regularly, and went to US to find job too. So there is some date in 2016 that you met SPT (if not sooner), and that makes you resident from the first day that you were in US in 2016.

And it BENEFITS you to break residency, and your spouse too if she is working.

[nelsona]

I was saying you were US resident from the day you went down to US even if your spouse was in Canada. To find out that she actually lives in US makes this a slam dunk Aug 2016 departure, if not earlier.

[davidgray]

Hi Nelsona,

I plan to submit my T1 Adjustment Request. There are so many items to be updated, as I have to correct my status from resident to non-resident for last year to CRA.
1. If I change my status from resident to non-resident in Canada for 2016, should I revise my US tax from 1040NR to 1040? I need a resident tax status for either Canada, or US. Correct? It would be a massive change, too.
2. Would such massive change trigger NR73 from CRA?

The most important thing, do you suggest I should do that?

[nelsona]

1. No. Unless you met SPT (using the 3-year calculation), you do not have to file a 1040. But as I said earlier, since your spouse lives in US, I'm not sure why you both did not file jointly in US, in order to save you (and maybe also your spouse) US taxes. What filing status does she use in US. In any event, whether 1040NR or 1040 you would have to indicate married and calculate tax in that way.

You do need to be resident somewhere, as you say. Fact is, you WERE resident in US since August, However, you just were not resident long enough to require you to file a 1040.

A 1040 in and of itself does not indicate residency.

2. it might. But the fact that your family and you live in the US since August make a determination of non-resident since August a slm dunk. Don't worry about NR73. And only sumit is they ask for it.

[davidgray]

Hi Nelsona,
My wife works in US, and I works in Canada for a couple of years. We think we won’t benefit from joint file tax.

I’m working on the T1-ADJ and had a question regarding how I should indicate my residence on December 31, 2016. I was physically living in the US on that day and thus, I believe I should indicate non-resident for December 31, 2016 when adjusting my T1 for 2016. However, I noted that my residence on that day impacts my total tax payable, i.e., residence in Ontario results in a provincial tax payable to Ontario and a non-resident status (which is what I should use in my opinion) will result in a $0 tax payable to Ontario (but a higher federal tax payable) for the whole year of 2016, even though I lived there for 7 months. Should I use non-resident for y/e? I REALLY appreciate your on-going support!

[nelsona]

Since your wife works in US, she files a 1040 Married Filing separately, which has a VERY HIGH tax rate (she might file head of household, which may be better), I'm almost 100% certain that filing jointly, since you now also have US income, would benefit you as a couple. You would still be able to exclude your Cdn wages from before moving to US using 2555. It would be quite easy to do using any normal US tax software.

This would likely reduce both your US tax and hers for 2016.


When filing an exit return in Canada, the question on the tax return becomes "where were you living on December 31, OR ON THE DAY YOU EMIGRATED". So you would indicate Ontario. You will pay Fed and Ontario tax as usual, with some of your credits reduced to 7/12ths. You should be using software of course. Ufile.ca handles this situation quite well, as long a syou set the controls to emigrant (instead of non-resident).

One does not file as a non-resident until the year after they leave (if they need to file at all). Instead they file as an Emigrant from Canada and the province they last resided in.