Though I found some answers to parts of my situation, I need a comprehensive look at my entire situation, and would appreciate it if some readers can offer ideas on how to proceed.
I am single, but with extended family in Canada and am a dual citizen (U.S./Canada) now. Living in Canada for the last 5 years. No real estate in either country. I believe I am fully compliant with regards to both CRA and IRS rules.
At this time I am not sure where I will finally settle down, so I could be switching between the U.S. and Canada for a while, depending on multiple factors.
I am currently trying to decide the best course of action to satisfy the essence of the following two seemingly incongruous factors:
a. I prefer being a Canadian resident for now (mostly for family, aging parents)
b. Though I have a job in Canada now, I am trying to take a different direction in my career almost out of necessity; cannot find a job in Canada in the new area I am interested. Better prospects in the U.S. until I expand into other areas in my profession.
From what I have read so far, it seems there are only three options for me:
1. living in Canada, working in the U.S. on contract, self employed and receiving a salary from a U.S. corporation directly
pros: a) no limit on the number of days I live and work in the U.S. (no downside if I exceed 183 days in the U.S.). Correct?
b) I can continue to trade investments in my IRA in the U.S. as a Canadian resident (Fidelity seems to allow it)
cons: c) all of the salary (higher than normal due to contract status), minus a few possible deductions must be taxed
2. living in Canada, creating a Canadian corporation and working through it in the U.S.; the U.S. company pays my Canadian corporation for the services I provide on a contract basis.
pros: a) only the portion of the annual earnings distributed to me by the Canadian corporation is taxable
b) I can continue to trade investments in my IRA in the U.S. as a Canadian resident (Fidelity seems to allow it)
cons: c) I am limited to living in the U.S. for less than 183 days, which increases the frequency of travel between countries
In general, it seems I can live in the U.S. for more than 183 days and still be considered a Canadian resident as long as I meet certain criteria - driving licence, bank accounts, extended family, etc. in Canada. The question is whether I can continue to be a Canadian resident for tax purposes (whether I implement option 1 or option 2), while still being in the U.S. for longer than 183 days to reduce the frequency of travel between countries, especially for long flights; if I can travel once in two or three weeks and work from Canada for a few days each time, it might help reduce the stress of travel.
3. move to the U.S. and visit Canada often to be with family
pros: a) residency question is solved (US resident for a U.S. job)
cons: b) either winding down all my financial accounts in Canada, in which case I pay 25% exit tax on RRSP,
or, filing tax returns in Canada every year, which is not bad as long as I can apply for tax credits for all my income in the U.S. -- is this possible?
c) if I didn't sell my RRSPs, it also means I cannot trade in my RRSP accounts, since I will not be a resident of Canada; not too keen on hiring a Canadian broker to do the trades, since the amount in the accounts are not large.
My understanding is that unless I dismantle my RRSP and file the exit tax return, I need to keep filing tax returns in Canada - correct me if I am wrong. And I am not too keen on dismantling my RRSPs because I might have to return to Canada to work at some point.
If it is better for me to move to the U.S., does anyone know if I can form a Limited Liability Corp (and choose to be taxed like an 'S' corp - this seems to be possible) in the U.S. to keep the earnings in the company and pay taxes only on the reasonable amount I take out as a salary, and also report this amount I take out as personal income when it comes to filing Canadian tax forms, or should I be showing the entire annual income of my LLC to the CRA and potentially pay taxes to Canada? I am not trying to hide the income; just trying to shelter it from taxes if the laws allow it.
Can someone offer some ideas or opinions on which of the three options would be better from a tax perspective (assuming I might be able to get contract positions in the U.S.), and correct my understanding if I made any incorrect statements above?
Thanks much.
Dual Citizen, living in Canada, trying to work in the U.S.
Moderator: Mark T Serbinski CA CPA