This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.
I worked in US on H1 visa and filed tax in Year 99-04 as US tax residence. I moved to Canada as Landed immigrant in August , 2005 and started new job in Canada.
As per the no. of days presence test , I think I pass US tax residence test.
I've Also established my residence tie in Canada since Aug05.
Can I file tax in both countries as tax Residence person?(This way I save most of my tax $$$) If not then
Can I file my tax in USA as residence and in Canada as Non-residence? I have 75% of income from USA firm and only 25% income from Canadian firm.
Also I got some 15k from my US employer as a final settlement after I moved to Canada . I think I need to show this amount to my Canadian tax return. Can I get some credit from US return for this amount? (based on US-Canada tax Treaty)
For 2005, you have no choice in Canada as to how to file: You are a
"newcomer" and should file as such, with an arrival date of Aug 2005 indicated on page 1.
Follow the instructions in the "newcomers" guide from CRA.
For the US, you have the choice of filing "as normal" for 2005, reporting ALL your 2005 income on 1040 and taking either the tax credit for your Cdn taxes (Form 1116) or excluding your Cdn wages by form 2555.
Your other choice is to file "dual-status", with a departure date coinciding with your arrival in Canada, which as you have probably noticed, yeilds a higher US taxrate.
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,
Thanks for all the knowledgeable answers on the forum that I have browsed through.
I have a similar situation to rakvyas, having moved (both my wife and I) in Aug 05 and having spent > 183 days in US in 2005 and being on H1 in the preceding years. We both started working in Canada in Aug 05 and our income is split nearly 50/50 for 2005 for US/CAN. My wife also received relocation (cash after tax) expenses which we should deduct in the Canadian return. I understand we can either file as dual status (1040NR - only 1 deduction) in US or as full-year resident (1040 - plus file for foreign tax credit for Canadian wages). Which option would be better for us?
Also can I claim relocation expenses for myself and my wife claim relocation expenses for herself for Canada since we both moved to new jobs in Canada?
thanks!
nelsona wrote:For 2005, you have no choice in Canada as to how to file: You are a
"newcomer" and should file as such, with an arrival date of Aug 2005 indicated on page 1.
Follow the instructions in the "newcomers" guide from CRA.
For the US, you have the choice of filing "as normal" for 2005, reporting ALL your 2005 income on 1040 and taking either the tax credit for your Cdn taxes (Form 1116) or excluding your Cdn wages by form 2555.
Your other choice is to file "dual-status", with a departure date coinciding with your arrival in Canada, which as you have probably noticed, yeilds a higher US taxrate.
Your moving expenses are not deductible in Canada. Period. Any money you received from your employer is reportable and taxable.
As to your US taxes, you should work them out both ways and see. The moving expenses are deductible on your US tax return, and the income reportable too.
You can elect to use 2555 to exclude the Cdn wages for 2005, if you will meet the time requirements sometime this year (you will need to file an extension, and file after you meet the requirements)
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
What about my income from USA after I moved to Canada?
If I pay tax on this income in Canadian return and take credit on US Tax return that means almost I am not paying any fedral tax on my AUG-DEC income from USA source in USA. Is it ok?
Question on State Tax return
---------------------------------
I was residence of California from Jan - August.
Should I file Californial Tax return with US income or it should have my world income?
I am planing to use normal 540 form.
Based on "new comer to Canada"
Paragraph from Treaty-exempt income .
"You have to report all foreign-source income that you received
after you became a resident of Canada. However, part or all of the
income may be exempt from Canadian tax if Canada has a tax
treaty with the country in which you earned the income and there
is a provision in the treaty that prevents Canada from taxing the
type of income you received. You can deduct the exempt part on
line 256 of your return."
P597 US CANADA TAX TREATY
=========================
If my income from USA is more than 10k and if
1) The residence are present in Canada for no more than 183 days during the calendar year and ( I am assuming this is valid for US Tax residence. (No GC) )
2) The income is not paid by Canadian residence employer or by a permanent establishment or fixed base of employer in Canada
In my case I moved to Canada in Aug-05 (less than 183 days) and income I got from was from my US employer (This was my final settlement with my company, not work for US company) .
Based on this can I deduct my US Source of income in Canadian T1 Line 256?
For my California Tax I guess I have to show all my world income and pay tax there.
None of the paragraphs you quoted apply to you. You are a returning resident, so the 183 days does not apply: you are resident the day you return to live in Canada, and you made more that US$10K in 2005 in US wages, so you cannot use that part of the treaty. Besides, the $10K exemption of US wages would be used ion your US return, not Canada
It is quite normal for the US tax to wipe out your Cdn federal tax, since the fed rate is usually lower that IRS rate, and the Feds use your foreign tax as a credit first, and the leftover is used by the province. It ends up that your tax is paid to your province of residence.
For california, you could probably exclude your non-cali-source income from after you moved to canada, but, like the IRS return, there may be advantage to report everything (I try not to get into the subtleties of each state if its not a cross-border issue).
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
I am new to Canada and moved in Aug-05. So I am going to file as “NEW COMER†and going to show all my word income after Aug-05.
(After I moved to Canada I’ve got final settlement and my last pay(11K) from US employer.)
Also I stayed in US more than 183 days(+ last five years) this allows me to file US 1040 and 540 CA as residence.
I am planning to file first Canadian return and then take Canadian tax as credit in my 1040 (showing world income) with filing 1116 form.
I am not paying any IRS(US) tax on my AUG-DEC income from USA source (11 K) as I have to show this in my Canadian return and then taking credit in US return.
This confuse me!!.As per my understanding generally you pay tax in the place where you earned it and then take credit from residence country. In this case 11k is from USA and also taking tax credit from US return.
I am not paying any IRS(US) tax on my AUG-DEC income from USA source (11 K) as I have to show this in my Canadian return and then taking credit in US return.
This is not corredct. Your fisrt tax responsibility for money you earn in uS is to the IRS. It is Canada that would give you any credit, not IRS.
Because you are filing a full year return, you must report all income for 2005 to IRS, regardless of where it was earned, or where it otherwise is reported.
To get credit for any Cdn tax on your 1040 (on Form 1116), you need to have Cdn source income. If you do not have Cdn-source income, thereis no credit for you to get. Your US-source income is not eligible for foreign tax credit in US, it is eligible for foreign tax credit in Canada.
You can file a full-yerar 1040 even if you spent no time in US in 2005, so, again, the 183 days is meaningless.
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
I've talked to tax consultant and discussed to file my returned for US as Full year residence with normal 1040 based on presence test .
He told me you must file as dual-status residence because I have terminated my tie with US in aug-05 and not a green card/citizenship. (I am a landed immigrant to Canada).
He shows me “Taxation of Dual-Status Aliensâ€-“Nonresident at End of Year†document.
This way I am going to pay very high tax.
If you leave in the middle of the year, you are automatically entitled to file FULL YEAR for that year (IRS Pub. 519),
You are also entitled and use 2555 to exclude foreign wages after departure., assoon as you meet the PPT (sometime in the foillowing year)
PLUS, as a cCdn resident, you could use the non-discrimination clause to file just as any US citizen in your circumstances (ie. leaving US to live/work in Canada).
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 for your informative answers, this is very helpful for me.
It was HR block. I am not able find any local tax consultant does both returns.
I have Canadian and US income after I moved to Canada and required to show them in both country returns. I am not 100% sure about calculating foreign tax on these amounts.
Foreign tax on US income in Canadian Return
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I have received X $ (my last pay and final vacation settlement) from US employer after I moved to Canada, I think, I have to show in my Canadian return and also take foreign tax credit on this amount
(a) US Tax on X amount (to calculate Line 431 & 14 (Federal Foreign tax credit ) on Canada Sch.1) .
= (Total US Federal tax (Line 46 on 1040 ) + California tax ) * ( X Amount / Total 2005 Yr. World Income(Line 37 US 1040 tax return))
Foreign tax on Canadian income in US Return
------------------------------------------------------------
I have received Y $ ( Salary + Canadian bank Interest ) income after I moved to Canada.
This is my foreign income in Form 1040 Line 21
(b) Tax paid in Canada on Y$(to use in form 1116) :
= (Canada Schedule 1 basic federal tax(Line 13) + BC tax ) * ( Y Amount / Total 2005 income after I moved to Canada, Line 150 )
Questions
1) Is it right calculation (a,b)?
2) Can I claim moving expense on my US return?
3) Do I need to give US address for filing Normal 1040?
Please do not classifyHR Blockheads as a consultant, they are (and this should be obvious to you now) merely poorly-trained data entry types.
I'll let you do your own calculations, but, yes, you can claim moving expenses on your 1040, and no you don't have to live in US to file a1040, nor give a US address.
Claiming moving expenses on your US return will not save you any ovewrall taxes, however, as your Cdn taxrate is still higher and is not improved by lowering your US taxes, so I would not go thru much effort to do this.
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
I checked on IRS Pub. 519 and it states that "you must file a 1040NR if you are a dual status taxpayer who gives up residence in the US during the year and who is not a US resident on the last day of the tax year". Can anyone clearly point to me if its allowable to file a "Full Year" return in the case above. Thanks a lot for your help!
As a Cdn citizen and resident, you are entitled to file exactly as a US citizen would ion the same circumstances.
Article XXV trumps any IRS instructions.
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
