Am I taxed on world income in Canada?
Moderator: Mark T Serbinski CA CPA
Am I taxed on world income in Canada?
I am on a TN visa and will probably be returning to Canada for school in September. Since I will only have been in Canada for 4 months for 2005, will I be taxed on all of my income that I made in the USA? Since I will have spent more than 6 months in the USA, will I have to pay income tax to the USA on my Canadian scholarship funds? I'm just trying to figure out what sort of tax hit I'm going to take. Thanks!
Finally got your name registered, eh?
Cdn tax is a matter of residence.
2 questions:
1. How long have you been on TN, and what ties did you maintain in Canada while you were down here?
2. have you read the "Emigrants" and "Newcomers" guides from CRA which quite clearly outline when your Cdn tax stops, how you are taxed in canada when you are away, and when Cdn taxation begins when you return.
For your US taxes, You will have 2 choices on how you do them, for this 'departure' year.
Generally, people run the numbers both ways, and choose the one that yields less US tax:
1. File full-year 1040 as if you never left, reporting all world income. This method allows for standard deduction and filing jointly with spouse.
2. filing part-year 1040 and 1040NR and reporting world income before the move and US-only income after, but not getting standard deduction (itemize only), and not filing jointly with spouse.
<i>nelsona non grata</i>
Cdn tax is a matter of residence.
2 questions:
1. How long have you been on TN, and what ties did you maintain in Canada while you were down here?
2. have you read the "Emigrants" and "Newcomers" guides from CRA which quite clearly outline when your Cdn tax stops, how you are taxed in canada when you are away, and when Cdn taxation begins when you return.
For your US taxes, You will have 2 choices on how you do them, for this 'departure' year.
Generally, people run the numbers both ways, and choose the one that yields less US tax:
1. File full-year 1040 as if you never left, reporting all world income. This method allows for standard deduction and filing jointly with spouse.
2. filing part-year 1040 and 1040NR and reporting world income before the move and US-only income after, but not getting standard deduction (itemize only), and not filing jointly with spouse.
<i>nelsona non grata</i>
Yes, Mr. Serbinski was kind enough to add me in himself!
2 answers:
1) I have no ties to Canada. I've been in the US for over 3 years and the CRA deemed me a non-resident.
2) I just read them now. The Emigrants guide says "For the part of the tax year that you're a resident of Canada for tax purposes, you must report "world income" (income from all sources, both inside and outside Canada) on your Canadian tax return." But, the Newcomers guide says "As a resident of Canada, you: must report "world income" (income from all sources both inside and outside Canada) on your Canadian income tax return."
When I move back to Canada I will only have Canadian income, and while in the US I will only have US income. The newcomer seems to fit for me, although I still have some questions. Does that mean that if I moved back to Canada in December, that I would have to pay tax on all my other 'world' income.
Will I end up just paying taxes to the US on my US income, and CDN taxes on my CDN income?
Thanks.
2 answers:
1) I have no ties to Canada. I've been in the US for over 3 years and the CRA deemed me a non-resident.
2) I just read them now. The Emigrants guide says "For the part of the tax year that you're a resident of Canada for tax purposes, you must report "world income" (income from all sources, both inside and outside Canada) on your Canadian tax return." But, the Newcomers guide says "As a resident of Canada, you: must report "world income" (income from all sources both inside and outside Canada) on your Canadian income tax return."
When I move back to Canada I will only have Canadian income, and while in the US I will only have US income. The newcomer seems to fit for me, although I still have some questions. Does that mean that if I moved back to Canada in December, that I would have to pay tax on all my other 'world' income.
Will I end up just paying taxes to the US on my US income, and CDN taxes on my CDN income?
Thanks.
Just to correct your statment:
the CRA <u>determined</u> (not deemed) you a non-resident. Deeming is a completely different matter.
You are obviously going to be a "Newcomer", just as obviously as you were an "Emigrant" 3 years ago. The newcomer guide clearly states (p. 12) that you report world income "for the part of the year that you were a resident of Canada". If you arrive on december 20th, you only pay tax on world income from dec 20th to dec 31.
<i>"Will I end up just paying taxes to the US on my US income, and CDN taxes on my CDN income?"</i>
For canada, yes. You will BECOME a Cdn resident on a specific date, and thus report world income from that date forward.
For The US, as I stated, you will have a choice. Pick the one that yields the least US tax. You might be surprised how adding your Cdn income, and filing like a US resident, might actually lower your US tax rate, especially if you are married, and because much of your income might be reduced by tuition credits/deductions, maybe even moving expenses, etc.
<i>nelsona non grata</i>
the CRA <u>determined</u> (not deemed) you a non-resident. Deeming is a completely different matter.
You are obviously going to be a "Newcomer", just as obviously as you were an "Emigrant" 3 years ago. The newcomer guide clearly states (p. 12) that you report world income "for the part of the year that you were a resident of Canada". If you arrive on december 20th, you only pay tax on world income from dec 20th to dec 31.
<i>"Will I end up just paying taxes to the US on my US income, and CDN taxes on my CDN income?"</i>
For canada, yes. You will BECOME a Cdn resident on a specific date, and thus report world income from that date forward.
For The US, as I stated, you will have a choice. Pick the one that yields the least US tax. You might be surprised how adding your Cdn income, and filing like a US resident, might actually lower your US tax rate, especially if you are married, and because much of your income might be reduced by tuition credits/deductions, maybe even moving expenses, etc.
<i>nelsona non grata</i>