Is someone with TN1 leaving the US need to pay the exit tax?

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Fromesy
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Joined: Thu Aug 05, 2021 10:00 am

Is someone with TN1 leaving the US need to pay the exit tax?

Post by Fromesy »

Hi,

I have currently spent 10 of the past 15 taxable years in the US under the TN1. I recently lost my job, so if I were to leave the US and return to Canada, would I be considered an expatriate (more specifically, a covered expatriate assuming that I also meet one of the 3 criteria for IRC 877A) and have tax responsibilities?

I ask because it seems like the relevant condition in my case is whether or not I spent more than 8 of the past 15 taxable years in the United States as a lawful permanent resident to qualify as a long term resident(LTR). However, since the lawful permanent resident seems to be defined as having the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws and the TN1 is temporary/nonimmigrant by definition, I am a bit confused on whether any of those years even counted.

Thank you in advance.
nelsona
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by nelsona »

For the purposes of LTR, the definition of Resident, refers to Lawful Permanent Resident(LPR) or green card holder for the 8 years in question. You were a TN, thus not a green card holder. The definition or intent of TN has no bearing.

There are other definitions of "resident of US" which typically refer to satisfying SPT, which refers to presence in most temporary statuses, even illegal presence.
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Fromesy
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Joined: Thu Aug 05, 2021 10:00 am

Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by Fromesy »

Thank you, nelsona. Since I am still a resident of the US based on definitions such as SPT, does this mean that I would still need to provide a statement establishing my residency termination date to the IRA either as part of my income tax return or directly to them?
nelsona
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by nelsona »

Not typically.
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Fromesy
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by Fromesy »

Thanks. Hopefully, this will be my last question on the subject for a little while, and I appreciate your patience and insight so far.

I also see a lot of references to filing a 1040-C prior to leaving, but also that it is extremely infrequent and not particularly well enforced. From your experience, is this the case?
nelsona
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by nelsona »

Never needed.
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skobes
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by skobes »

> Since I am still a resident of the US based on definitions such as SPT, does this mean that I would still need to provide a statement establishing my residency termination date to the IRA either as part of my income tax return or directly to them?

If you meet the SPT for the year of departure (and not for the year following), then you have a presumptive residency termination date of Dec. 31. Pub. 519 p. 9.

If you want to claim an *earlier* residency termination date you can file a part-year resident (a.k.a. "dual-status") return, but this must be accompanied by a statement satisfying Reg. § 301.7701(b)-8 and asserting a closer connection to Canada. See also: https://hodgen.com/telling-the-irs-that ... -building/

But it's often better to file as full-year resident, since dual-status filers can't take the standard deduction.
okinawafl
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by okinawafl »

Regarding exit tax, is exit tax only apply for Federal tax? For example, if I live in New York and New Jersey for 5 years with working visa, when I leave,
would there be any exit tax or other special tax I will need to pay for state or city?
skobes
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Joined: Sat Mar 25, 2017 10:41 pm

Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by skobes »

> Regarding exit tax, is exit tax only apply for Federal tax? For example, if I live in New York and New Jersey for 5 years with working visa, when I leave, would there be any exit tax or other special tax I will need to pay for state or city?

The exit tax is only for individuals who renounce citizenship, or relinquish a green card after holding it for 8+ years. If you're on a work visa, there is no exit tax (even at the federal level).
okinawafl
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by okinawafl »

Thanks for your reply skobes but may I know if State or City has similar tax like exit tax as well?
nelsona
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by nelsona »

No they do not. For affected persons (not you) this applies only to federal.
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okinawafl
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by okinawafl »

Very much appreciated for your information nelsona
skobes
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by skobes »

Because of the way states link to federal AGI or federally taxable income, it's possible for the deemed-sale etc. provisions of the federal exit tax to have a state tax impact if you are also a resident of the state on the expatriation date.

But this is easily avoided by first ending state residency (e.g. by moving out of the country / severing ties), and then renouncing / relinquishing the green card from abroad.
nelsona
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Re: Is someone with TN1 leaving the US need to pay the exit tax?

Post by nelsona »

You canot expatriate while living in US, and this poster is not even a GC holder.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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