dual citizen now living back in usa-tax nightmare

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
romfig
Posts: 5
Joined: Wed Aug 31, 2011 2:56 pm
Location: dfw texas

dual citizen now living back in usa-tax nightmare

Post by romfig »

:arrow: i am a dual citizen who lived in canada for over 14yrs until 2008 when i moved back with family to the usa. have continued to file 2008-2010 canadian taxes, as a resident, as well as us taxes. own no property, rrsp in canada and tired of being taxed in both countries. it's getting expensive. would like to sever ties with canada but still keep canadian citizenship. is this possible. also, have been collecting a small cpp pension for the last couple of years. want to only pay taxes in the us. help please!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You shouldn't have been filing in canada from the year you left: you emirated way back then, and would not have had any Cdn tax filings anymore. In fact, even your CPP would not be taxed in Canada.

Where did you get that BAD advice?!

Moving to US and becoming Cdn non-resident has no impact on Cdn citizenship.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

The solution is to ammend your 2008 Cdn tax return with the departure date you left, following the Emigrant guide.

You will need to know what assets you had on the day you left, in case their is departure tax.

Once this is done, you can amend your 2009 and 2010 returns to get all Cdn tax back.

This will mean, of course, that you will ahve to amend your US returns to reduce any foreign tax credit you took during those years.

Wish you had visited this site back then....
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
romfig
Posts: 5
Joined: Wed Aug 31, 2011 2:56 pm
Location: dfw texas

Post by romfig »

wow, that's a switch. just to clarify. I am a us citizen who moved to canada, married a canadian, had a child (dual citizen) and then moved back to us in 2008. continued to file as a resident since then and have been taxed in us and canada for us income. did purchase a house in tx before official departure date, cash, sold all property in canada. ok, still the same advice? and with whom do we do this back filing? THANKS for this info. we have been totally surprised as how difficutl severing ties with Canada has been.
romfig
Posts: 5
Joined: Wed Aug 31, 2011 2:56 pm
Location: dfw texas

Post by romfig »

ooops, did forget to mention that i became a cnd citizen just before leaving canada. if that makes any difference...
my wife has official green card and also is still continuing to file. she has an appeal in with the cra regarding a charitable tax shelter and was advised that she could not sever ties with canada until tax shelter is settled in court between cra and the charity. is this also correct? at this point the cra is deeming the tax shelter 'Illegal' and is already imposing interest on "apparant tax owing". in other words, guilty till proven innocent. we've been told this could take another 10 years in the courst. UGH! and that she can not sever ties unless she pays monies that they deem "owing" or put the amount in a lawyers trust. confused!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

"we have been totally surprised as how difficutl severing ties with Canada has been"

Obvioulsy it was easier than you thought, since it was done the day you moved to US.


As to your charity troubles, your lawyer shoudl be dealing with this. Howver, the treaty overrides all these considerations: you and spouse left in 2008, regardlesss of the charity issue.

Besides, since they have levied the tax anyways, why would she need to remain a tax residnt (even though she is not)..
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

However, even in your current situation, if done properly, the fainal tax you pay should be negligible in US on your Cdn income.

perhaps you are not doing your US taxes properly.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
romfig
Posts: 5
Joined: Wed Aug 31, 2011 2:56 pm
Location: dfw texas

Post by romfig »

thank you for all the info. we are stumped as to where to find a tax lawyer that could help us with these issues. Is there a website/list you can recommend? we really would like to start asap. Thanks again.
baby_king_bob
Posts: 14
Joined: Tue Oct 13, 2009 7:00 pm

Post by baby_king_bob »

When you talk about 'severing ties' I assume that you are not trying to renounce your recently acquired Canadian citizenship but am unclear exactly what you might be referring to.

Regarding your charitable donations issue, I assume you bought into one of these tax credits schemes that seemed too good to be true, but came with a nicely prepared tax opinion from an expensive lawyer, but still turned out to be.... :o too good to be true?

The promoters of the scam are still fighting-the-fight, so all you can (should?) do is sit back and wait.
romfig
Posts: 5
Joined: Wed Aug 31, 2011 2:56 pm
Location: dfw texas

Post by romfig »

To clarify, all we want to do is sever our residency status with Canada, not our citizenships, and stop paying taxes in both Canada and the US while earning an income in the US only.
rlb
Posts: 139
Joined: Thu Feb 17, 2011 8:51 pm
Location: NB, Canada

Post by rlb »

I'll try to paraphrase nelsona to make it clearer:

(1) You have already severed Canadian residency status in 2008.

(2) The US is pratically the only country that taxes both citizens and residents on their world-wide income. Other countries, including Canada, tax only their residents. You can maintain your Canadian citizenship indefinitely without paying Canadian taxes on anything other than Canada-source income, and that at non-resident rates. (My wife and I did this for 34 years.)

(3) You should have filed a departure return in 2008 with Canada. Read the Emigrants guide on the CRA web site. This basically means a deemed disposition of assets that may have appreciated in value (e.g., stocks, second home). Nelsona is telling you to go back and correct your 2008 Canada return.

(4) Then you will need to possibly correct your 2008 US return to match the corrected Canadian one.

(5) Finally, file corrected returns for 2009 and 2010 with both Canada and the US. The Canada returns will be as a non-resident, the US returns will be full 1040 on world-wide income (file amended returns to get correct foreign tax credit for Canada).

(6) In 2011 and going forward, file Canada returns as a non-resident on any Canada source income (don't file at all if you have none), and full 1040's on world-wide income.

(7) Be sure FBAR forms have been filed for all years in which you have more than $10,000 in foreign (relative to US) accounts. Proper forms also to declare any RRSP or foreign trust etc.

I am not sure of the solution for your wife. Consider paying any tax asked for by the CRA right now, and hope you can it back if things work out with the charity in your favour.

Nelsona: please correct mis-statements I may have made or elaborate as necessary.
Post Reply