Canadian working in US, need file both US and Canada income tax return

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.

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Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Jan 20, 2019 5:11 pm

nelsona, you are very professional. I think Tie-Breaker Rules would apply for my Residency, to determine if I should be a US resident or Canada resident for my 2018 tax. I visited my Canada family 7 times after I started working in US in Feb. 2018. They visited my US place once in 2018, I have a long term lease in US. We still have a home in Canada. I did not cut any tie with Canada. I still keep my Canada driver licence. In US, I have driver licence, SSN, bank accounts, full time job. I stayed 285 days in US and 80 days in Canada in 2018. based on all above information, by applying tie-breaking rules,
Should I be US resident or Canada resident for my 2018 tax? I am afraid CRA would question me if I claim to be a deemed non-resident of Canada. Thanks for my help.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Fri Jan 25, 2019 9:28 pm

Is there anybody under similar situation with me, and had filed tax return as US resident, Canada deemed non-resident at before? Did you receive questions from CRA?

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sat Jan 26, 2019 4:14 pm

You meet US residency rules because of days spent, and you meet CDn rules because of "house and spouse" in Canada.

I would accept your claim of being Cdn tax resident. You should then use 1040NR and apply the special rules for section XXV(2). Realize however that you will be paying more tax overall since you will pay Cdn tax in the end on all your income. If that is too much, then file the other way, as US tax resident.
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Fan8899
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Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Jan 27, 2019 8:44 pm

If I file as a US tax resident, then become a deemed non-resident of Canada. For the house my wife and kids are living in Canada, which owned by both my wife and myself. Do I have to consider it is sold in Feb. 2018 when I went to US for full time job? considering I own 50%. same question for the rental house which I own 50%, my wife own 50%, do I have to consider it is sold in Feb? if yes, then there will be capital game for both my wife and myself. Do I have to report the capital gain to IRS? Thanks

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sun Jan 27, 2019 9:26 pm

Realize that you are allowed to file a full 1040 whether you are US tax resident or not, as long as you follow all requirements (ie. like a US citizen living in Canada would). This would include various reporting requirement associated with FATCA, and PFIC. You would still be considered Cdn resident, because you outweigh US ties with Cdn ties.

So you may not wish to do this. That is why filing as a Cdn resident, using XXV(2) to lower your US tax might be best, so you do not (yet) become non-resident of Canada. From what you describe, your centre of vital interests is still Canada, based on your previous post.

But, in general CDn property is NEVER considered sold when you move. What would happen if you declared non-residency, is that, at time of sale, you would not be able to completely should the house from cap gains in Canada, especially if you sold more than one year after feb 2018. But the tax would be very small.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Thu Jan 31, 2019 8:56 pm

I will probably proceed with US non resident, Canada resident, noted I will pay more tax to Canada. For US tax, do I have to report my Canada rental house income to IRS? Thanks

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Fri Feb 01, 2019 8:20 am

1040NR is for US sourced income only
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sat Feb 02, 2019 6:41 pm

I wonder if I need pay Social security (SS) tax and Medical tax to US when I work in US. I am paid as an employee of the US firm under TN, I received W2 from my US employer recently, it shows SS and Medical tax has been withheld in 2018. But I will be considered as Canada tax resident, US non-resident alien for tax purpose. I will file 1040NR for US tax. even I worked more than 10 months in US in 2018. Please let me know if I can avoid paying SS and medical tax to US. Thanks

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sat Feb 02, 2019 8:29 pm

Social security and medicare contributions are based on where you are an employee. You should be and are paying SS/MEd correctly. You use these as taxes in the foreign tax credit calc on your Cdn return.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Sun Feb 03, 2019 2:57 pm

Thanks nelsona. Do you think I need file form 8840 to explain that I have closer tie with Canada?

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Sun Feb 03, 2019 4:30 pm

1040NR has sufficient space to take the treaty position as non-resident. If you spend more than 183 days you cannot use 8840 anyway.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Mon Feb 04, 2019 10:14 pm

I work in FL, no state tax, so I paid US Federal tax only. My family live in ON, Canada, when I file Canada income tax as a resident, I need pay both Canada Federal and ON provincial tax. Will my US Federal tax credit help to reduce my ON provincial tax? of course it is based on the condition of my US Federal tax credit is more than my Canada Federal tax liability. Thanks

nelsona
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Re: Canadian working in US, need file both US and Canada income tax return

Post by nelsona » Tue Feb 05, 2019 9:56 am

You will apply your IRS and FICA tax first to the fed tax, and whatever's left will go to the prov form. Software handles this fine.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

Fan8899
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Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Wed Feb 13, 2019 12:28 am

1. I will file 1040NR to IRS. I know I can make a "fake" 1040 pro forma to determine my tax rate for 1040NR. When making fake 1040. I am supposed to report my Canada rental income, but if the rental income turns out to be negative after depreciation, Do I still need report it in the fake 1040?

2. I assume all my wife Canada income (employ and rental) can be exempt in the fake 1040, by using 2555. Do I still need apply ITIN (W7) for my wife for this fake 1040 and true 1040NR? I will choose married nonresident alien for myself at 1040NR.

3. Another question, is above tax treaty article of XXV(2) or XXV(4)?

Thanks for the help.

Fan8899
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Joined: Fri Dec 28, 2018 8:16 pm

Re: Canadian working in US, need file both US and Canada income tax return

Post by Fan8899 » Fri Feb 15, 2019 8:24 pm

I did further research, I think I find some answers to above three questions.
1. Yes. I need report my rental income to IRS in fake 1040 even it is negative, it actually will lower my US tax.
2. Yes. I need apply ITIN for my wife, because I file US return as married.
3. No answer yet, probably both XXV(2) and XXV(4)? I read treaty article XXV, XXV(4) is more specifically talking about fake 1040.
And for fake 1040, I should not report my wife negative rental income, but not sure about her Canada employment income. any help is appreciated.

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