TN visa holder - tax residency

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okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

TN visa holder - tax residency

Post by okinawafl »

Hello,

I am Canadian and living in Canada now but I will be going to US shortly and work there for a 3-year contract under a TN visa. I hope to know my tax residency in both Canada and US and to know if there is anything I should do before I leave Canada.

I would not pass the SPT in U.S. (less than 182 days) this year.
I don't have primary ties with Canada (no owned/rented house, no spouse, no dependent) but I still have a driver licence, a canadian passport, an RRSP ac, a bank account and two credit cards, and my parents live in Canada.

Would I still be a resident of Canada for tax purpose full year in 2021? or would I become a nonresident of Canada from the date I leave Canada this year (under tax treaty rules? or because I leave Canada to work in US for 3 years and don't have primary ties?)
For US tax reporting, am I a non-resident of US for tax purpose (so to file 1040 NR) because I cannot pass the SPT?

Thanks so much for your advice in advance.
nelsona
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Re: TN visa holder - tax residency

Post by nelsona »

You will be a non-resident of canada the day you leave. The treaty overrides the SPT. Departure tax return this years.
For US, you will, as you say not have to file a 1040, but you may wish to, if it is to your advantage, using all the deductions and credits US residents do. Aggain, the treaty allows this. a 1040 usually has a better taxrate than 1040NR, due to standard deduction.
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okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Thanks so much nelsona for you prompt reply.
May I also ask:
1. in my case, I want to keep my Canada driving licence, one joint-bank accounts with my mom, one credit card and RRSP ac (less than 20k) in Canada. Would CRA allows me to be nonresident from the date i leave this or next month if I keep all of them? I have a very old car but I will dispose or donate it before I leave Canada.
2. if I file 1040 instead o f1040NR, would my TN visa status will be affected?
3. My mom wants me to apply OHIP coverage during extended absence for the coming 3 years when I work in U.S.? Can I do this if I file a non-resident Canada tax return?

I am so worry, the CRA resident tie rules and the tax treaty rules is so complex :(( Thanks so much for this forum (and the organizer) and you. It seems I finally see lights from the tunnel.
nelsona
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Re: TN visa holder - tax residency

Post by nelsona »

1, You won't be able to keep your CDn DL; all states require that workers living in their state get state DL. This almost always requires surrendering the Cdn one. But, even if it doesn't, you have moved and must advise province of move, which will invalidate your license. You will also need US DL for car insuarnce purposes, which must be US-based once you move. You can keep the rest. CRA has to view you as non-resident by treaty.

2. No

3. Before you leave you can ask OHIP to not cancel your coverage while you are away. It has nothing to do with tax residency; you are telling them you are out-of-country. It won't do you much good in US (you absolutely need coverage from your job), but it may avoid the 3-month waiting period when you return.

Don't assume you will be returning.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Thank you very much for your information, nelsona.
okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Hi nelsona

Just want to clarify:

1. If I don't drive in New York, or use my cdn D/L in US to drive in the first year, can I still keep my cdn D/L as I mostly will visit my mom 1-2 times next year so I hope I can drive during my visit to Canada? sorry for asking this, this is total new to me.

2. you mentioned that don't assuming returning to Canada, but can I renew my TN if I assume I will not return to Canada?

3. If I file 1040 without passing the SPT, would the 1040 cover 2021 full year? or from the date I arrived US next month till 12/31/2021 as US tax resident?

4. thanks so much for your advice on OHIP coverage during extended absence - I just think about after I become nonresident of canada this year, I don't need to file T1 before I moving back to Canada. That means I won't be able to pay OHIP health premium, would this govt still honour my OHIP coverage during extended absence in the coming 3 years?

May I also know :

I will keep my RRSP when I stay in US, I understand that I have FBAR requirements as it is over 10k. May I know if there is other additional reporting requirement if I invest mutual funds, ETF funds, etc. within the RRSP account.

Thanks again.
nelsona
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Re: TN visa holder - tax residency

Post by nelsona »

These are a lit of questions, that are answered previously.

1. Just get a license. You will need it for ID. And, You will not be living at the address on your Ontario DL, which is an offense.
2. Yes, TN is renewable indefinitely
3. A 1040 would be full year. A part year 1040 is not advantageous.
4. Check with OHIP. But, you won't be using OHIP while in US, you will be using your coverage from work
FBAR will be all you need for RRSP and any other bank account you have,
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
okinawafl
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Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Thanks a lot for your help.
okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Hi nelsona

A U.S. tax preparer just said I am NR of US for tax purpose this year because I cannot pass the SPT and treaty can't make me a U.S. resident for tax purpose this year. But I believe you are right, and I also look at IRS pub 519, it has a first year choice.

But I want to know the bottom line, if I file:
1. T1 Departure return for Canada (stated departure date 9/15/21) and
2. 1040NR and New York states return as non-resident from Sept to Dec this year (not taking 1040 option)

Would both CRA accepts me as non-resident for tax purposes if I am also NOT resident of US for tax purposes (1040NR) this year? (My parents worry CRA come back to me later years saying I should be taxed as resident for full 2021 year.)

I attended a webinar, the presenter said a person must be resident for tax purposes somewhere, is this true too?
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: TN visa holder - tax residency

Post by nelsona »

CRA will accept your departure return regardless of how you file in US: you meet the definitions of non-resident on your move date. The treaty also covers you.

Then you will choose how you file in US based on which is lowest US tax, 1040NR or 1040 full year. Usually it is 1040 full year, using various credits etc including the foreign earned income exclusion (form 2555). You need to decide if you want it simple, or your want to save taxes. The US tax preparer you spoke with is clueless on these matters.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
okinawafl
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Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

Thanks nelsona. Much appreciated for your advice.
elgoog
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Joined: Thu Sep 19, 2019 9:40 pm

Re: TN visa holder - tax residency

Post by elgoog »

Hi Nelsona,

Just curious about where I can find the information in the treaty that the treaty overrides SPT?
nelsona
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Re: TN visa holder - tax residency

Post by nelsona »

Article XXV. Non-discrimination. Cdns are to be treated like Americans in the same situation. An american moving form Canada to US would be allowed to file a 1040.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
okinawafl
Posts: 96
Joined: Sun Jul 11, 2021 12:38 pm

Re: TN visa holder - tax residency

Post by okinawafl »

just to clarify additional coverage part "treaty coverage":

"CRA will accept your departure return regardless of how you file in US: you meet the definitions of non-resident on your move date. **The treaty also covers you.**" -- In the options Treaty coverage - are you also referring to deemed NR by treaty / tie-breaker rules?. Then, if I file departure return of Canada, would I become no choice but to file 1040 instead of 1040NR as under treaty rules even I do not meet SPT as a person must be a tax resident of his/her worldworld income in one country? Kindly let me know if I misunderstand.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN visa holder - tax residency

Post by nelsona »

There is a subtle difference between being a US tax resident and having to file a 1040 vs a 1040NR. You have to be resident a certain number of days to be required to file a 1040. you can file 1040NR if you have not been resident long enough, but you are meeting treaty residency definition (abode, centre of vital interest, etc).

CRA has long viewed actual events as establishing residency/non-residency, rather than days, so the day you move (the "event"), establishes your non-residency date, not some criteria based on the year calendar.

Only in cases where one is borderline non-resident (empty house in Canada, or spouse still there) would filing a 1040 vs 1040NR be poof of your claim of CDn non-residency. Otherwise, you can follow the options open to anyone transitioning to US and not meeting SPT in the transition year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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