Cdn non-resident? Timing & penalties for amending tax fo

GC-CdnCitizen · Post by **GC-CdnCitizen** » Sat Mar 07, 2009 2:41 pm

Hello

I moved to the U.S. July 2004 after marrying a U.S. citizen, and have since held a Green Card, working for a U.S. employer in the U.S (for approx $50K/y).

Since 2004, I have been filing 1040s in the U.S. and T1s in Canada. Naively, I did not report worldwide income to the respective countries (i.e. reported U.S. income only to IRS; Cdn income to CRA).

I filed the T1s despite my $0 to minimal Cdn income ($5000 in scholarships in 2004 and $2400 from stocks in 2007) because I have unused federal/provincial $52000 tuition education deduction to carry forward that I think that I will lose if i stop filing T1 returns (should I come back to Canada). I did not file a departure return.

For the past 4 years, I have been filing with CRA as a Canadian tax resident, and I do not know if (a) this is accurate and (b) this will result in a higher Cdn tax liability, once I file amended returns.

Background: I have a Cdn bank account, line of credit, credit card, provincial health care, and use my parent's Cdn address for my CRA returns, but spend less than a month of vacation in Canada/y. I gave up my provincial driver's license.

My job is in in the U.S., I have a U.S. car & registration, car loan, bank accounts, credit card. I divorced my U.S. husband in 2007, have changed rental abodes several times since '04 and do not own a permanent U.S. residence. After my U.S. employment contract ends in 1.5y, I will likely return to Canada, since my ties to my family and friends are stronger since my divorce. Therefore, I am also wary of giving up Canadian resident status now, if I have to reacquire it again in 1.5y.

QUESTIONS:
1. Am I considered a Cdn tax non-resident?
2. Can I amend my 2004-07 T1 returns to retrospectively declare non-resident status?
3. Can Cdn non-residents claim foreign foreign tax credits (on U.S. income)?
4. Can Cdn non-residents continue to file T1 returns to carry forward deductions from previous years?
5. Or, can I be a DUAL-tax resident and still claim enough Cdn foreign tax credits to not have to pay a large back-tax bill to the CRA?
6. When do foreign tax credit deductions expire?

I bring this up now because I realize my unintentional error over the past 4 years, and want to file amended returns in the U.S. and Canada, but at this point can't afford a large one-time back-tax + penalties bill from the CRA, or even for that matter high accountant fees. If I postpone amending my tax returns for 1-2 years, I will be in a better financial position to handle the extra expense.

Thanks for any suggestions you can provide!

nelsona · Post by **nelsona** » Sun Mar 08, 2009 3:24 pm

You are and have been a Cdn non-resident. However, unfortunately your filing a T1, commited you to report world income. Yo uneed to correct this by either reporting everything, or declring yoursfelf non-resident since the day you leave, and complying with departure provisions, and correcting your returns to be non-resident (on which you get very little deductions).

You owed deperture tax on your stocks held the day ypou left, and then nothing on stocks thereafter. Your provincial health card died years ago when you left. You will probably owe more tax to US rather than Canada. You need to fix this.

Same for your 1040. You needed report all world income, and then take any creits or exclusions for Cdn tax and income. You need to correct this too.

GC-CdnCitizen · Post by **GC-CdnCitizen** » Sun Mar 08, 2009 5:36 pm

Do I have the OPTION of re-filing/amending my 2004-07 T1s (Including world income) as a Cdn RESIDENT in order to take advantage of my foreign tax credits and tuition deductions?

[you wrote above "You are and have been a Cdn non-resident" BUT also wrote "unfortunately your filing a T1, commited you to report world income. Yo uneed to correct this by either reporting everything, OR declring yoursfelf non-resident"]

I'm more worried about my U.S. source tax liability to CRA, since I only had a small amount of Canadian-source income ($5000CAD in 04 and $2400CAD in '07) to now report to the IRS and pay any tax owing.

nelsona · Post by **nelsona** » Sun Mar 08, 2009 6:17 pm

You don't really have the option, since you are non-resisen. canada often 'pushes' people out of residency, due to treaty.

Your tution credits are safe. Use them when you go back. You worried so much about tuition credits instead of worrying about more basic things like reporting your income.

and yes, you should be worried more about IRS,

GC-CdnCitizen · Post by **GC-CdnCitizen** » Sun Mar 08, 2009 6:44 pm

As others have noted, thank you very much for taking the time to answer our questions and provide this forum. It's a wealth of info! Take care.