F-1 OPT + H-1B, US and CAN tax preparation questions

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fmincon
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Joined: Tue Mar 12, 2013 8:56 pm

F-1 OPT + H-1B, US and CAN tax preparation questions

Post by fmincon »

After going through various related threads on this topic for the past while, I am afraid I am still slightly confused on my situation:

Canadian citizen, single, attended US grad school starting Jun 2011
Jun 2011 to Jun 2012 - F-1 status, graduated Jun 2012, no worldwide income
Jun 2012 to Sep 2012 - F-1 OPT status, US only income, did NOT pay FICA taxes
Oct 2012 to Mar 2013 (present) - H-1B status, US only income

Ties to Canada: Bank account + debit card, Ontario's DL, Passport, BC MSP card (unused), nothing else

I have resided in the States since Jun 2011, visiting Canada for only about 5 days in 2012. I intended to stay in the States since receiving a job offer in Oct of 2011 (not 2012). I don't pass the SPT in 2012, unless I file for dual-status to have part-year residency begin in Oct 2012 (which would first entail requesting an extension to achieve residency status in 2013).

***For filing 2012 US taxes, it seems like typical options are:
1) 1040NR
2) 1040 using XXV
3) dual status

As far as I understand, XXV(1) ensures that, tax-wise, I can't be treated worse off than a comparable American version of myself, and hence I can elect to file 1040 but must mention the use of XXV(1) using 8833. And I assume that this is more desirable because of greater deductions available for 1040.

***For filing 2012 Canadian taxes, would I pass as a non-resident starting Jun 2012 because I started work in the US with no intention to return and minimal ties to Canada, or Oct 2012 because that's the earliest time the States would consider me as a resident alien + FICA taxes start here? Confused because these 2 threads point to different directions:
Deemed non-resident Cdn during OPT: http://forums.serbinski.com/viewtopic.php?t=2934
Resident Cdn during OPT: http://forums.serbinski.com/viewtopic.php?t=3153

If the latter case applies, this would mean the US income from Jun - Sep 2012 would be treated as foreign income. Since I have unused tuition credits left in Canada, I believe I'm forced to use this first, and any remaining taxes can be further reduced with foreign tax credits based on my US accrued/paid taxes. This also means it's unwise for me to claim any US deductions (e.g. moving expenses, job-related expenses) because it would also reduce my foreign tax credits in Canada, and I'm assuming these US deductions don't roll over into 2013.

Also, in calculating claimable foreign taxes paid, it would be (wages attributable to months as resident/total 2012 wages) * (IRS + state + FICA taxes)?

Sorry for the long post, but is my line of reasoning outlined above correct? This is the second time I've ever filed taxes on my own, and I've never had good experiences with the tax preparers from the standard, ubiquitous tax prep companies. Any help/clarification greatly appreciated.
nelsona
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Post by nelsona »

You only become non-resident of canada the day you got H1. before this, since your days could not count for US residence, you cannot clim Cdn non-residency.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
fmincon
Posts: 6
Joined: Tue Mar 12, 2013 8:56 pm

Post by fmincon »

Thanks for the quick reply, Nelson!

So do the other items I mentioned make sense? Especially filing as resident via form 1040 using XXV. On this website it mentioned that:

"Single taxpayers are not eligible to claim the benefits of Article XXV or to use the Tax rates for Head of Household. When the Article is claimed and the necessary information is not included, the Form 1040NR is to be processed using Filing Status Code 1 for single."
http://www.irs.gov/irm/part3/irm_03-038-147r.html
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Post by nelsona »

The quote you referred to is specifically referring to the article XXV(3) which allows for a special calculation for married people living in Canada. It was merely emphasizing that such a provison is not to be used by unmarried individuals.

The only other poiint I would make is that since you will have to use tuition credits before US tax credits, it IS VERY MUCH in your interest to reduce your US tax as much as possible, since you will not be able to claim much in terms of US tax credits on your Cdn returns, and they cannot be carried over. This is a problem that many former students face when they do not make a clean break from canada at the tie they start earning US income (such as is the case when you OPT).

I would try out 1040NR, reporting only US income, or I would try 1040 reporting world income, and pick which one gives the lowest US tax. I would think dual status will not be useful.

Also, you don't mention any income before OPT, did you not get any scholarship or grant income?
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
fmincon
Posts: 6
Joined: Tue Mar 12, 2013 8:56 pm

Post by fmincon »

I didn't receive any scholarship/grant income during 2012 prior to OPT becoming active. (For some strange reason, my 1098-T in the prior year, 2011, lists $3,000 for Fellowships/Traineeships which I wasn't even aware of, and I am guessing there aren't any effects since I was still F-1 during that time.)

Also curious on the implications of having a Canadian departure date set to Oct 1 when H-1 status kicks in and filing for 1040NR in the States. This would mean that both countries recognize me as non-residents from Oct to Dec?

Also, really appreciate your clarification of the foreign tax credit + tuition credit issue!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You are resident of US since October. Your right to file 1040NR is only because you have not been resident sufiicient days.

But you are resident of US, not Canada, by treaty, from that date.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
Luorrallsc
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Re: F-1 OPT + H-1B, US and CAN tax preparation questions

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mark33
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Re: F-1 OPT + H-1B, US and CAN tax preparation questions

Post by mark33 »

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