Not meeting substantial presence test: which of 3 options?

[cantax14]

Hello,

I moved to the US in Oct 2013. I am single and don't have any residential ties in Canada, but I do have a TFSA unfortunately.

I wanted to check my understanding of my filing options:

1)
Canada: Full-year resident, report all US+Can income
USA: Non-resident, file 1040NR with US income
Advantages: Much less forms (skips 3520 and 3520A for TFSA, possible 8621 for TFSA, FBAR, 8891 for RRSP)
Disadvantages: Pay more tax due to US+Can income bumping me to next tax bracket in Canada

2)
Canada: Emigrant as of Oct 2013, so report only Can income
USA: First-year choice, resident as of Oct 2013, file 1040, so report only US income
Advantages: Much less tax (low tax bracket in both countries as US income is not reportable in Can and vice versa)
Disadvantages: Many more forms (TFSA, RRSP, FBAR)

3)
Canada: Emigrant as of Oct 2013, so report only Can income
USA: Full-year resident for all of 2013, report US+Can income and deduct using 2555 and/or 1116.
Advantages: Claim standard deduction in the US. (Will having US+Can income bump me to the next tax bracket in US here?)
Disadvantages: More forms (TFSA, RRSP, FBAR, 2555, 1116).

My understanding is that I can't file an emigrant return in Can and also file 1040NR in the US, because I must be a tax resident somewhere: the CRA website says Canada won't allow me to be non-resident until I become resident somewhere else (http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... g-eng.html "When do you become a non-resident?"). Correct?

Did I correctly understand the three options? Any advice or caution choosing between them?

[cantax14]

Another disadvantage of #3 is to figure out how to actually do it. I see in IRS #519 how to do it for married couples filing jointly, but for single individuals I haven't seen such a possibility mentioned anywhere but this forum.

At least option #2 (first year choice) has a couple paragraphs in IRS #519, and some complete worked examples available online.

[nelsona]

You can pretty much ignore IRS Pub 519. and forget dual-status.

If you did not meet SPT, you probably should just file 1040NR, or file full year (treaty allows this, not IRS regs).

If you di meet SPT, file full year, using 2555 to exempt your Cdn wages from before the move..

[cantax14]

[quote]If you did not meet SPT, you probably should just file 1040NR, or file full year (treaty allows this, not IRS regs).[/quote]

What would this look like on the Canadian side? The cra says I can't be nonresident until I am resident somewhere else, but being a full year Canadian resident is much more expensive due to the races bracket.

[nelsona]

You left in march 2013. You meet the treaty definition of US resident at that time. CRA allows for transition.
You file a departure return.

In US the way you file is not so closely linked with you tax residency status as it is in Canada.

[isabel84]

Hi,

I know this post is quite old but it exactly reflects my situation.

My husband and me left Canada on August 27th 2014. No Canadian income after that day. We were temporary residents in Canada, not Citizens. We have since been living in the US. He has income since Sept. 2014. I'm not working (so filing jointly would be a HUGE benefit). No children. Married.
I am trying to narrowing down our options and came to the same conclusions as the author of this post. And I don't know what to do.

1. Canada: Full-year resident, report all US+Can income
USA: Non-resident, file 1040NR with US income
Problem: high tax burden

2. Canada: Emigrant as of August 27th 2014, so report only Can income
USA: Get extension for tax return, wait until we fulfill the SPT, then apply First-year choice, resident as of August 27th 2014, file 1040, so report only US income
Problem: no joint filing but personal excemptions

3. Canada: Emigrant as of August 27th 2014, so report only Can income
USA: Get extension for tax return, wait until we fulfill the SPT, Full-year resident for all of 2014, report US+Can income and deduct using 2555 and/or 1116. The only thing I don't understand is if we qualify for this. IRS publication 519 says that one spouse has to be a resident at the end of the tax year (2014) in order to become a "full year resident" for tax purposes.

4. Also I read the following: "If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim a personal exemption for your spouse if your spouse had no gross income for U.S. tax purposes and cannot be claimed as the dependent on another U.S. taxpayer's return." If I understood that correctly, we can do that if we are dual status, right? Does it matter if we were only Canadian temporary residents and not citizens?

Any advice, comments, help?

[nelsona]

1. one is not possible, you were not residents of Canada after 8/27
2. is correct for Canada, but unnecessary restriction for US.
3. correct, but no need to wait for SPT, you are filing like US citizens returning to US. Ignore everything in Pub 519.

4. Is meaningless in this context.

So, departing return for Canad, full 1040 joint income for US, using 1116 and/or 2555 for Cdn wages and other income.


All that head-scratching for nothing.

[isabel84]

Oh really? Even though we are not US citizens? But why is pub 519 giving all this information regarding SPT which I can ignore now?

[nelsona]

because most people aren't Canadians with special treaty privileges,.

[isabel84]

Thank you, that was very helpful! I now found the important section in the treaty (Article XXV, Number 4). One last questions: Benefiting from the treaty privileges doesn't automatically mean that I will have to file form 8833, correct?

[nelsona]

No. But even if you had to use 8833, that is no big deal.

[qacawowub]

If you are banned from this platform then you can get unlocked. There is many reasoning of this that you are banned so https://www.bestassignmentservices.co.u ... rvices-uk/ can assist you in this to resolve your issue by contacting to the customer department.