Tax software for doing both Canadian and U.S returns

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.

Moderator: Mark T Serbinski CA CPA

worryfreeinvestor
Posts: 144
Joined: Thu Mar 24, 2005 6:17 pm
Location: Seattle, WA

Tax software for doing both Canadian and U.S returns

Post by worryfreeinvestor » Mon Jan 02, 2006 1:23 am

I am trying to determine whether my reach exceeds my grasp, with respect to completing my taxes. I'm a Canadian citizen who moved to the California on May 2, 2005 to start work (TN1). Wife also Canadian but doesn't work (TD1). Plan to file 1040 as married joint.

When I lived in Canada I always used Quicktax and found it effective. The question is, because I have to do tax returns for both countries for 2005, is it advisable to simply buy Canadian QuickTax and the U.S version (TurboTax) and muddle through both returns? I appreciate the challenges of doing this, especially for the year in which I changed residence. I understand the issues of Calfornia taxation of RRSPs, the cost base in Canada and the U.S. for calculation of capital gains on securities, even that the fact we plan to file jointly as married persons effects the date of departure we report on our 1040.

We have no real estate or anything else exciting going on. I'm just a salaried employee with a wife and no children, RRSPS and now a 403(b), Roth IRA and HSA (Health Savings Account). Also, I hate to admit it, but I have always kind of enjoyed doing my taxes, and have done so accurately in Canada as well as Britain and Germany, where I've also lived.

So, to get to the point: Can the software handle this situation? Can I do this myself without getting into too much trouble, or if I my head was screwed on straight I'd skedaddle right over to Serbinski or PriceWaterhouse or someone who had done this a million times and pay the money to have it done professionally?

Anyone with experience one way or the other, please let me know.

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Mon Jan 02, 2006 1:35 am

Canadian tax software is completely able to handle the 'departure return' (even U-file online), however no off-the-shelf US software can properly handle the "dual-staus" return,. particularly if one files a 1040NR as part of their US return (1040NR is never included).

If you plan to do your own taxes in future, I would recommend picking up one of the US packages, just for information and 'playing around', but for year one, because of the dual-status and the complex foreign credit issues, a pro might be the way to go, despite the $1000+ cost, and then do-it-yourself afterwards.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
Posts: 144
Joined: Thu Mar 24, 2005 6:17 pm
Location: Seattle, WA

Post by worryfreeinvestor » Mon Jan 02, 2006 3:56 pm

Thanks for the advice. Is it the 1040NR that I file? I believe I file the regular 1040, with a residency starting date as determined by the substantial presence test. N'est ce pas? Or perhaps the U.S. tax software does not have the flexibility to have any start date other than January 1.

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Mon Jan 02, 2006 4:42 pm

See what I mean?

You are not entitled to file a 'Normal' 1040 unless you report ALL income for the calendar year. Otherwise, you are filing dual-status, which requires a 'statement' which is best thru 1040NR for the non-resident portion.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

MaggieA
Posts: 112
Joined: Sun Oct 31, 2004 4:06 pm

Post by MaggieA » Tue Jan 03, 2006 7:26 pm

About TurboTax and QuickTax, a friend told me that they know about each other and work together quite well if you have to file in both countries.

This is strictly hearsay on my part, but I think the friend was trustworthy. She's a US citizen, husband Canadian, when they moved from Canada to the US he ended up continuing to be resident in Canada for a while so they were filing in both countries for a couple of years. Did it themselves with the above-mentioned programs.

Personally, I've always done my own taxes (nowadays with tax software, of course) except for the year we moved from Canada to the US. For that year, I got professional tax preparation as part of my relocation package, and I'm grateful not to have had to get into the complexities of transition-year returns. I had more than enough other transition matters to take care of.

TN Holder
Posts: 32
Joined: Wed Nov 09, 2005 1:57 pm

Post by TN Holder » Mon Jan 09, 2006 2:41 pm

Hi,

Is it realy $1000 :shock: for somebody doing your taxes?

I am working in US (TN) and wife (TD). All 12 month in 2005 salary in US no income in Canada.

Just Wife was in canada (no income) till October. Which 1040 should I file? normal or NR?

My plan is:
1-use US tax software to file my taxes as regular resident in US, the only income in 2005 was in US (365 bdays)
2- Calculate income and taxes for the months my wife was in Canada, then use on-line Canadain tax software (as I did for last 4 years) and file taxes for canada. (what do I have to show as evidance of income to CRA?, I don't have T4 anymore)
Do I have to wait for IRS reply before filing tax for Canada? (in case I owe IRS?)


3- for 2006, I will only file tax in US and don't file any tax in Canada till I go back there.

Is it the best way to save accountant fee of $1000? :D
BTW I called HR Block, they don't do Canadian taxes :cry: (at least the one I called)

Thanks

flames9
Posts: 50
Joined: Fri Apr 08, 2005 9:00 am

Post by flames9 » Mon Jan 09, 2006 10:13 pm

I would be very leary of H&R block. I'm a Canadian down in the USA and now a permanent resident 9cr-1 visa). I made an appointment last year with their "Canadian" specialist. Luckily I found this site before and had read up and our super hero Nelson answered many of my questions. So I was not going into this meeting blind. The H&R specialist was clueless. Needless to say I walked out. Not saying there aren't well trained H&R block people, just be carefull.

TN Holder
Posts: 32
Joined: Wed Nov 09, 2005 1:57 pm

Accountant or not accountant, this is the question !!!!

Post by TN Holder » Tue Jan 10, 2006 12:37 pm

Thanks flames9,

So what do you suggest?

I've red the postings on this site, but still I am not sure how to do the taxes on the first year and realy don't want to pay $1000 to accountant.

On reason is, when I was in Canada, I undrestoot what accountants are doing is axactly what the tax software are doing, absolutly no difference. (I tried once and compared them!!!)

and for some reason I think the difference of what an accountant could save can not justify $1000.

Thanks

angolaian
Posts: 1
Joined: Tue Jan 10, 2006 1:54 pm

Post by angolaian » Tue Jan 10, 2006 2:27 pm

Hello all,

My experience is to do you taxex and don't pay for it.

flames9
Posts: 50
Joined: Fri Apr 08, 2005 9:00 am

Post by flames9 » Tue Jan 10, 2006 2:36 pm

I ended up going to Jackson Hewitt and in most cases they are probably not much better than H&R block,lol. At least this fellow listened to me, did some research and said I was correct (Thank you nelson) This year I wil ltry to do them on my own. Think Jackson hewitt (or is it hewiit jackson?) charged me $350 ttl for my wife and I. I think the best one can do is take some time, read through the posts here and the IRS website, and if your still not comfortable, find a qualified tax person. There must be other people besides H&R block, jacksonHewitt or accountants that do tax preperation. Cheers

worryfreeinvestor
Posts: 144
Joined: Thu Mar 24, 2005 6:17 pm
Location: Seattle, WA

Married filing jointly and a request for MaggieA

Post by worryfreeinvestor » Tue Feb 14, 2006 3:31 pm

2005 was my departure year from Canada to U.S. (May 1). My wife and I sold our Canadian equities in April 2005 in order to realize the capital gain. This is because we plan to remain in the U.S. indefinitely and understood (from "The Border Guide" book) that the tax treaty does not address capital gains. So, if you do not sell appreciated equities before departing Canada, Canada will tax notional capital gain from deemed disposition, but the U.S. will not recognize the deemed disposition as a stepped up cost basis when you sell the stock in the U.S. Ergo, some double taxation of cap gains.

I have a job and my wife does not. We understand that, normally, couples file as "married, filing jointly" in the U.S. However, an accountant told us that we can do this only if we use January 1 as our date of departure for the first year. Is this true? Does it have something to do with the 1040NR versus 1040R or 1040EZ, as nelsona mentioned above?

If so, it looks like we made a mistake disposing of Canadian equities in April 2005: we should have done so in December 2004 (which would have been difficult as I did not have the job offer yet). Will we suffer double taxation or should we NOT file as "married, filing jointly" in U.S.?

Any feedback gratefully appreciated.

MaggieA: I (and I'm sure others) would really appreciate it if you could get your mixed-nationality couple to join this forum and post their experience of using only tax software for both countries directly so that we could peruse it. My spidey-sense tells me that their lives might be easier because one spouse is a U.S. citizen.

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Wed Feb 15, 2006 2:54 pm

Canada will tax notional capital gain from deemed disposition, but the U.S. will not recognize the deemed disposition as a stepped up cost basis when you sell the stock in the U.S. Ergo, some double taxation of cap gains.
This is no longer true, as an agreement between US and canada made it possible for CNds going to US to use their deemed disposition price as the cost basis.

In general though, it was a good idea to rid your self of any WINNING stocks you held before leaving (it didn't harm you). However if you sold losing positions, holding them 'til after arrival in US would have gotten you a 'loss' in both countries.

You can definitely use tax software to do Cdn/US returns, but not in the first year, because tax softawre does not handle non-resident issues.

The matter of first year taxes (ie. the 2 or 3 choices you have in how you file in US) has been cobvered extensively in other threads.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
Posts: 144
Joined: Thu Mar 24, 2005 6:17 pm
Location: Seattle, WA

Post by worryfreeinvestor » Thu Feb 16, 2006 11:22 am

Thanks. I tried searching other threads with not much success, but I'll try again. Yes, I sold only winning stocks (not that easy in 2005) and kept the losers.

worryfreeinvestor
Posts: 144
Joined: Thu Mar 24, 2005 6:17 pm
Location: Seattle, WA

Quicktaxweb

Post by worryfreeinvestor » Tue Mar 21, 2006 2:06 am

I'm using Quicktaxweb and I'm losing confidence it's going to work. I can't see anywhere to put a departure date, nor do I see form T1243 (Deemed Disposition of Property by An Emigrant of Canada). Also, one of the first questions is "Select the province or territory you were a resident of on December 31, 2005". Notwithstanding the bad grammar, the accurate answer here is "non-resident", not "BC" which is the return I'm supposed to file if I departed Canada in 2005. Should I just put in BC and see what happens?

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Mar 21, 2006 7:46 am

Ufile works great
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply