Canada to US TN Visa Holder, but visited US prior in same year

[headachetaxes]

Filing my taxes for first time as a TN Visa holder for 2023 calendar year.

I worked for Canadian company in January and February before moving to Illinois to work for US subsidiary. Earned Canadian wages with Canadian company and then US wages with US company. Publication 519 has gotten be extremely confused because it mentions filing dual status, meaning a 1040 and 1040NR, but also that I need to report my worldwide income because I satisfy the substantial presence test.

Complicating more matter is that in early 2023 (Jan and Feb), I entered the US a few times: twice for work conferences of 2 days, and then for a few weeks to visit my wife who is currently in the US on an F1. Pub 519 says that my start date might actually be my first presence in the US, which would be early January.

When preparing my taxes, doing a simple 1040 for my US income generates a tax refund, but if I were to add the Canadian income, I end up with tax owing, which seems bizarre since I'll be filing a Canadian tax return as well for 2023.

My wife and I are also deciding if we file separately or jointly. Given that she is a resident for tax purposes, I believe we would be able to file jointly, but I also read I cannot use standard deductions.

Thanks in advance

[nelsona]

Cdns can essentially ignore Pub 519 when moving to US, as you have the option by treaty to file EITHER as a full year resident, a dual-status resident, or a non-resident by using the treaty definition of resident or non-resident, instead of SPT. Since you have been resident since February/March, your choice is to file full year 1040, reporting world income (and then using all the deductions exemptions and exclusions available to any US citizen/resident or dual status (1040NR + 1040) from Feb/March. Ignore those "first day in US issues"

do it both ways to find out, but since dual status does not allow standard deduction, most arriving in the first half of a calendar year opt for full year 1040, and exclude their Cdn wages using Foreign earned income credit (Form 2555) and take credit any Cdn tax on other income from Canada (on their Cdn departure return)

[headachetaxes]

Thanks Nelsona.

In that case, you're saying I report my Canadian income, but it will be excluded using form 2555. However, the language from the IRS regarding Bona Fide Residence test or Physical Presence Test can be confusing.

Given that Canada has a treaty with the US, the way I'm reading it is that I would use the Bona Fide Residence test? In 2022, I traveled often back and forth from Canada to the US to visit my wife while she was studying (F1 status). Do you foresee this being an issue when claiming Bona Fide Residence? I was working for the same Canadian company all of 2022 and up until I moved to the US in end of Feb 2023.

Do you also foresee an issue with my wife and I filing jointly or given that it's my first year, we should file separately?

Thanks again.

[nelsona]

Not an issue, and you should file jointly.

[nelsona]

Btw, April 5th is a little late to be working on this. Next year start working on this in December.

[headachetaxes]

Yes absolutely. Learning the hard way. Was always under the impression that I would simply file my Canadian return for my Canadian income and simply my US income as of my Visa start date

[headachetaxes]

Also had child born this year came early, so been back and forth to hospital. trying to catch up. Appreciate your help.

[headachetaxes]

Reading the instructions of form 2555, they mention this:

"Note. If you did not live 330 full days in a foreign country, or countries, during a 12-month period, you are not entitled to claim the foreign earned income exclusion. The 330 qualifying days do not have to be consecutive."

For 2023 tax filing, does this refer to Jan 1 2022 to Dec 31, 2022? As I mentioned previously, I often traveled to the US in 2022 to visit my wife, therefore was not in Canada for 330 days, based on my calculations. If I'm reading correctly, I wouldn't qualify for the FEIE?

[nelsona]

As you read it, for the presence test says any 12-month period. so yours would be the period from the time you left Canada, back 12 months, since you are wanting to exclude the wages from early 2023.

For the residence test, you simply need to have established a residence in canada, which you had.