Taxes for new resident from US

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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duscrin
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Joined: Wed Mar 10, 2021 3:30 pm

Taxes for new resident from US

Post by duscrin »

Sorry if I missed anything relevant already posted, but here goes:

I moved to Canada from the US (where I am a citizen) officially at then end of 2020 so I plan to file both US and Canadian (Quebec) taxes for the first time. I have been talking with a CPA in Canada who has been helpful in giving me a general idea of what to do, but they are asking close to $2k for filing my US and Canadian taxes so I am thinking of doing so on my own. Are there any good resources/instructions about which forms are necessary in both countries? Has anyone done this themselves without too much difficulty, or is it really so tedious that I have no chance of filling things out correctly myself?

I have filed my US taxes by hand, even dealing with moving between states several times, so I am familiar with the general process, but this will be the first time filing taxes in Canada. I have one job which is remote work for the US but also a few 401(k)-like and IRA accounts, plus a non-tax-deferred investment account, all of which are in the US. I know I have to fill out special forms in Canada for these accounts to make sure they are counted as tax-deferred in Canada, and also a form for the foreign tax credit in the US, though I'm not sure which forms, or if there are others too.

Thanks for any help!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Taxes for new resident from US

Post by nelsona »

You should not need help filing your US tax return. I would suggest however that you use software, like taxact or turbotax, if you get into foreign tax credits, etc. Your US return will only become more complicated if you have certain types of Cdn investments, which I doubt you had in the few days you were in canada in 2020.

Your Cdn return should be quite simple since you only need to report income from after your arrival. Again, tax software will be your friend,. Uflie.ca or Turbotax for canada. Only Roths need a special statement.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
duscrin
Posts: 3
Joined: Wed Mar 10, 2021 3:30 pm

Re: Taxes for new resident from US

Post by duscrin »

Thanks for the help nelsona! One thing I want to make sure I understand. For the time I am a Canadian resident, I have US based W-2 income for which I have already paid taxes through withholding. I'm not sure if I should be filing for a refund from the US as a non-resident and be paying this tax to Canada, or just let the US keep what has been withheld and use the foreign tax credit in Canada. Does it depend on my commuting status (I have been working remotely in Canada the entire time). Also, from what I can tell Massachusetts (where the income is from) won't respect the tax treaty since I am not yet a citizen of Canada, so I think I will have to account for my state taxes paid as a foreign credit on my T1.

Also, can I put my contribution to a 457b (basically a 401k) in line 20700 or something similar? Or is there no way to avoid Canadian taxes on this?

Thanks!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Taxes for new resident from US

Post by nelsona »

You need to file IRS, Mass and Cdn taxes the year you leave. You cannot just assume that the withheld tax is correct.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
duscrin
Posts: 3
Joined: Wed Mar 10, 2021 3:30 pm

Re: Taxes for new resident from US

Post by duscrin »

Sorry if I wasn't clear. I know I must file in all three places, but I am unsure of how to handle my W-2 Massachusetts income for the part of the year after I became a Canadian tax resident. My question is if I should be paying taxes for this Massachusetts income to Canada or if I can/should use a foreign tax credit instead (in CA). I believe there are two or three options for me.

First I can pay fully taxes in Canada for the part of the year I am a resident, including my foreign W-2 income, and apply for a tax credit in the US (federal and state) where I should be refunded for the taxes already paid, and should pay close to zero tax since I am paying fully in Canada (of course I would still pay tax in the US for the part of the year I am a Mass resident).

Second I could pay taxes in Canada on everything that isn't foreign income (everything but my W-2 income from Mass), use a foreign credit in CA for W-2 taxes paid to US/MA (like on form T2209) and use a foreign credit in US for the other taxes paid to CA.

If the first option is correct, I think I will actually have to do a third option, where I pay mostly my tax to CA, but have a foreign credit for taxes paid specifically to Mass, since Mass does not seem to honor the tax treaty in my case and I think I have no option but to pay Mass taxes on my Mass-sourced W-2 income, even as a Canadian tax resident.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Taxes for new resident from US

Post by nelsona »

The W-2 income that was earned in canada must be reported in canada, and as US citizen, it ALL must be reported on your 1040. Only the portion worked before leaving MA needs to be reported in MA (they have their own way of dividing this - I leave that to you.)

Canada will not give you any credit for the US or MA tax, since the income you are reporting was earned in canada. US will give you credit for the tax you owe in Canada on those wages.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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