Hi,
I am a canadian citizen and got a job on TN Visa in December 2005.
I travelled from Canada to all over USA for multiple project work at different sites and would be back home about every 2 weeks for the weekend.
I finally settled down in one place in USA in May 2006.
My wife quit her job in May in Canada. My family also joined me in my travel a lot of times since then to USA.
I sold my home and moved my family in october 2006.
I also brought my car along with me.
While filing for taxes, my accountant tells me that I can claim Non residency status from december 2005 as I was hardly in canada for more than a few weekends.
I find that confusing as the CRA website tells me that I cannot be a Non resident If I have a family in Canada.
My accountant also tells me that many people have claimed Non residency status while their family were still in Canada for years. He also quotes a law case where this was established.
My instinct does'nt agree with him and I do not want to make a mistake and be in soup later on. I think he want to take an agressive stance.
Agreeing with him will save me a lot of hard earned money and I am tempted. But I want to do the right thing.
I will truly appreciate if any body can help me to clear this confusion. And the time is running out fast.
Thanks a lot in advance for any guidance.
Canadian Non residency determination
Moderator: Mark T Serbinski CA CPA
Deemed Non residency status
Hi,
I just figured this out after posting the earlier letter.
I think my accountant could be right based on the definition of the "[b]Deemed Non resident" status[/b].
I quote the definition from CRA:
T-4131
What if your circumstances change?
If your circumstances change, you may no longer be a factual resident.
For example, you may decide to stay permanently in the country where you are working, sell your house in Canada, and move your spouse or common-law partner and dependent children with you (severing all residential ties with Canada).
In this case, we will usually consider you to be an emigrant in the year that you sever your ties. If this is your situation, get the Guide T4056, Emigrants and Income Tax, for the rules that apply for that year.
For all following years, you will be a non-resident of Canada. For information on non-residents, see "Are you a non-resident?"
T-4056
If you left Canada in 2006 and keep residential ties in Canada, you are usually considered a factual resident. However, if you are also considered to be a resident of another country for the purposes of a tax treaty, you may be considered a deemed non-resident. The ordinary effects of ceasing to be a resident of Canada will apply as if you were an emigrant.
Note
Generally you become a deemed non-resident at a time when your residential ties in the other country are such that, under the tax treaty between Canada and that country, you are considered to be a resident of that country and not a resident of Canada.
Note
If you are the spouse or common-law partner of a deemed resident and we consider you to be an emigrant in 2006, you may still be eligible for CCTB, CDB, and/or UCCB payments. If this is your situation, you will have to send us a completed Form CTB9, Canada Child Tax Benefit Statement of Income, each year. For more information, contact the International Tax Services Office.
Note
If you determine that you do not have to file a return for 2006, you should let us know the date you left Canada as soon as possible.
I just figured this out after posting the earlier letter.
I think my accountant could be right based on the definition of the "[b]Deemed Non resident" status[/b].
I quote the definition from CRA:
T-4131
What if your circumstances change?
If your circumstances change, you may no longer be a factual resident.
For example, you may decide to stay permanently in the country where you are working, sell your house in Canada, and move your spouse or common-law partner and dependent children with you (severing all residential ties with Canada).
In this case, we will usually consider you to be an emigrant in the year that you sever your ties. If this is your situation, get the Guide T4056, Emigrants and Income Tax, for the rules that apply for that year.
For all following years, you will be a non-resident of Canada. For information on non-residents, see "Are you a non-resident?"
T-4056
If you left Canada in 2006 and keep residential ties in Canada, you are usually considered a factual resident. However, if you are also considered to be a resident of another country for the purposes of a tax treaty, you may be considered a deemed non-resident. The ordinary effects of ceasing to be a resident of Canada will apply as if you were an emigrant.
Note
Generally you become a deemed non-resident at a time when your residential ties in the other country are such that, under the tax treaty between Canada and that country, you are considered to be a resident of that country and not a resident of Canada.
Note
If you are the spouse or common-law partner of a deemed resident and we consider you to be an emigrant in 2006, you may still be eligible for CCTB, CDB, and/or UCCB payments. If this is your situation, you will have to send us a completed Form CTB9, Canada Child Tax Benefit Statement of Income, each year. For more information, contact the International Tax Services Office.
Note
If you determine that you do not have to file a return for 2006, you should let us know the date you left Canada as soon as possible.
Your accountant is basically correct that once YOU went down to US, you *could* have declared yourself non-resident, even with family in Canada. Notice though, he said 'years', as it tales a few months for you to establish residency in US especially if you neverr stayed in one place.
However to do ths you must (a) meet the definition of US tax residence which means spending sufficient days in US, and (b)make a home there. The key words in the guide being "considered to be a resident of another country for the purposes of a tax treaty". For US this means presence and abode.
Did you do this? It does not sound like it, until may.
Second, you have the problem of how you filed in 2005. Did you indicate a departure date on your Cdn rax return? If not, CRA is unlikely to think that you moved to US in Dec 2005, since you didn't think so either.
So, the question becomes: when did you buy/lease a home in US? Or, when did you meet the SPT in US. Only when either (preferably both) these conditions weremet would you be considered "deemed non-resident".
My guess is that the date you became a deemed non-resident May 2006, will be your departure date. October will be your wive's. Forget anything about deemed resident. that does not apply to you..
However to do ths you must (a) meet the definition of US tax residence which means spending sufficient days in US, and (b)make a home there. The key words in the guide being "considered to be a resident of another country for the purposes of a tax treaty". For US this means presence and abode.
Did you do this? It does not sound like it, until may.
Second, you have the problem of how you filed in 2005. Did you indicate a departure date on your Cdn rax return? If not, CRA is unlikely to think that you moved to US in Dec 2005, since you didn't think so either.
So, the question becomes: when did you buy/lease a home in US? Or, when did you meet the SPT in US. Only when either (preferably both) these conditions weremet would you be considered "deemed non-resident".
My guess is that the date you became a deemed non-resident May 2006, will be your departure date. October will be your wive's. Forget anything about deemed resident. that does not apply to you..
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Hi Nelsona,
Thank you very much, I appreciate your quick response.
Sorry, I didn't understand what you meant by SPT.
Yes, you are correct that I did not have any idea of permanently staying in USA for long term when I first started. Everything was new and I didn’t have a clue if I would last long in the company or I will like the company to stay long term.
This is exactly the scenario mentioned in T-4131 with an example for a factual resident.
I will quote the CRA example here. (Sorry to repeat some quote to illustrate my point.)
Factual residents and income tax
Example
Tim is an industrial designer. His employer has sent him to work in Hong Kong for three months. His spouse and children stay at the family home in Saskatchewan during his absence.
We consider Tim to be a factual resident of Canada for income tax purposes because he keeps residential ties in Canada. When he files his Canadian return, he will report his world income and can claim all deductions that apply to him. Tim will pay federal tax and Saskatchewan provincial tax. He can reduce both federal and provincial taxes by claiming all federal and provincial non-refundable tax credits that apply to him.
What if your circumstances change?
If your circumstances change, you may no longer be a factual resident.
For example, you may decide to stay permanently in the country where you are working, sell your house in Canada, and move your spouse or common-law partner and dependent children with you (severing all residential ties with Canada).
In this case, we will usually consider you to be an emigrant in the year that you sever your ties. If this is your situation, get the Guide T4056, Emigrants and Income Tax, for the rules that apply for that year.
For all following years, you will be a non-resident of Canada. For information on non-residents, see "Are you a non-resident?"
Thank you very much, I appreciate your quick response.
Sorry, I didn't understand what you meant by SPT.
Yes, you are correct that I did not have any idea of permanently staying in USA for long term when I first started. Everything was new and I didn’t have a clue if I would last long in the company or I will like the company to stay long term.
This is exactly the scenario mentioned in T-4131 with an example for a factual resident.
I will quote the CRA example here. (Sorry to repeat some quote to illustrate my point.)
Factual residents and income tax
Example
Tim is an industrial designer. His employer has sent him to work in Hong Kong for three months. His spouse and children stay at the family home in Saskatchewan during his absence.
We consider Tim to be a factual resident of Canada for income tax purposes because he keeps residential ties in Canada. When he files his Canadian return, he will report his world income and can claim all deductions that apply to him. Tim will pay federal tax and Saskatchewan provincial tax. He can reduce both federal and provincial taxes by claiming all federal and provincial non-refundable tax credits that apply to him.
What if your circumstances change?
If your circumstances change, you may no longer be a factual resident.
For example, you may decide to stay permanently in the country where you are working, sell your house in Canada, and move your spouse or common-law partner and dependent children with you (severing all residential ties with Canada).
In this case, we will usually consider you to be an emigrant in the year that you sever your ties. If this is your situation, get the Guide T4056, Emigrants and Income Tax, for the rules that apply for that year.
For all following years, you will be a non-resident of Canada. For information on non-residents, see "Are you a non-resident?"
Yes, and your situation is exactly as described: you BECAME a deemed non-resident in May AFTER your circumstances changed
In the example you cite, CRA will not go back to the first day he left for HK. They will go to the day his sitution changed, ie, when he sold his house etc.
"If your circumstances change, you may NO LONGER be a factual resident. "
But you WERE until your circumstaces changed.
SPT is substantial presence test. You did file a 2005 tax return in US?
In the example you cite, CRA will not go back to the first day he left for HK. They will go to the day his sitution changed, ie, when he sold his house etc.
"If your circumstances change, you may NO LONGER be a factual resident. "
But you WERE until your circumstaces changed.
SPT is substantial presence test. You did file a 2005 tax return in US?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks Nelsona,
I get your point.
Yes, I did file the 2005 tax returns in USA as a resident.
Do I have to formally establish my "Deemed Non residency " status with CRA or I can just file my departing tax return in canada?
Do I have to file NR73 for that ?
Also do I provide supporting documentation or just palin NR73?
Thanks again for taking a bunch load of stress off my chest.
I get your point.
Yes, I did file the 2005 tax returns in USA as a resident.
Do I have to formally establish my "Deemed Non residency " status with CRA or I can just file my departing tax return in canada?
Do I have to file NR73 for that ?
Also do I provide supporting documentation or just palin NR73?
Thanks again for taking a bunch load of stress off my chest.
Hi Nelsona,
I talked with the international office in canada--- the person on the other told me even before I finished talking my case that I was a factual resident of canada.
But after inisitent on reading the clause in T-4056 she asked if I was paying tax on world income in USA and that I did not have any income in canada?
I said yes, as I am a resident of USA for the full year and am liable to pay tax on my world wide income.
She conceded and said if that was the case then yes I was a "deemed non resident " and wont have to file tax in canada for 2006. but I have to file T1 - ADJ for 2005 and declare that I left in 2005.
I think the deciding factor was that I am liable for world income in USA and that clinches the deal.
Also going back to our earlier example of factual resident -- the person going to Hong Kong was decidely for a short term and then his situation changed. For me I wennt to USA from Canada for a permanent job, but wasn't sure if I would like to stay with the company for long term.
So, unlike in the example my situation didn't change from temporary assignment to permanent. Mine was permanent to start with.
Now the only thing for me to worry is the fact that my company wanted me to travel all over USA in their different plants and then finally decided to locate me a one particular plant. So I couldnt establish any lease agreement till I wa fixed in a location.
Could this be used as a fact to lose my "Deemed Non resident " status for the portion of the year when I travelled?
I talked with the international office in canada--- the person on the other told me even before I finished talking my case that I was a factual resident of canada.
But after inisitent on reading the clause in T-4056 she asked if I was paying tax on world income in USA and that I did not have any income in canada?
I said yes, as I am a resident of USA for the full year and am liable to pay tax on my world wide income.
She conceded and said if that was the case then yes I was a "deemed non resident " and wont have to file tax in canada for 2006. but I have to file T1 - ADJ for 2005 and declare that I left in 2005.
I think the deciding factor was that I am liable for world income in USA and that clinches the deal.
Also going back to our earlier example of factual resident -- the person going to Hong Kong was decidely for a short term and then his situation changed. For me I wennt to USA from Canada for a permanent job, but wasn't sure if I would like to stay with the company for long term.
So, unlike in the example my situation didn't change from temporary assignment to permanent. Mine was permanent to start with.
Now the only thing for me to worry is the fact that my company wanted me to travel all over USA in their different plants and then finally decided to locate me a one particular plant. So I couldnt establish any lease agreement till I wa fixed in a location.
Could this be used as a fact to lose my "Deemed Non resident " status for the portion of the year when I travelled?
So, your telling me that because you were in US for 3 weeks in december 2005, you had the presence of mind to file a FULL-YEAR 2005 US 1040, reporting all your world income for 2005, including Cdn income before you went down, using foreign tax credits for your Cdn tax, reporting your wifes's income (or filing married filing separate)...
but then forgot to put a departure date on your Cdn tax return for 2005.
C'mon...
but then forgot to put a departure date on your Cdn tax return for 2005.
C'mon...
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Given the fact you barely can determine what to do for 2006, it's very likely you misfiled in US, grossly under-reporting your income, or over-staing your deductions. You will have to fix this.
You are getting too excited by the over-reaching advice of your accountant (who may have been misleading you since 2005).
You are getting too excited by the over-reaching advice of your accountant (who may have been misleading you since 2005).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
You have another problem too.
Since you are going to try to say you left in Dec 2005, that mens all your deemed dispositions as well as property reports became due on April 30 2006. You will have fines and penalties for not paying these last year, which will more than eat up any supposed tax savings from not reporting your US income.
Since you are going to try to say you left in Dec 2005, that mens all your deemed dispositions as well as property reports became due on April 30 2006. You will have fines and penalties for not paying these last year, which will more than eat up any supposed tax savings from not reporting your US income.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Hi Nelsona,
Thanks for pointing out my mistake, I realize now that I have indeed misfiled in 2005 for US taxes.
I can credit that to my ignorance (that doesn’t excuse it though).
I will try and amend that.
I should have claimed my residency for US only for last 3 weeks of 2005 instead of the whole year. Fortunately (I think) I filed for myself alone and not jointly.
Regarding the deemed disposition, I had only one property—my house which I jointly own with my wife. She moved to USA after selling it –if we claim she left Canada in October.
So should I have to have deemed disposed half the house when I left?
Once again, Nelsona, I deeply appreciate your insight and analysis and the time you take to help.
The accountant in USA—I have just met him. I had a different accountant in Canada last year for my Canadian income, and I did the self-filing for USA with turbotax.
Thanks for pointing out my mistake, I realize now that I have indeed misfiled in 2005 for US taxes.
I can credit that to my ignorance (that doesn’t excuse it though).
I will try and amend that.
I should have claimed my residency for US only for last 3 weeks of 2005 instead of the whole year. Fortunately (I think) I filed for myself alone and not jointly.
Regarding the deemed disposition, I had only one property—my house which I jointly own with my wife. She moved to USA after selling it –if we claim she left Canada in October.
So should I have to have deemed disposed half the house when I left?
Once again, Nelsona, I deeply appreciate your insight and analysis and the time you take to help.
The accountant in USA—I have just met him. I had a different accountant in Canada last year for my Canadian income, and I did the self-filing for USA with turbotax.
It is not worth the trouble to re-file 2005 taxes. and merely filing the return in 2005 does not make you a US tax resident. Any Cdn can file a US tax return without even setting foot in US. You did not meet any of the definitions of US resideny in 2005, including the treaty.
++
You left Canada in May 2006. Put that on your 2006 return and file accordingly.
It is inadvisable to have separate accountant do your returns.
++
You left Canada in May 2006. Put that on your 2006 return and file accordingly.
It is inadvisable to have separate accountant do your returns.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
The only way that you could, legally and in good conscience make a claim that you became DNR in dec 2005 is if you bought/renteda place back then, and stateed in US the required 30 consecutive days.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing