Hi,
My wife (J-1 Professor) and I (J-2 dependent) moved to the US from Canada in September 2011. My wife's two-year contract in J-status ends in June 2013. Usually, one is not considered a US resident for tax purposes for the first two years in J status. However, since both my wife and I have been in F-1 status before (with the last year being 2006), it seems that we will be considered US residents for tax purposes in 2012. This is my reading from the explanatory notes on form 8843. We may remain in the US even after June 2013 if we get jobs in the US. Otherwise, we'll head back to Canada.
Would appreciate if you could address the following questions:
1) If my wife and I are considered residents for tax purposes in the US, is there any way for us to ALSO remain factual residents of Canada?
2) If not, is it mandatory that we break Canadian tax residency (possibly having to re-establish it in mid 2013, if we return to Canada)?
3) We have already contributed $5k each to our TFSA's in January 2012. If we are deemed residents of the US, would that be considered an overcontribution? Should we pull out that amount ASAP?
4) What should we do with our TFSAs if we will be deemed US residents in 2012? There doesn't seem to be any advantages in maintaining them unless/until we return to Canada.
Thanks a lot for your help. I'll be happy to book an initial consultation if our situation is becoming particularly complex. Much appreciated.
J-1 - Tax issues
Moderator: Mark T Serbinski CA CPA
Good question.
First off, since neither of you meet SPT for 2011, whether you count the days or no, you aren't yet a US resident for 2011, as you said. But that does not prevent you from departing canada as soon as you no longer had ties there, and from filing either a dul-status of full-year 1040 in US. You should be acting like you live and work in US -- which you do.
For 2012, you will probably be resident, you cannot exempt your 2011 or 2012 days, according to how I read it.
In which case you should be collapsing your TFSA, not adding to it. Your departure date from canada was last september, and you should be filing a departure return as such, unless you have overwhelming Cdn residential ties (which is unlikley since both you and your spouse are living and working in US).
So, you need to withdraw your entire TFSA until you return to Canada. It isn;t tax-free in US, and it a paerwork burden in US as well. You will get to put back what you take out when you return.
As to your jan 2012 contribution, check with your trustee: ask them how to handle over-contribs that are withdrawn within the year that they are made.
make sure you stop any GST UCTB payments as well.
First off, since neither of you meet SPT for 2011, whether you count the days or no, you aren't yet a US resident for 2011, as you said. But that does not prevent you from departing canada as soon as you no longer had ties there, and from filing either a dul-status of full-year 1040 in US. You should be acting like you live and work in US -- which you do.
For 2012, you will probably be resident, you cannot exempt your 2011 or 2012 days, according to how I read it.
In which case you should be collapsing your TFSA, not adding to it. Your departure date from canada was last september, and you should be filing a departure return as such, unless you have overwhelming Cdn residential ties (which is unlikley since both you and your spouse are living and working in US).
So, you need to withdraw your entire TFSA until you return to Canada. It isn;t tax-free in US, and it a paerwork burden in US as well. You will get to put back what you take out when you return.
As to your jan 2012 contribution, check with your trustee: ask them how to handle over-contribs that are withdrawn within the year that they are made.
make sure you stop any GST UCTB payments as well.
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