TN moving back to Canada. Tax Question

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curiousJ
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TN moving back to Canada. Tax Question

Post by curiousJ »

Hello,

I have been working in the States for several years with a TN Status. I recently got a job offer and plan to move back to Canada and start the job in December. In this situation, how should I file my tax for 2022?

1. When I file tax to IRS, should I only file my income from January 2022 - November 2022 since my December 2022 income will be made in Canada?
2. When I file tax to CRA, should I only file my December 2022 income to them since my income before December was all made in the States? Just considering the tax bracket, I would pay a lot more tax if CRA requires me to file my whole 2022 income to them.

Thank you in advance.

JJ
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

1. You can file just the US income, but that forces you to file "dual-status{, wherby you lose the standard deduction and som other benefits of filing full-year. It is usually best to simply file full year 1040, including the CDn income, and getting the beter taxrate, and excluding the Cdn income using form 2555
2. For Canada, you file a new resident return, reporting only the income you earned after arriving in canada. There is no choice to be made here, its just that simple.

Jiust make sure you receive any US-source income BEFORE you return. And if you have any investments, sell your losers before returning, but keep your winners after Jan 1, 2022.
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curiousJ
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Re: TN moving back to Canada. Tax Question

Post by curiousJ »

Thank you for your reply. This is very helpful.

When you advised to receive all my US income before I return to Canada, do you mean by the date I actually receive my paycheck?
I am planning to go back on December 1 st, but I will receive my paycheck on the 8th for my work during November 15th - 30th.

J
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

If you receive the monied after your arrival, you will need to include it on your CDn (and US) returns. Canada will give you some credit for the US taxes on that portion of your US income.
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szbjsh
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Re: TN moving back to Canada. Tax Question

Post by szbjsh »

In Canada, when you leave the country permanently, you have to indicate on your final return your departure date, that's how CRA knows you are becoming an emigrant.

May I ask how do you do that with the IRS if one chooses to file a full-year 1040 (taking advantage of standard deductions) for their last year in the US when moving back to Canada permanently?
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

Cdns do not "have to" make any declaration to that effect. Others may file a "sailing permit", 1040-C, but it is not required.

One *could*, but is not required to, file a 1040NR the next year.
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curiousJ
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Re: TN moving back to Canada. Tax Question

Post by curiousJ »

Thanks for all your reply. On my final return before I moved to the US, I did give my departure date.

Now I will have to report my 2022 December income. In this case, do I just simply file my 2022 return and CRA will know I am a returning resident? or is there a particular form I need to file to inform them?
curiousJ
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Joined: Sat Feb 06, 2021 7:25 pm

Re: TN moving back to Canada. Tax Question

Post by curiousJ »

Another question I have is: I informed CRA of my departure date on my 2020 return and I didn't file my return for 2021 because I was not a resident of Canada in that tax year. For my 2022 return, are they going to ask for my Notice of Assessment for 2021? I remember when I did my tax return before, they always ask for the NOC from the previous year.
curiousJ
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Re: TN moving back to Canada. Tax Question

Post by curiousJ »

nelsona wrote:
> 1. You can file just the US income, but that forces you to file
> "dual-status{, wherby you lose the standard deduction and som other
> benefits of filing full-year. It is usually best to simply file full year
> 1040, including the CDn income, and getting the beter taxrate, and
> excluding the Cdn income using form 2555
> 2. For Canada, you file a new resident return, reporting only the income
> you earned after arriving in canada. There is no choice to be made here,
> its just that simple.
>
> Jiust make sure you receive any US-source income BEFORE you return. And if
> you have any investments, sell your losers before returning, but keep your
> winners after Jan 1, 2022.


After reading about Form 2555, I don't think I will pass the Bona Fide Residence Test and Physical Presence Test as it requires me to be living in a foreign county for most of the tax year. I have been living most of the time in the US for the past few years. sigh. didn't expect the tax to be this complicated.
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

One question at a time:

The request for previous tax year info *might* be for netfiling, which you probabaly can;t do anyways as a returning resident. You were not supposed to file in 2021, so don't worry.

As for 2555, you will only qualify after you leave US for about a year, it will still be worth it.
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curiousJ
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Re: TN moving back to Canada. Tax Question

Post by curiousJ »

nelsona wrote:
> One question at a time:
>
> The request for previous tax year info *might* be for netfiling, which you
> probabaly can;t do anyways as a returning resident. You were not supposed
> to file in 2021, so don't worry.
>
> As for 2555, you will only qualify after you leave US for about a year, it
> will still be worth it.

Thank you very much. It looks like I will lose the standard reduction plus me and my wife need to file separately if we file as "dual status". It gives a higher tax bracket.

Like I said, I will be back in Canada starting December so I won't be qualified for 2555 by the time I file for 2022 tax year (I won't hit the 1 year mark by the tax return deadline). Does that mean the only option for us is to file dual status? Is there anyway around it?

Really appreciate your answers, nelsona. Hope you are having a great weekend!
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

file an extension, and file when you meet the test
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curiousJ
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Re: TN moving back to Canada. Tax Question

Post by curiousJ »

nelsona wrote:
> file an extension, and file when you meet the test

That's going to be at least 6 months extension plus the Canadian side. I've never done it before so I am not sure if they will allow such long extension period.

Can I just file full year 1040 including the CDn income for the standard deduction and better tax rate like you said. For 2555, do I have to file the form? I mean since I only have one month CDn income, I am fine with not excluding my CDn income using form 2555. Is this feasible? Does it trigger 'dual status' if I don't file Form 2555 with my full year 1040?

Again, thank you very much,.
nelsona
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Re: TN moving back to Canada. Tax Question

Post by nelsona »

You certainly can file without 2255, but then yo uare paying US tax that you don't need to. The IRSA will never refuse a return on which you overpay your taxes.

Kidding aside, you could also simply use the Cdn tax on your Cdn income as a credit using form 1116. That usually isn't the best case, but it is better than just paying US tax for nothing.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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