Hi, There,
I am a Canadian citizen. Starting from February 2005,I work as a full-time employee for a US company in Virginia on TN visa. My wife and two kids are still living in Toronto, Canada. And they will not move to states in year 2005. I own a car,a condominium, and joint banking account with my wife, I still have canadian credit cards, health card, driver licence, auto insurence, etc.. Basically I still have family tie in Canada.
I have only stayed in States less than 35 days in year 2005( I do not think I will spend more days in states this year.I am on an oversea business trip for the US company.). I do not buy any health insurence offered by the US company. US taxes is deducted from my payroll every two weeks.
My questions are:
1. Am I a deemed non-resident for Canada? Do I have to send the NR73 form to canadian govenment to get my deemed non-resident?
2. If I stay in states less than 35 days in a year, I do not have to pay taxes to US govenment. Is that right? Where can I find some information about this?
3. Basiclly, how should I handle my tax.
Thanks a lot,
James
TN visa Canadian and US Taxes?
Moderator: Mark T Serbinski CA CPA
No, you will not be determined to be a deemed non-resident of Canada (DNR), because the first criteria for that status is to become a tax resident of another Country.
As you state, you atre not becoming a tax resident of US, since you are not spending 183 days there. Besides, you have no other ties there that would indicate that you LIVE anywhere else than in Canada.
The only way that you would qualify as a DNR is if you become a resident of the country in which you are now working, and they have a treaty with Canada.
You will have to pay US (and state) tax on the income earned while in US, but not while on foreign posting. You should probably be stopping any US tax withholding on your income at this point. Since the US portion is likely to be less than $10K, you *might* be able to exempt yourself from US tax, but only if you maintain Cdn tax residency.
You would still need to pay state tax for the time you worked in that State.
So, unless you become a resident and start paying taxes in your other foreign country (which is doubtful), you will have to pay Cdn tax on ALL your income, from whatever source, wherever you are working. And even if you do become residnt, that would only exempt your 3rd-country income, not US-sourced income.
So, for IRS in 2005, you will file a 1040NR in US, reporting only the portion of US income that was earned while in US, and, if it is less than US$10K, you will exempt this by treaty.
For your state, you will report as a non-resident, the same portion as above, and pay state tax.
In canada, you will report EVERYTHING, and take credit for the state tax you owe, as well as any SS and Medicare taxes you paid.
Your Cdn return will not indicate any departure date, since, really, you did not leave Canada.
The above would only change if (maybe) you became resident in the 3rd country.
<i>nelsona non grata... and non pro</i>
As you state, you atre not becoming a tax resident of US, since you are not spending 183 days there. Besides, you have no other ties there that would indicate that you LIVE anywhere else than in Canada.
The only way that you would qualify as a DNR is if you become a resident of the country in which you are now working, and they have a treaty with Canada.
You will have to pay US (and state) tax on the income earned while in US, but not while on foreign posting. You should probably be stopping any US tax withholding on your income at this point. Since the US portion is likely to be less than $10K, you *might* be able to exempt yourself from US tax, but only if you maintain Cdn tax residency.
You would still need to pay state tax for the time you worked in that State.
So, unless you become a resident and start paying taxes in your other foreign country (which is doubtful), you will have to pay Cdn tax on ALL your income, from whatever source, wherever you are working. And even if you do become residnt, that would only exempt your 3rd-country income, not US-sourced income.
So, for IRS in 2005, you will file a 1040NR in US, reporting only the portion of US income that was earned while in US, and, if it is less than US$10K, you will exempt this by treaty.
For your state, you will report as a non-resident, the same portion as above, and pay state tax.
In canada, you will report EVERYTHING, and take credit for the state tax you owe, as well as any SS and Medicare taxes you paid.
Your Cdn return will not indicate any departure date, since, really, you did not leave Canada.
The above would only change if (maybe) you became resident in the 3rd country.
<i>nelsona non grata... and non pro</i>
Thanks a lot. I am really appreciated.
BTW. I started working for the US company on Feb 7th, 2005. And on March 18th, 2005, I left US and went to China. Now I am working in China for the US company. I receive my payroll every other week.What I understnd is that I am still a tax resident of Canada, but I am not a resident of US. So I have to pay tax to Canadian govenment, pay State tax to VA state, SS and Medical tax.But I do not need to pay US tax.
BTW. I started working for the US company on Feb 7th, 2005. And on March 18th, 2005, I left US and went to China. Now I am working in China for the US company. I receive my payroll every other week.What I understnd is that I am still a tax resident of Canada, but I am not a resident of US. So I have to pay tax to Canadian govenment, pay State tax to VA state, SS and Medical tax.But I do not need to pay US tax.
Correct.
You only need to pay State tax for the time you spent in VA.
You will not owe any IRS tax, but you will have to explain this on a 1040NR next spring, as well as to get your refund of what has been withheld so far.
It is in your best interest therefore to stop your firm from withholding US tax, and to put that moneyt aside for your Cdn traxes next spring.
<i>nelsona non grata... and non pro</i>
You only need to pay State tax for the time you spent in VA.
You will not owe any IRS tax, but you will have to explain this on a 1040NR next spring, as well as to get your refund of what has been withheld so far.
It is in your best interest therefore to stop your firm from withholding US tax, and to put that moneyt aside for your Cdn traxes next spring.
<i>nelsona non grata... and non pro</i>