I am a US citizen, working in the US, and my spouse is NOT a US citizen, working in Canada.
I am hoping to be able to file a joint return for 2004 (married filing jointly has the lowest tax rate). I know that this would require my spouse to elect to be treated as a US resident for tax purposes, and all of her Canadian income must be reported. However, I believe I can use Form 2555 to exclude all of her Canadian income.
I recently discovered form TD F 90-22.1 (report of foreign bank and financial accounts). I am wondering if my spouse would have to fill this out- she is not a U.S. citizen, but is electing to be treated as one for tax purposes. Does this election mean she has to submit the form?
Also, we did not submit the form for 2003, but may have had more than $10,000 in a foreign account. If she were to submit the form for 2004, could it possibly lead to trouble for not submitting it for 2003?
Thanks.
Non-res. spouse treated as a resident, TD-F 90-22.
Moderator: Mark T Serbinski CA CPA
Any year in which she joins you on a 1040,she will have file the TD form, as well as the Form 8891 for her RRSPs.
Since I gather from your post that 2004 would be the first year you include her on your return, so why would 2003 be a concern?
If she did not file a 1040 in 2003, nor join you on your 1040, she didn't have to file TD form as she was not a US resident.
But as to causing trouble, it will not.
By the by, whether or not she joins you on your 2004 1040, YOU may have to file TD form, if any of the foreign accounts you hold are joint (and exceeded US$10K last year).
I presume that given your wife is living in canada, that you are also BOTH filing a Cdn tax return?
<i>nelsona non grata</i>
Since I gather from your post that 2004 would be the first year you include her on your return, so why would 2003 be a concern?
If she did not file a 1040 in 2003, nor join you on your 1040, she didn't have to file TD form as she was not a US resident.
But as to causing trouble, it will not.
By the by, whether or not she joins you on your 2004 1040, YOU may have to file TD form, if any of the foreign accounts you hold are joint (and exceeded US$10K last year).
I presume that given your wife is living in canada, that you are also BOTH filing a Cdn tax return?
<i>nelsona non grata</i>
Thanks for the reply.
Actually, in 2003, she lived and worked in the US for the first half of the year, and lived/worked in Canada for the 2nd half of the year. We filed a joint return for 2003, but we did not do it correctly- we did not know that her CDN income had to be reported. That is also why I believe she would have had to file the TD for 2003.
I'm not sure if we are supposed to file an amended return for 2003 to include the canadian income- and if so, how would that work? I'm not sure if we could use 2555 to exclude her canadian income.
My wife included me on her 2003 CDN return, but listed my income as $0, since I lived in the U.S. (My research indicated that only while I live in Canada do I need to include my worldwide income.) Is that right?
Actually, in 2003, she lived and worked in the US for the first half of the year, and lived/worked in Canada for the 2nd half of the year. We filed a joint return for 2003, but we did not do it correctly- we did not know that her CDN income had to be reported. That is also why I believe she would have had to file the TD for 2003.
I'm not sure if we are supposed to file an amended return for 2003 to include the canadian income- and if so, how would that work? I'm not sure if we could use 2555 to exclude her canadian income.
My wife included me on her 2003 CDN return, but listed my income as $0, since I lived in the U.S. (My research indicated that only while I live in Canada do I need to include my worldwide income.) Is that right?
Yikes.
You 1st need to ammend your 2003 1040, since you obviously could be accused of tax evasion.
Filing a 1040 means reporting all world income, which you did not do. Letting IRS find this themselves would be alot worse than you reporting it.
Remember too that 2555 only covers foreign wages, not interest and many other forms of income.
On the Cdn side of things, the fact your wife lives in Canada makes you presumptively a Cdn tax resident, unless you can CLEARLY show that you have no intention of moving to Canada, have very few other ties there, and spend very little time there.
The fact that she has a tax home in canada and not US would lead me to believe that you spend more time in Canada than she does in US.
You would have to answer these questions to your own satisfaction, and be prepared to back these up to CRA.
The immediate problem I see, is reporting your income as '0', could have triggered some credits on her tax return (as if you simply were staying at home) such as the GST credit, spousal credit, lower medical expense threshold etc.
She would need to review her return and make doubly sure that she has received no benefit by claiming that you had no income (which is false of course).
Your missing TD form is the least of your worries.
<i>nelsona non grata</i>
You 1st need to ammend your 2003 1040, since you obviously could be accused of tax evasion.
Filing a 1040 means reporting all world income, which you did not do. Letting IRS find this themselves would be alot worse than you reporting it.
Remember too that 2555 only covers foreign wages, not interest and many other forms of income.
On the Cdn side of things, the fact your wife lives in Canada makes you presumptively a Cdn tax resident, unless you can CLEARLY show that you have no intention of moving to Canada, have very few other ties there, and spend very little time there.
The fact that she has a tax home in canada and not US would lead me to believe that you spend more time in Canada than she does in US.
You would have to answer these questions to your own satisfaction, and be prepared to back these up to CRA.
The immediate problem I see, is reporting your income as '0', could have triggered some credits on her tax return (as if you simply were staying at home) such as the GST credit, spousal credit, lower medical expense threshold etc.
She would need to review her return and make doubly sure that she has received no benefit by claiming that you had no income (which is false of course).
Your missing TD form is the least of your worries.
<i>nelsona non grata</i>
Geez...
For 2003, she did not earn anything but wages. Would she meet the physical presence test since she was physically present in Canada for over 330 days- STARTING in 2003 until the present. (In other words, can 2555 be used to exclude her foreign income for both 2003 and 2004?)
For her CDN return, I don't think she took advantage of listing me there to lower her tax.
For this issue- isn't there a tax treaty b/w US and Canada that gives specific rules for determining residency, and that you should only be considered a resident of one country? I thought I had read this, and determined that since I spent much more time in the US and that my principal workplace was in the US, that this would make me a resident for US tax purposes but a Non-res for canadian purposes. And as a Canadian-NR, I wouldn't have to report my worldwide income.
For 2003, she did not earn anything but wages. Would she meet the physical presence test since she was physically present in Canada for over 330 days- STARTING in 2003 until the present. (In other words, can 2555 be used to exclude her foreign income for both 2003 and 2004?)
For her CDN return, I don't think she took advantage of listing me there to lower her tax.
For this issue- isn't there a tax treaty b/w US and Canada that gives specific rules for determining residency, and that you should only be considered a resident of one country? I thought I had read this, and determined that since I spent much more time in the US and that my principal workplace was in the US, that this would make me a resident for US tax purposes but a Non-res for canadian purposes. And as a Canadian-NR, I wouldn't have to report my worldwide income.
"can 2555 be used to exclude her foreign income for 2003?
Definitely. her tax home became foreign when she left. She became eligible for 2555 as soon as the full year was met.
That is what I meant to say when responding that you need to report all her income in 2003 (and then deduct it by 2555). You can't just say, "it would be a wash so I don't have to do anything."
For 2004, 2555 will be no problem
Canada:
"I don't think she took advantage of listing me there to lower her tax"
Hard to tell. If she used software it does it automatically. If she is getting GST cheques, that would be proof. I would also question exactly how she did her 2003 return, given that she was a 'newcomer' and there are special rules to follow.
Cdn tax residency. Your analysis is generally correct, however you could be putting too much emphasis on where your work is, as this is only part, your "centre of vital interests" certainly includes your wife. While ultimately, you can use the treaty to declare yourself (or be declared) resident of only one country, you do indeed right now meet the residency rules of both countries, so it is a tie-breaker situation.
As I said, make sure you can justify this position if CRA comes a-knockin'.
And while an NR (and I agree that you are NR, but probably a deemed NR) ultimately does not have to pay Cdn tax on his US income, that is a far cry from (a) not having to report the income, and even farther cry (b) stating on her return that you had no income.
Again here is where software would bite you, as most packages take that '0' and run with it, not stopping to ask whether the spouse is a deemed non-resident and taking a treaty position.
<i>nelsona non grata</i>
Definitely. her tax home became foreign when she left. She became eligible for 2555 as soon as the full year was met.
That is what I meant to say when responding that you need to report all her income in 2003 (and then deduct it by 2555). You can't just say, "it would be a wash so I don't have to do anything."
For 2004, 2555 will be no problem
Canada:
"I don't think she took advantage of listing me there to lower her tax"
Hard to tell. If she used software it does it automatically. If she is getting GST cheques, that would be proof. I would also question exactly how she did her 2003 return, given that she was a 'newcomer' and there are special rules to follow.
Cdn tax residency. Your analysis is generally correct, however you could be putting too much emphasis on where your work is, as this is only part, your "centre of vital interests" certainly includes your wife. While ultimately, you can use the treaty to declare yourself (or be declared) resident of only one country, you do indeed right now meet the residency rules of both countries, so it is a tie-breaker situation.
As I said, make sure you can justify this position if CRA comes a-knockin'.
And while an NR (and I agree that you are NR, but probably a deemed NR) ultimately does not have to pay Cdn tax on his US income, that is a far cry from (a) not having to report the income, and even farther cry (b) stating on her return that you had no income.
Again here is where software would bite you, as most packages take that '0' and run with it, not stopping to ask whether the spouse is a deemed non-resident and taking a treaty position.
<i>nelsona non grata</i>
Thank you very much for your help.
It sounds like I have the following ahead of me:
U.S.:
2003: I *must* file an amended return to report my wife's worldwide income, but it can be excluded with 2555. Net effect should be zero, but I'm no longer evading taxes.
2004: I can optionally file a joint return, and exclude my wife's income with 2555. But, I cannot exclude her interest income, and she must fill out the TD form.
(I say optional because I don't think she has to file a return; I can file separately and pay more tax...)
Canada:
2003 and 2004: I *think* i'm a deemed non-resident. Now that you mention it, I recall seeing that exact term as I was exploring the tax treaty tie breakers. I better look into whether I need to report my income, but not have to pay tax on it??
The Canada stuff is totally new to us (she's not Canadian), and her 2003 could be incorrect. We did our best, but it is pretty confusing... esp. in Quebec, where lots of stuff is in French.
As a deemed-NR (assuming I am), does my US income go on my wife's return, and if so, how do I avoid paying tax on it? Or do I file a return as an NR?
It sounds like I have the following ahead of me:
U.S.:
2003: I *must* file an amended return to report my wife's worldwide income, but it can be excluded with 2555. Net effect should be zero, but I'm no longer evading taxes.
2004: I can optionally file a joint return, and exclude my wife's income with 2555. But, I cannot exclude her interest income, and she must fill out the TD form.
(I say optional because I don't think she has to file a return; I can file separately and pay more tax...)
Canada:
2003 and 2004: I *think* i'm a deemed non-resident. Now that you mention it, I recall seeing that exact term as I was exploring the tax treaty tie breakers. I better look into whether I need to report my income, but not have to pay tax on it??
The Canada stuff is totally new to us (she's not Canadian), and her 2003 could be incorrect. We did our best, but it is pretty confusing... esp. in Quebec, where lots of stuff is in French.
As a deemed-NR (assuming I am), does my US income go on my wife's return, and if so, how do I avoid paying tax on it? Or do I file a return as an NR?
For Cdn Federal taxes, there is no 'joint' return, however your income is used to determine some credits and limnits, and should be indicated on her return on page 1.
There is a non-resident tax return on which all income would be reported and then deducted.
QC is an entrely different issue (and all QC tax information is available in English, so drop that excuse). Your best bet would be not to file anything (and cetainly not a joint QC return -- the only province which allows this) but reporting on her return your correct correctly your total income, again just to make sure that you have not triggered an improper advatage.
Her 2003 returns should have had an arrival date, and thus is not a starightforward tax return (since she would not be including her pre-arrival income).
All the 'newcomer' and 'non-residnt' guides from CRA are very inforamtive on all this.
<i>nelsona non grata</i>
There is a non-resident tax return on which all income would be reported and then deducted.
QC is an entrely different issue (and all QC tax information is available in English, so drop that excuse). Your best bet would be not to file anything (and cetainly not a joint QC return -- the only province which allows this) but reporting on her return your correct correctly your total income, again just to make sure that you have not triggered an improper advatage.
Her 2003 returns should have had an arrival date, and thus is not a starightforward tax return (since she would not be including her pre-arrival income).
All the 'newcomer' and 'non-residnt' guides from CRA are very inforamtive on all this.
<i>nelsona non grata</i>
C'mon rhollan, for several years now, MRQ has had, in all respects, the option of joint return.
Just because the taxation method is not <i>exactly</i> the same as MFJ 1040, doesn't remove its 'jointness'.
Each US state taxes couples a little differently, too, and theirs is still a joint return.
<i>nelsona non grata</i>
Just because the taxation method is not <i>exactly</i> the same as MFJ 1040, doesn't remove its 'jointness'.
Each US state taxes couples a little differently, too, and theirs is still a joint return.
<i>nelsona non grata</i>