Does filing 1040NR = Canadian full year tax resident?

[DJohannes]

Hi, first time poster, excellent forum.

I've scanned the threads back for 18 months, and haven't seen my particular question. Here is my hypothetical question:

1. I'm currently a lifetime Canadian citizen/resident.
2. As of August I plan to terminate all Canadian ties except RRSP, and a Canadian bank account and credit card, and file a NR73 with Revenue Canada advising them I will be a non-resident effective September.
3. I will effect a permanent move to the US at the end of August, using either a TN or H1-B visa (to be discussed with my US employer)
4. I will not meet the definition of US resident for 2014 under the green card nor substantial presence test.
5. I will decline the First Year Election option, and thus file a year end 1040NR as a Non-resident Alien for US tax purposes for Sept-Dec 2014.
6. I will then file as Resident Alien for 2015 and onwards.

Question 1: Does #5 above overrule #2, and thus require me to file my 2014 taxes as a full year Canadian tax resident, even though I terminated all ties in August? Or do I simply file my Canadian tax return for income Jan-Aug, and the 1040NR for income Sept-Dec.

Question 2: I will receive a large "retiring allowance" severance package in September. Revenue Canada stipulates that the 25% non-resident withholding tax on Part XIII income is the final the tax liability to Canada on this income, and I do not need to file a Canadian tax return to report this income. (see following link under "Part XIII Income" just below the grey box)
http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... s-eng.html

However, under 1040NR, non-US income is not included. So what further reporting would be required for this income, if any?

[nelsona]

How you file in US does NOT impact your residency in canada in the departure year. You will still be considered EMIGRANT, if your "house and spouse" are in US.

Do NOT file an NR73. You determine residency on your own. Look over the form and take care of the simple things. But by treaty you will be considered US resident the moment you move and are working in US. Only if cases where your family is remaining behid, you are travelling back and forth, or your jCdn job is not quite finished would you need to be propactive in showing that you are really acting like a US resident. That would be the only reason to file the "first year choice" in your case. If it came to that you would simply file a full year 1040 and be done with it, especailly if you are married.

But given your severance package, I would be filing 1040NR. You would want to make sure that your employer in canada knows that you have left when they make the payout.


To file a 1040NR doesn't mean youu are not a US resident by year end, it simply means you have not been resident long enough (by SPT or GC tests) to be required to file 1040. Your 1040 is for theentire year, but just for US-source income. Your Cdn departure return will be for Jan-August world wide income.


byw, it won't be H1-B unless you are working for a non-profit. H1-B quota is met already for october 2014, next availability is Oct 2015.

Just one caveat. While IRS PUb 519 will not apply to you in terms of dual-status, do make sure that you do not meet SPT by the 3 year rule, or you could find yourself forced to filer dual-status ofr full year in US, inc which case your severance would be taxable in both countries.

[nelsona]

You also wnt to make sure that your Cdn employer will issue your severance (at the 25% rate) without you having to file NR73, as this will take a long time to get. If push comes to shove, you would still accept the severance (and whatever withholding was made at graduated rates), but then submit a letter with your departure return, on which you remit or request refund on this sevearnce transaction only, not on your return.

[DJohannes]

Thank you for your excellent, speedy and comprehensive reply.

In light of the H1-B quota at limit, I guess I could go on the TN1, and then have them file for the H1-B next year if needed.

Thanks for the note to check my 3 year total for the SPT. I'm safely below the 183 given an end of August move, but would not be if I started in the US one month earlier than planned, so an excellent heads up.

Thx again.

[nelsona]

There is little advantage to H1 over TN. if you are wanting green card, don't let firm delay under the guise of thinking that you need h1 first.

You don't.