dual-status year in US

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SergeP
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dual-status year in US

Post by SergeP »

I am a Canadian resident filing 1040-NR returns to IRS (for my income from US). I will become a US resident for the last 2 months of 2022. Pub 519 states that for this situation I have to file a dual-status 1040 tax return for 2022. This return should include a statement about changing the residency. Does it mean that I have to file two separate returns for 2022, 1040 for the last two months and 1040-NR for the rest of the year? Does it mean mailing two paper returns for the same year? ( e-filing likely does not allow these two returns for the same year).
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nelsona
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Re: dual-status year in US

Post by nelsona »

Yes, if you CHOOSE to file dual-status, you file a 1040NR and a 1040.

But, take care as to what you mean by 'becoming resident'. Unless you are getting a green card, to be resident for IRS purposes, you need to meet the Substantial Presence test, for 2022. If you do not meet that, you do not have to file a part-year 1040, you can simply file a 1040NR, including only US source income.

The fact that you will file a departure return for Canada, does not by itself mean you have to file a US resident return for the subsequent portion of the year.
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nelsona
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Re: dual-status year in US

Post by nelsona »

Dual-status returns need to be mailed.
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SergeP
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Re: dual-status year in US

Post by SergeP »

Yes, I am getting a green card so I will be a resident for tax purposes at the end of 2022. My wife is a USC and can choose to be treated as a resident for the entire year. Is there any advantage to file MFJ 1040 instead of the dual-status returns?
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nelsona
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Re: dual-status year in US

Post by nelsona »

I think you meant that your wife can choose to have YOU be a resident for the entire year, and file jointly. Yes. In fact YOU can choose this independent of your spouse, because you are Canadian. No need for her to make a special election. The treaty allows it.

There are advantages for both of you in the sense that any US income you have will generally be taxed at a lower rate than if you file separately (dual-status) cannot file jointly.

It will depend on how much Cdn income you make this year. I would try it two ways:

1. dual-status for you; MFS for your spouse
2. Jointly, reporting world income, and then using 2555 and/or 1116 against the Cdn income/
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SergeP
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Re: dual-status year in US

Post by SergeP »

Sorry, my mistake. I meant that I could choose to be treated as a full-year resident.
I have some funds in TFSA (invested as saving accounts and GICs). If we file MFJ, can I report to IRS the TFSA interest only for the last 2 months of 2022?
I am going to close TFSA savings accounts before moving to US. However TFSA GICs can be closed only after maturity (2 more years).
Thank you.
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nelsona
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Re: dual-status year in US

Post by nelsona »

You can probably remove the GICs from the TFSA and put them in an ordinary account. The TFSA is merely a box in which you put investments.

Even reporting TFSA income from the whole year will still be better than filing dual-status. I don't know of many situations where dual-status is advantageous for a married person.
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SergeP
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Re: dual-status year in US

Post by SergeP »

Nelsona, you mentioned that a Canadian can always file 1040. So far, as Canadian residents I filed 1040-NR and my wife (USC) filed 1040. I become a US resident at the end of 2022. If filing MFJ for 2022 do I need to declare a US residency for a full year or we can just simply file MFJ 1040 without any declaration?
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nelsona
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Re: dual-status year in US

Post by nelsona »

I would file an 8833 referring to the non-discrimination clause XXV. You are not subject to most of what is in Pub 519.
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SergeP
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Re: dual-status year in US

Post by SergeP »

Could you elaborate what is the non-discrimination clause XXV about? Usually I filed to IRS form 8833 claiming a treaty-based return position for my Social Security (per article XVIII).
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nelsona
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Re: dual-status year in US

Post by nelsona »

It is the non-discrimination clause which states that Cdn nationals are not subject to anymore filing requirements than a US citizen would be in the same situation.

A US citizen (your spouse) is not required to make a special election when her spouse becomes a resident; they simply file jointly. She is entotled to do the same, without making an election for you.

Similarly you, as a couple can choose to file jointly or separately year by year without restriction.
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SergeP
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Re: dual-status year in US

Post by SergeP »

Thank you.
Who will file form 8833, me or my wife? Or both?
I checked instructions for 8833. It seems that this non-discrimination clause XXV falls under a treaty-based return position as required by section 6114.
Is the clause XXV a part of this 6114 regulation or it is an article of the treaty?
It looks like this form 8833 is usually filed for a specific income item. In our case this form will be used for the whole 1040 return. We will probably need to explain it in the last section 6 of this form. Correct?
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nelsona
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Re: dual-status year in US

Post by nelsona »

it will be a joint return, so it is filled out for the return. she is likely the primary ssn on the return.
just mention that you are filing jointly for the year, using xxv.
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