Giving up GC and staying permanently in Canada

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pencileveryone
Posts: 23
Joined: Sun Sep 22, 2019 12:10 pm

Giving up GC and staying permanently in Canada

Post by pencileveryone »

Hello,

I am a Canadian citizen and a US GC holder (since 2017). I was working and living in the US until 2021 when I moved back to Canada. I've been filing my US taxes as a resident to maintain my green card. I filed an re-entry permit and it's about to expire in Jan 2023.

I've decided to stay in Canadian permanently so I want to give up my green card before the expat tax kicks in. Currently, I am employed in Canada, but I still have RSUs and rental income that are US sourced. I also have an investment account that I transferred to Canada with a higher cost basis when I became a Cdn resident. I plan to only sell stocks in there after I give up my GC, so I do not get taxed in the US with the original cost basis.

1. In general, is there a "best" time in the year to give up the GC for taxation benefits?
2. If I give it up say in Sept 2022, do I need to file a dual status return for this upcoming year? [1040 for Sept Jan-Sept account for all worldwide income, then 1040NR for Sept-Dec for only US Sourced income.]
I've read in this forum that canadians are ALWAYS allow to file an 1040 for the full year. I was going to do this for tax year 2022 then file a 1040NR for tax year 2023. I want to do this for simplicity sake + to claim the full year basic exemption amt. But my concern is that the US won't "know" that I've given up my green card on a certain date. What is the pros and cons of each approach?
pencileveryone
Posts: 23
Joined: Sun Sep 22, 2019 12:10 pm

Re: Giving up GC and staying permanently in Canada

Post by pencileveryone »

Just wanted to see if anyone has run into a similar experience. If I choose to file a 1040 for the whole year even though I'm giving up my GC in Sept, what are the pros and cons?

I'm just curious how IRS will know that I'm no longer a resident.
nelsona
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Re: Giving up GC and staying permanently in Canada

Post by nelsona »

When you give up GC, you have forms that the US consulate will want you to file.
That, and IRS forms will let them know.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
I will be taking may usual break until MAY. In the meantime, please direct your questions to ND.
canadiandeserter
Posts: 54
Joined: Sun Mar 01, 2015 10:52 pm

Re: Giving up GC and staying permanently in Canada

Post by canadiandeserter »

If you have lots of capital gains on US property, selling during the non-resident portion of the dual-status return would save the 3.8% NIIT.

On the other hand, the 1040NR Schedule A does not seem to allow claiming an itemized deduction for foreign taxes paid. Can one claim a foreign tax deduction on the resident portion of a dual-status return? This could be a significant deduction if one is paying income tax instalments to Canada during the departure year.
pencileveryone
Posts: 23
Joined: Sun Sep 22, 2019 12:10 pm

Re: Giving up GC and staying permanently in Canada

Post by pencileveryone »

A Quick update and a follow-up question:

I ended up submitting the I-407 to abandon my GC in December 2022, so I am not longer a GC holder. I have a question though. AFAIK, technically, GC holders ARE allowed to file as non-resident (1040NR) based on closer ties. However it may lead to issues when trying to re-enter US as a permanent resident because filing as 1040NR may be considered as abandoning the GC.

But since I already abandoned my GC, is there any harm in just filing as 1040NR for the entire 2022? I was living in Canada for the entirety of 2022. I'm thinking it may just save a bunch of paper work?
nelsona
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Location: Nowhere, man

Re: Giving up GC and staying permanently in Canada

Post by nelsona »

If you had US income, you MUST file a return, if your income is above certaim limits, or if you want a refund.

1004NR is the fomr you need.

It won't have any effect on you.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
I will be taking may usual break until MAY. In the meantime, please direct your questions to ND.
pencileveryone
Posts: 23
Joined: Sun Sep 22, 2019 12:10 pm

Re: Giving up GC and staying permanently in Canada

Post by pencileveryone »

Yes, I understand I will still need to file US-sourced income on my 1040NR.

But it would still save the work of filing a dual status (or a full year 1040 and claiming income exclusion or FTC etc). I guess with 1040NR, I'll lose any full-year basic exemption amt.

Some additional info I found online:

https://www.roedl.us/trending/tax_matte ... orm%208833.

In order to take the treaty position, the Green Card Holder must file Form 8833 with Form 1040NR, the U.S. non-resident income tax return, reporting only U.S. source (and not worldwide) income. There is a $1,000 penalty for failure to disclose the treaty position on Form 8833. In addition, in theory the statute of limitations never begins to run and there is a risk that the IRS could assert that the Green Card Holder is a resident and require the return to be filed on such basis, if the treaty position is not claimed.

The U.S. non-resident treaty position does not extend to certain informational return filings for the Green Card Holder including (but not limited to) Forms 5471, 8865, 8858, 8838, 8621, and FinCEN 114 (i.e. "FBAR"). In other words, the Green Card Holder would still be required to file these informational returns even if claiming U.S. non-resident status under the treaty and filing Form 1040NR. The penalties for not filing the majority of these forms start at $10,000 per form.
nelsona
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Re: Giving up GC and staying permanently in Canada

Post by nelsona »

Ah, yes, since you filed I-407 in 2022, you file dual status. You don't get standard deduction, but since your income is taxed in Canada, it is unlikely, regardless of how you file, that your overall tax liability.

You have all the reporting requirements you had previously. But this will end with the 2022 filing.

Remember to also file to expatriation form(s).
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
I will be taking may usual break until MAY. In the meantime, please direct your questions to ND.
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