TAX issues

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 1:18 pm

I am working in US on TN status.

during this year I travel outside north america, and have some earnings.

I also travel to Toronto and have some earnings there (the payments I received are in canadian bank and its self employed earnings).

Recently I filledup form NR73 (I think thats the right name) for CCRA and they declared me deemed non-resident of Canada.

I do have a property in Canada and its rented, (the rent is not sufficient to pay mortgage and common element fee) this means that for example I receive $800 rent and my mortgage+common elemnt fee is about $1200

Now as its time for taxes I need some advise which income declare where.
ofcrouse I releaize that I have to declare my canadian income to CCRA? does that means that I have to declare that income to IRS as well?
What about the overseas income, does that have to be declare to both CCRA AND IRA?

I will appriciate the detail answer for this question so, I will be prepeared myself to see if my accountant is doing somethign wrong.

Thanks,

nelsona · Post by **nelsona** » Thu Jan 25, 2007 4:32 pm

First you must determine your date of depature from canada. From what you wrote, you seem to indicate that you left canada before 2006. If this is the case, you should have been non-resident at some point before that.

For your Cdn renatl income, you must have a portion of your rent sent to CRA monthly, or you need to file documantation to show that none of it will be taxed. Sounds like you haven't done this yet. You must.

Since you are living in US, you must report every penny of income earned anywhere on your 1040.

It doesn't matter where money is kept.

How you file in Canada will depend on when you left canada.

When was that?

So, the first thing

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 5:56 pm

Thanks for your quick reply nelsona.

I left canada in July 2005

the residency determination was done yesterday. which I received the letter from CCRA tells me that I become a deemed non resident.

I do have some income from canadian employer (self employed income) in the year 2006.

nelsona · Post by **nelsona** » Thu Jan 25, 2007 6:20 pm

So, your 2005 return must be corrected, with a departure date for that time.

Your rental income reporting has to be corrected or else you will be liable for 25% of your rent in tax, instead of 0.

Then, in 2006, you will be considered non-resident for entire year, and be able to exclude the self-employemnt income from Cdn taxation (on line 256 of your non-res return).

You will need to report all world income in US on 1040, including the Cdn and other foreign income, renatl income, depreciation, etc.

If I might ask, why did they say you are a 'deemed non-residdnt; rather than a purte non-resident, since you do not have a homw in Canada? This seems like a strange determination, usually reserved for those who keep a home avaailbale to themselves.

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 6:33 pm

What I think the reason behind is that I do have a property in Canada, I couldn't find the buyer. and my spouse and kids are with me in USA.

Can I challenge that?

They said " You indicate that you are subject to tax on your world income in another country. In our opinion, you have maintained significant residential ties with canada. However, since you are considered a resident of another country under an internaltional tax agreement, you will be considered a deemed non-resident of Canada as of June 29 2005."

I think thats the reason they declared me as a deemed non-resident.

so what I understand is I must have to correct my 2005 tax return and exclude my US income that I declared, also do I have to correct anything with IRS? i only declared my US income (not the canadian income from JAN-JUNE) to IRS. I filled 1040.

Please advise.

nelsona · Post by **nelsona** » Thu Jan 25, 2007 6:44 pm

[quote]What I think the reason behind is that I do have a property in Canada, I couldn't find the buyer. and my spouse and kids are with me in USA. [/quote]

No, you are fine as deemed non-resident, it means the same, just curious.

Yes, you ahve to correct your 2005 Cdn return, as I indicasted above. You also need to fix your 104 for 2005, since you had to report all income to use a 1040. You may not have anymore tax, but you need to report and then exclude the Cdn WAGES form your income.

I willsay that since your accountant didn't file correctly in 2005, that you should probably fire him.

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 7:10 pm

when you say you also need to fix 104 you mean thats a US 104 right?

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 7:27 pm

Also which one is prefferet more to file first CCRA? IRA?

i mean i need to use the foreign tax credits somewhere, which one?

ShyBoy · Post by **ShyBoy** » Thu Jan 25, 2007 7:40 pm

The last question I have is , I am planning to make 5 trips to canada, each trip will be about a week long for possible contractual work in Canada.

Is this legal here in USA, I am going out from US to do my business activity.
My canadian employer is willing to give me T4A (i think it A or E).

Will that help in my case for filling 2007 taxes?

nelsona · Post by **nelsona** » Fri Jan 26, 2007 8:03 am

US has absolutely no business telling you what you can or cannot do in canada.

If its all the same to your Cdn 'employer', you should just be paid as a contrator, not as an employee. That way you don't have any CPP/EI issues, and your income is excludable in Canada without limit.