TN tax

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nelsona
Posts: 16413
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Fri Mar 25, 2005 7:36 pm

Joe: 2 things you've said troubled me:

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">I already filed my taxes in canada as I normaly do,<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

For 2004 you CANNOT file as you normally did, since you became non-resident, and thus cannot file as before. Your return is definitely incorrect: at the very leat line 300 is wrong. If you did not indicate a departure date and include your US income, your return is flat wrong.

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">What happenes if I dont file?<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

The IRS is different than CRA. In Canada, as long as you ultimately don't owe them a penny, you don't have to file.

Not so with IRS. Once you make a certain threshold of income (and for 2004, that would include your Cdn income) you MUST file. There are certain options you have that MUST be exercised in a timely fashion, so do not entertain such an option.

At a very minimum, fill out a 1040NR (using IRS Pub 519, if you did not meet SPT), with your spouse as a dependant, along with a W-7 requesting her ITIN. You (and she) will need this for 2005 anyways, for tax and investing purposes, so best to at least get it now.

Once you do a 1040NR, and see that your tax rate is much higher than it should normally be, this may spur you to try (succesively) a dual-status return -- 1040NR and 1040 MFS (again explained in 519); then a 1040 MFJ, 1040 MFJ with 1116 and finally a 1040 with 2555/1116.

Do not rely on HRBlockheads or any walk-in tax service. They will invariably file incorrectly for your situation.

After 2004 tax year, the plain software will be fine for your case, with only the RRSP reporting to be done manually.






<i>nelsona non grata... and non pro</i>

Joe
Posts: 8
Joined: Thu Nov 04, 2004 7:02 pm

Post by Joe » Tue Mar 29, 2005 2:32 pm

Again I am very grateful to everyone here who replied. The last post by Nelsona explained something very important: My tax rate is higher than the average american! and thus thats why I should consider the trouble of going to file as a duel stats or under the treaty.

My canadian income was low under 20k and I already filed the canadian tax and I dont have any investments except student loans to claim. I will go ahead try to download the forms I was adviced here to file and then will see how much I will owe [B)]

nelsona
Posts: 16413
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Wed Mar 30, 2005 11:16 am

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">That, by itself, does not justify a treaty claim<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

I agree. Thats why in 5 years of these posts, I don't run through the litiny of options, more than once a tax season.

Dual-status is sufficient for most Cdns, as it establishes US tax residency as a point of fact, and allows one sufficient possibilities for itemizing.

Full-year joint, while it usually yields a lower US tax bill, requires a treaty position (and thus the services of an acct), may bring about US taxation of pre-arrival cap gains which would otherwise be excludable, and starts the IRS taxation of RRSP clock running upto a year earlier than otherwise required.
<i>nelsona non grata... and non pro</i>

Joe
Posts: 8
Joined: Thu Nov 04, 2004 7:02 pm

Post by Joe » Tue Apr 12, 2005 6:17 pm

I am back. After getting lost between the different forms to fill, I decided to go to a professional CPA. He tells me that if I plan to stay in US for rest of the year 2005 then I am a resident and I should file as a resident. He said if any problems with IRS they will send me a letter and then he deals with it. Because of the deadline in 3 days; I took his word especially that he has his office for 12 years now. Is there any truth to that? If I stay in US for over a year I am considered a resident and I file as one? I know for 2004 I wasn't but he said it not important.

ok I have my tax-guilt eating me now!

This is summary of my situation from my previous posts:
- Canadian with wife entered US in Oct 2004 as TN/TD
- US income for 2004 is 15K
- Most likely TN will be renewd for 2005/2006
- no property/interest/other income to claim, except Canadian income from employment about 15k (already filed tax in canada, but did not know about the non-resident option cause I filed online, still repaying student loans in canada).




nelsona
Posts: 16413
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Apr 12, 2005 10:21 pm

Professional CPAs are generally completely unqualified to do anything but resident taxes, so his boasts are hollow.

We already adressed the hows and whys to filing as a resident for 2004. While does depend on you becomeing resident in 2005, the letter is supposed to be sent with the return, not afterwards.

<i>nelsona non grata... and non pro</i>

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