Hello everyone,
I am currently living in the United States (arrived in August) to work as a Research Scholar under a J-1 visa.
According to the rules for J-1 visa, I am considered as a non-resident alien for tax purposes in the United States (I have visited an IRS office to make sure of that).
I also filled out a form with the Canadian Revenue Agency to ask for assistance about my residency status. Their answer was that I am considered as a non-resident of Canada for tax purposes (starting in August of 2012).
My issue is that, according to both government, I am considered as a non-resident for tax purposes in both countries. Is that normal? If I am considered non-resident in both countries where do I pay my taxes?
On the 1040NR (non-resident US form) form I have to answer the question "In what country did you claim residence for tax purposes during the tax year?". How am I suppose to answer this question if both countries consider me as non-resident?
I would appreciate if anyone that has been in a similar situation could help me. So far I have visited an IRS office, called the IRS and called the Canadian Revenue Agency, but nobody has been able to answer my questions.
Thanks!
Canada and United States residency status conflict
Moderator: Mark T Serbinski CA CPA
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CanadianScholar
- Posts: 3
- Joined: Wed Mar 19, 2014 9:52 am
Intersting situation. Did you mean Aug 2013 or Aug 2012?
That is where the treaty comes in. This would clearly be Cdn resident.
I'm surprised that the result of your NR73 that you sent was that you were considered non-resident. Since one of the questions on NR73 is whether you are considered a tax resident of another country (you are not, as you correctly found), and thus CRA NEVER lets one become non-residnt until such time.
How did you fill in that section? CRA always reserves the right to say they have made a mistake on this, especially if you give incorrect info.
Every J-1 I've ever encountered is considered CDn resident (either factual or deemed) until such time as they either changed status, or at least until 2 years (?) after, at which time IRS began to consider you resident.
Since you have not filed a departure return in Canada, I would simply keep filing like you lived in Canada (ie. reject their determination). I would do this especilly if you are likley to return to canada after your stint in US.
If you are not planning to return to Canada however, file a departrure return as CRA is expecting. Take them at their decision.
I would then start filing a 1040 (Cdns can ALWAYS file 1040 -- by treaty -instead of 1040NR, it does not make you tax residnt but it does give you all the rights of a US taxpayer) This would avoid having to fill out all that stuf on 1040NR (and you could use off-the-shelf software to do your taxes.)
In essence, CRA has kicked you out of the country (incorrectly in my opinion), so you have the choice of either rejecting that decision, and filing a Cdn return as a deemed resident, and either a 1040NR or 1040 in US.
OR you accept CRA decision. File a CDn departure return based on the Aug departure date, fulfilling all the requirements of an Emigrant, and file a what is known as a dual-status 1040 return for 2013
I guess it all depends on what you wnat to do AFTER you finish J1.
That is where the treaty comes in. This would clearly be Cdn resident.
I'm surprised that the result of your NR73 that you sent was that you were considered non-resident. Since one of the questions on NR73 is whether you are considered a tax resident of another country (you are not, as you correctly found), and thus CRA NEVER lets one become non-residnt until such time.
How did you fill in that section? CRA always reserves the right to say they have made a mistake on this, especially if you give incorrect info.
Every J-1 I've ever encountered is considered CDn resident (either factual or deemed) until such time as they either changed status, or at least until 2 years (?) after, at which time IRS began to consider you resident.
Since you have not filed a departure return in Canada, I would simply keep filing like you lived in Canada (ie. reject their determination). I would do this especilly if you are likley to return to canada after your stint in US.
If you are not planning to return to Canada however, file a departrure return as CRA is expecting. Take them at their decision.
I would then start filing a 1040 (Cdns can ALWAYS file 1040 -- by treaty -instead of 1040NR, it does not make you tax residnt but it does give you all the rights of a US taxpayer) This would avoid having to fill out all that stuf on 1040NR (and you could use off-the-shelf software to do your taxes.)
In essence, CRA has kicked you out of the country (incorrectly in my opinion), so you have the choice of either rejecting that decision, and filing a Cdn return as a deemed resident, and either a 1040NR or 1040 in US.
OR you accept CRA decision. File a CDn departure return based on the Aug departure date, fulfilling all the requirements of an Emigrant, and file a what is known as a dual-status 1040 return for 2013
I guess it all depends on what you wnat to do AFTER you finish J1.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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CanadianScholar
- Posts: 3
- Joined: Wed Mar 19, 2014 9:52 am
Thank you for your quick reply!
I meant August 2013.
I'll have to check what I initially wrote on my NR73 (if I still have access to it, it's currently in Canada ...). I might have entered the wrong answer on that line. I don't think I had officially checked my residency status in the US yet and might have made an incorrect assumption.
It is not clear yet where I will go once my J-1 status is over, but it is possible that I return to Canada.
Right now I am leaning more towards filling as resident Canada. I forgot to mention it in my initial post, but I have a fellowship from the goverment of Québec (FRQNT funding agency) and thus have an income in both Canada and the United-States.
Once again, thank you very much for your reply, this is very helpful.
I meant August 2013.
I'll have to check what I initially wrote on my NR73 (if I still have access to it, it's currently in Canada ...). I might have entered the wrong answer on that line. I don't think I had officially checked my residency status in the US yet and might have made an incorrect assumption.
It is not clear yet where I will go once my J-1 status is over, but it is possible that I return to Canada.
Right now I am leaning more towards filling as resident Canada. I forgot to mention it in my initial post, but I have a fellowship from the goverment of Québec (FRQNT funding agency) and thus have an income in both Canada and the United-States.
Once again, thank you very much for your reply, this is very helpful.
Just a tip. Cdn students who subsequently move to US end up. by the way taxes are done, losing all tyhose built up tuition credits.
Since the correct way is to reamin resident, I would just keep doing so.
And don't bother contacting CRA or IRS. Their telephlunkies are notoriously wrong.
Since the correct way is to reamin resident, I would just keep doing so.
And don't bother contacting CRA or IRS. Their telephlunkies are notoriously wrong.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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CanadianScholar
- Posts: 3
- Joined: Wed Mar 19, 2014 9:52 am
Once again, thanks for your advice.
I got access to my completed NR73 form, and I did not say that I was considered a tax resident of another country.
I even said that I intended to move back to Canada in the future.
I don't understand what information they used from the form to determine that I was not a resident anymore ...
I got access to my completed NR73 form, and I did not say that I was considered a tax resident of another country.
I even said that I intended to move back to Canada in the future.
I don't understand what information they used from the form to determine that I was not a resident anymore ...