2009 US tax returns after moving back to Canada

[bcbeagle]

Spouse and I are Canadian citizens who moved to California in 2004 for work, each on TN visa. We married in 2005, I converted to a H-1B visa in 2006, and have a pending green card application (filed 12/31/07, still stuck in PERM). We moved back to Canada Sep 2009, with our 3 US-born children, and spouse began work with a Canadian employer. I continue to work remotely for my California employer, though I am now paid through a Canadian payroll service. All my work has since been performed in Canada, I have not re-entered the US for any reason.

I’m trying to assess if I can muddle through our 2009 returns on my own. I think the Canadian returns will be straightforward (just employment income and childcare expenses since we arrived, plus some pro-rated homebuyer tax credits), but I’m not sure where to start on the US side. We have filed jointly in the US since 2005, taking the standard deduction. For 2009, I believe we could either file separate dual-status returns (as described in Pub. 519) or choose (per treaty article XXV.1) to jointly file a full-year 1040 including the Canadian income (and form 1116 for the associated FTC).

I have a couple of questions about the full-year 1040 option:
1. I assume I can just bury our 3 months of Canadian employment income in line 7 (with no corresponding W-2 forms)?
2. I don’t think the childcare expenses incurred in Canada will have any place on a joint 1040 if we claim the standard deduction?
3. Would I need to file form 8833 to indicate a treaty position in filing a full-year 1040?
4. I understand from this forum that I may be able to continue filing full-year 1040 (per same treaty article) in order to collect the child tax credits for our US born children. I assume these future returns would look much like what we file for 2009, except all reported income would be foreign income.

Lastly, are there any other filing scenarios I should consider? For the California 540NR, it looks like we should have the same filing status as used on the federal return. I haven’t yet thought about what difference filing joint/separate could make at the state level.

Thanks in advance...

[nelsona]

Forget 519 options. File 1040 MFJ full year, using foreign earned income exemption 2555 to exclude Cdn wages (best), or use foreign tax credit 1116 against the US tax.

By the way, filing full year is NOT a treaty provision, it is the same option for anyone who leaves US: you can either file dual-status, or full year.

So.
1. Yes.
2. The provider is probably not qualified. If you standard deduct, it doesn't apply.
3. No, see above
4. Correct. You would proabably need to use 1116 in future years instead of 2555 for your wages, but the $3000 is yours for the picking.