landed in Canada in middle of 2004. How to file?

gpacino · Post by **gpacino** » Tue Mar 22, 2005 11:27 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

<blockquote id="quote">quote:<hr height="1" noshade id="quote">As discussed earlier, nelsona mentioned that since I landed as a Can. PR (although I still lived part time & worked full time in US), I should file as a resident for the part of the year following the landing<hr height="1" noshade id="quote"></blockquote id="quote">

I doubt that I said that. "Landing" in canada is not sufficient to make you a tax resident. PRs are not obligated to be tax residents (they once were).

I may have said that choosing to say that for tax purposes you live in US, but for long term PR eligibity, you live in canada, may not be mathematically possible after, say, 2 or 3 years.

I may also have said that it is not worth fighting Cdn tax residency, because of your other ties, and because you may have very little tax advantage in doing so, and would be jeopardizing health insurance, PR status, etc.

As to when residency began, it is customary to allow for a spouse who is about to immigrate, shortly after marriage, to use the actual arrival date ("move date") in Canada as the first day of residency, rather than insisting that the day you married you became irrevocable tied to Canada.
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Sorry, I must have misquoted you. I see your point about filing as a CDN resident being helpful for long term immigration purposes, and that the "move date" could be the date that I "establish CDN residency".

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I would not file an NR74. I would merely look at it and see whether more of my ties are in US or Canada, if that makes you fell better.

Your other comments about seeking professional help illustrate this: To make a treaty claim that you are not living in Canada will cost you money, as it will have to be done prtofessionally, and will likley cost you more than your tax savings.

I would say that unless you are making well over US$100K, and your spouse is making more than the $80K foreign exclusion, you should simply be filing your taxes as a married US citizen working in US, but living in Canada since Oct 2004, and continuing to do so.
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I'm fine with filling out CDN returns as a resident, as long as I can reduce my CDN tax to near nothing with foreign tax credits. (Who wants to pay tax to 2 countries??)
As far as the US return goes, I'd seek help just to get solid advice on exactly what forms need to be filled in. I almost filed without noticing the 90-22.1... which looks like it could lead to big trouble, if we need to file it but don't. My point is, I wouldn't mind paying somebody a little bit just to make sure I do it right.
But I don't think I need to pay a lot and have somebody do my entire return(s).

Your comments about making a treaty claim vs. just filing as a CDN citizen are helpful- it sounds like I could get into a mess or spend too much $ trying to make a treaty claim, where just filing might not really cost me much anyway.

nelsona · Post by **nelsona** » Tue Mar 22, 2005 11:53 am

IRS publication 54 is your best stating point, and a copy of the US Canada treaty wouldn't go amiss.

You will be paying tax in 4 jurisdictions (IRS, state, CRA, MRQ) you have little choice in that, since you live in one place and work in another.

nelsona non grata... and non pro

chjun · Post by **chjun** » Wed Mar 23, 2005 12:13 am

Hi guys,

thanks a lot for all the info.

I calculated both my US and Canada tax return. It's surprised me a little. since I was working in Detoit, Fed 15%, State 4%, SS and Medicare Tax 7% was taken off when I got the paycheck. and I use those as the foreign tax credit when I filed Canada tax. it turned out Canada goverment owe me money!!! (Actually, they don't since I can only apply Foriegn tax credit up to whatever the tax I'm going to pay. )

But this surprised me, since my canadian friends told me their tax is much higher than americans. Am I doing this right?

By the way, I only have CAN$25K from Sept to Dec.

Jim

nelsona · Post by **nelsona** » Wed Mar 23, 2005 7:51 am

Most Windsor-Detroit commuters find this.

nelsona non grata... and non pro

gpacino · Post by **gpacino** » Wed Mar 23, 2005 10:18 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

Whatever % of your US wages you do end up reporting, you would use that percentage of US tax/state tax etc towrds your foreign tax credit, first on the federal and then what's left on the QC return.

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I didn't get this at first. Is this how it works?
Suppose I paid CAN$5000 US tax, and figure my CDN Federal tax would be CAN$4000. I could then use $4000 as a tax credit on the Federal form, but then I could only get a $1000 tax credit on the Quebec form?

nelsona · Post by **nelsona** » Wed Mar 23, 2005 10:32 am

Pretty much.
First you determine the amount of US tax that is eligible for credit (say $5000)

You use the $5000 on your fed return, do the calculation, and see how much credit you get. If the credit works out to $3,928, you have $1,072 to use on the QC calculation (or for the other provinces, the Provincial sheet).

You need to do the fed one first, by law.

nelsona non grata... and non pro

gpacino · Post by **gpacino** » Wed Mar 23, 2005 10:38 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

Pretty much.
First you determine the amount of US tax that is eligible for credit (say $5000)

You use the $5000 on your fed return, do the calculation, and see how much credit you get. If the credit works out to $3,928, you have $1,072 to use on the QC calculation (or for the other provinces, the Provincial sheet).

You need to do the fed one first, by law.
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I see. Isn't there a "quebec abatement" that goes on the federal return? If the fed. form must be filled out first, then this abatement must not depend on the results of filling out the Quebec form?

I could be way off here. I'm new to the canadian side.

nelsona · Post by **nelsona** » Wed Mar 23, 2005 10:54 am

The QC abatement is purely on the fed return, and does not depend on anything from the QC return.

You should be using tax software to do all this. It will spit out all the numbers correctly as long as you put the correct arrival date on Page 1, and indicate that you are resident of QC on Dec 31, 2004.

Then all you have to do is tell the s/w what your various incomes are, which ones are foreign, and what your eligible foreign tax is.

nelsona non grata... and non pro

gpacino · Post by **gpacino** » Wed Mar 23, 2005 11:23 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

The QC abatement is purely on the fed return, and does not depend on anything from the QC return.

You should be using tax software to do all this. It will spit out all the numbers correctly as long as you put the correct arrival date on Page 1, and indicate that you are resident of QC on Dec 31, 2004.

Then all you have to do is tell the s/w what your various incomes are, which ones are foreign, and what your eligible foreign tax is.

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Any software would do? Is there a certain one that you would recommend?

Thanks again for the help.

nelsona · Post by **nelsona** » Wed Mar 23, 2005 11:28 am

Are there choices in canada? I thought there was only one.

I've even used u-file, completely online and it is quite accurate, for both QC returns for my folks, and 217 returns, which is pretty specific.

nelsona non grata... and non pro

gpacino · Post by **gpacino** » Fri Mar 25, 2005 9:53 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

Most Windsor-Detroit commuters find this.

nelsona non grata... and non pro
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Not so with Quebec, though, eh?

Let me illustrate:
I'm a US citizen, Cdn PR, working in US, living part time in US part time in Quebec, wife lives full time in Quebec.
Suppose my US income is $100,000. My US tax is approx. $15000, + 7000 (SS/med) and $3000 (state), for an approximate total of $25000.

Seems like I'd be considered a resident of Canada, so here's the Fed bill:
$120,000 income, $30,000 tax paid to foreign country.
approx. 25,000 tax; apply FTC, Tax = $0.

Quebec:
Tax is about $24,200; only have $5000 left for FTC;
Tax is approx. $19,000.

Total in US: $25,000 + 15,800 = over $40,000!

Isn't there any way to reduce this Quebec tax burden? This is nuts.

nelsona · Post by **nelsona** » Fri Mar 25, 2005 1:14 pm

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Isn't there any way to reduce this Quebec tax burden? This is nuts.<hr height="1" noshade id="quote"></blockquote id="quote">

Not really. Have your wife -- since she's a citizen -- vote for a provincial party that will reduce taxes, I guess.

Or move to anpther province, a million QCers have over the last 30 years.. Your biggest expense is probably commuting, not taxes.

I should point out that Detroit-Winsdor commuters who pay no Cdn/ON tax, usually have only one spouse working, max out their RRSPs, and have healthy donations. But indeed the tax rate for high earners is quite a lot more in QC than almost anywhere else.

Next year, 2006, your RRSP contribution room will be such that you will be able to start cutting down the Cdn tax.

nelsona non grata... and non pro