Is option to elect residency in US always better?

skoper · Post by **skoper** » Mon Nov 02, 2009 8:16 pm

Situation: on a TN visa working in the US, no spouses, property in Canada, moved to the US in mid October.

I do not meet the SPT for 2009 in the US and therefore should be considered NRA. However, I do have the option to claim dual-status as the time in the US can be considered residency (if I anticipate qualifying for SPT in 2010, which I do) under "First Year Residency" in Pub 519. Is there any advantage to [i]not[/i] claiming residency in 2009? Perhaps from a capital gains perspective?

Also complicating matters is that I received about $25k in bonus (which was taxed at source) from the US employer in 2009 while I was a not even in the US, let alone a non-resident or resident alien. If I claim residency for 2009, which starts in Oct, how is this bonus compensation considered? If it makes any difference, I made very little income in Canada prior to Oct in 2009, as I was in school and traveling. I am hoping the CRA does not want its hand in this cookie jar as well, for I was considered a Cdn tax resident when I received this compensation.

thanks in advance,
Very confused but learning

skoper · Post by **skoper** » Mon Nov 02, 2009 8:18 pm

to clarify, I have NO property in Canada (ie. I am very comfortable I meet non-residency for Canada when I moved).

nelsona · Post by **nelsona** » Tue Nov 03, 2009 7:14 am

Your Cdn residency ended on the date you moved to US. If you received US income before that date, it must be reported in canada as well. US income after that date is not reported. There is no point maitaining Cdn residency, and there is no other date for departure you can realisticly choose. File your departure return by the Emigrants guide from CRA.

As to you US return, you should file a full year 1040 (the treaty overrides all the IRS Pub 519 stuff). You will find that this is better that 1040NR or part year choice. Report all income from all soureces on your 1040.

That bonus is considered wages under both US and Cdn definitions.

skoper · Post by **skoper** » Wed Nov 04, 2009 2:10 pm

nelsona, so the whole 183 days in a year, first year residency option (must stay for 31 consecutive days, etc) as per Pub 519 is overridden by the treaty?? To repeat, I file a full year, resident alien 1040 next spring? Can you direct me to where I can get more details about the treaty? Pub 597 lacks much detail. Thanks!

nelsona · Post by **nelsona** » Wed Nov 04, 2009 2:17 pm

The Treaty article is XXV, the non-discrminiation clause: It basically allows cdns in the same situation as americans to file as they do.

Thus, since an american moving to US from canada would file a full-year 1040 (because of his citizenship), so can a Cdn.

jjhowey · Post by **jjhowey** » Thu Mar 25, 2010 8:02 pm

Is 8833 still required in this situation?

nelsona · Post by **nelsona** » Fri Mar 26, 2010 9:10 am

I would always file an 8833 just to advisw IRS what you are doing -- citing the treaty article. It is never required to fill more than that (like which part of the IRS code is being overridden, etc).

needsUStaxhelp · Post by **needsUStaxhelp** » Sun Mar 28, 2010 2:18 pm

Would the same apply if you earned income in Canada last year (ie. 35,000?) I'd prefer to file the 1040NR (moved to US from Canada in the fall, don't meet STP) for the first year since I've done the 1040NR-EZ before for summer work in the US and am comfortable with that process. If there are substantial tax savings, I'll file the 1040 R - but there doesn't seem to be a major difference. Am I missing something?