Determining Canadian tax residency status

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rao_manoj2004
Posts: 13
Joined: Sat Feb 12, 2022 11:50 am

Determining Canadian tax residency status

Post by rao_manoj2004 »

Hi, I see that Canada simply do not go by 183 days rule to determine if one is tagged as tax resident or not. Even if you are less than 183 days in canada, Significant residential ties can still tag one as "tax resident". I have primary house, rental properties, wife and kids, bank accounts/credit cards and car in Canada. I live and work in US border town. Live 4 days in US and 3 days in Canada.

Am I Canadian tax resident?

Below links make it more confusing.

https://www.canada.ca/en/revenue-agency ... tatus.html
https://taxpage.com/articles-and-tips/t ... in-canada/
nelsona
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Re: Determining Canadian tax residency status

Post by nelsona »

Yes, you remain a Cdn tax resident.

Your frequent returns to where your family lives, makes Canada your "centre of vital interests" using the tax treaty parlance. You could not even argue that you are a deemed (treaty) non-resident.

You are merely "staying" in US, not living in US.

Even the US discounts any days that Canadian residents commute to the US, so you would have a hard time making the 183 days you would need to even start looking at the treaty.

As a Cdn resident, you are quite free to file a full year 1040 if you think that benefits you in your overall tax payments, but that would not make you a CDn non-resident, nor a treaty non-resident.
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rao_manoj2004
Posts: 13
Joined: Sat Feb 12, 2022 11:50 am

Re: Determining Canadian tax residency status

Post by rao_manoj2004 »

Thanks Nelsona.

1) From US perspective, the day I leave US and return is counted as US presence. Hence technically I spend only 1 day in week in Canada. I keeping track of my entry/exit in sheet so that same can be used during my US Citizenship presence requirement (3 years out of 5 years).
2) Since I am tax resident of both US and Canada, I am filing tax for both:
rao_manoj2004
Posts: 13
Joined: Sat Feb 12, 2022 11:50 am

Re: Determining Canadian tax residency status

Post by rao_manoj2004 »

Thanks Nelsona.

1) From US perspective, the day I leave US and return is counted as US presence. Hence technically I spend only 1 day in week in Canada. I keeping track of my entry/exit in sheet so that same can be used during my US Citizenship presence requirement (3 years out of 5 years).
2) Since I am tax resident of both US and Canada, I am filing tax for both as resident:
- US Tax: Just W2 income. Declaring Canadian rental income as foreign income and taking foreign tax credit.
- Canada Tax: Just Rental income. Declaring US W2 gross income (include 401k) as foreign income and taking foreign tax credit.
3) I have doubt about claiming 401K in Canadian tax as RRSP (Form RC268). I am using Turbotax and adding 401K under "Foreign Retirement plan" but this is not reducing my tax obligation. Looks like form RC268 is not supported by Turbotax and I have to file tax manually but still atleast turbotax lower my tax when 401K is added to RRSP section. Not sure what wrong I am doing.
nelsona
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Re: Determining Canadian tax residency status

Post by nelsona »

Your above statements don't affect my initial answer. You would be considered resident of both countries, and the centre of vital interest would still be Canada.

For US, you are still not required to file a 1040, since are still Cdn resident, and would either file a straight 1040NR, reporting only US wages (there is space to explain why), or you could file the treaty 1040NR using 1040 taxrate. Reporting rental income in US can be cumbersome, requires depreciation, etc. And foreign tax credits never give the best tax situation.

Which is why I recommend the XXV(3) tax filing for your family.

In Canada, you will need to file the appropriate RC form.

Ufile, for example, handles this form
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.
rao_manoj2004
Posts: 13
Joined: Sat Feb 12, 2022 11:50 am

Re: Determining Canadian tax residency status

Post by rao_manoj2004 »

Thanks Nelsona.

I am filing up form RC268 for 401k deduction.
This form is of two pages. Second page is "Prescribed amount". Not sure I need to fill second page too. My 401K is through employer and called "401K Saving plan", but this page talks about employer contribution to "money purchase plan" OR "defined benefit plan" which I am not aware of. Can I simply mention employer contribution to "401K Saving Plan"?
nelsona
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Re: Determining Canadian tax residency status

Post by nelsona »

You would only fill line 2, since this is NOT a defined benefit plan, it is a money purchase plan.
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.
rao_manoj2004
Posts: 13
Joined: Sat Feb 12, 2022 11:50 am

Re: Determining Canadian tax residency status

Post by rao_manoj2004 »

nelsona wrote:
> You would only fill line 2, since this is NOT a defined benefit plan, it is
> a money purchase plan.
Thanks Nelsona ... Turbotax do not support RC268 and asking to file by mail. Is there a software which allow e-file of RC268
nelsona
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Re: Determining Canadian tax residency status

Post by nelsona »

As I said, Ufile works.
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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