CDN moving to US summary

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Posts: 2
Joined: Tue Feb 03, 2015 5:02 am

CDN moving to US summary

Post by ceran » Tue Feb 03, 2015 5:54 am

Read a TON of pages/posts from various sources and years (esp nelsona, thx!)
on moving from Canada to the USA, talked to some CDN accountants as well,
found it complex but fascinating, and figured I'd post a summary of what
I've deciphered that might be useful to people in the future...

Hopefully someone will correct me if I misunderstood anything, do your due
diligence, get an accountant! If you're tempted to treat this as a reference
instead of a starting point... don't! If this has a lot of errors, someone please
let me know and I'll just delete the post, don't want to make learning more
work than it already was.

Before leaving:
- leave Canada early in calendar year to avoid residency rule (less future
paperwork, better tax profile?)
- close TFSAs before calendar year of departure (less future paperwork?)
- RRSP positions with a market value higher than book value should be sold and
rebought to bring the total book value of the RRSP as a basket as high as
possible on the departure date (used as the new cost basis for net profit
calculations in USA)
- if departing early in calendar year, Canadian income and US income of that
year are filed independently on income in their respective geographies;
withdrawing RRSP at a lower average tax rate than prior year's
marginal rate becomes possible, but personal deductions for the year are
also lower, pro-rated for the number of days in Canada
- tell CDN financial institutions about becoming non-resident (might
lose access to certain capabilities)
- only some institutions are permitted to allow RRSP activity from US residents
(depends if they have a sister entity in that state?)

- becoming non-resident occurs the later of physical departure date, and
cessation of ties to Canada (CRA has pretty clear guidelines, esp. the
major ties)
- minor ties like giving up OHIP card, drivers license, credit cards, getting
American health insurance, etc. contribute to an *aggregate* effect in CRA's
evaluation of Canadian residency, individually on their own don't count for
that much
- getting a TN1 at a land POE works for a lot of ppl; relevant immigration
officials don't keep 24/7 hours; wait times to actually be interviewed *can*
be long?

After leaving:
- IRS changed RRSP reporting rules in 2014, annual 8891 filing is no longer
needed to defer RRSP gains (since entry) from federal taxes, deferral is
- But for the Californian-bound, California is not obliged by the US-Canada
treaty with respect to RRSP, and is entitled to state tax on RRSP gains since
- moving expenses can be applied against US income for that year's tax return
- have to file a report for every foreign account held or have authority over
(FBAR/FinCen?) if they ever held more than several k in total at any time in the year
- lump sum withdrawal from RRSP by non-resident is taxed at a flat rate
(currently 25%), which covers tax obligations to Canada; the net profit since
entry is reported as (pension?) income to the USA, but (part of) the 25% paid
to Canada can be used a foreign tax credit
- alternatively for over 50, converting the RRSP to an RRIF and siphoning out
small amounts (10% of fund size) is taxed at a lower flat rate (15%)
- TN1 and TD status renewals/get can be obtained by mail from within the US,
albeit at a higher fee than the border, and a couple months wait
- get an ITIN for TN1 spouses on TD, for joint filing (and joint deductions)?
- get a drivers license by applying for an SSN first, and bring the denial
letter to the DMV? (if on appropriate status, not a visitor)
- people not eligible to work in USA (e.g. TD status, no SSN) can work remotely
for entities in foreign countries that have no ties to USA, but income is
reported to IRS as USA income (surprising?!)

- Canada Post offers mail redirect to US
- US is picky about dogs entering (health cert in last 10 days, shots, etc.),
not so picky about cats; Hawaii is especially picky
- Air Canada allows one small pet as passenger's cabin luggage (albeit small
feed and need to register the pet with AC after booking) on flights it owns
- a lot (most?) of the big Canadian banks only have a retail presence on the US
east coast (HSBC has some on the west, also TD Ameritrade brokerage out west)

Posts: 16509
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Feb 03, 2015 11:19 am

I'll only correct the misinformation. Nothing in your case is unusual, so you can follow other existing threads.

The timing of your departure form canada is not really crucial, it will be driven by your US status. Since you will not be getting full personal deductions, you will essentailly be flat taxed on your pre-departure income, and your Cdn wages will be excluded on your US return by FEIE. I would actaully say that later in the year is better than early, and mid-year is worst.

Your incomes are not filed "independently" in US. You willreport ALL world income on your initial 1040, ESPECIALLY if you move early in the year. Otherwise you are penalizd by not being allowed to file jointly in US that year, which would be very costly. Don't listen to anything else the person said who told you this.

RRSPs withdrawn after departure are flat taxed 25%, regardless of how little other Cdn income you have. And funds withdrawn before departure will be taxed progessively, but without the personal dedecution. so it is best to ust take the funds AFTER becoming non-Resident.

The decision of a firm to jkeep managing your funds has NOTHING to do with US affilaition. NONE of the banks can manage for you wheile they ALL have US affiliates. Some few brokers will. TD waterhouse is one.

Deoarture is whn you begin living and working in US, preferably (but not required) with spouse also present.. That is the treaty definition which overrides residential ties.

Correct on OHIP and DL, but remeber that OHIP require Cdn residence, and DL must be changed within 30 days by the rules of your state.

FBAR aggregate is 10K. Above that need to report every account.

All of the 25% Cdn tax can be used as scredit, but the credit will be limited to a very small usable amount.

the conversion to RRIF can be done at any age.

The ITIN will be issued as part of your first tax return, not before.

TD spouses in some states simply cannot get DL, evne wityh SSN denial letter. Best check on this before settling. It may mean living in on nearbycstate and comuting. IMPORTANT.

I would not be counting on spouse doing foreign work. Each person would need to get legal counsel on this before attempting as each circumstance is . The income would be reported in US as foreign income.

There is no need for a Cdn associated bank account in US. Keep your Cdn bank account and open a US one. Opinion, most will find better service at a 1-5 branch bank, not the big chains. This is counterintuitive to what Cdns experience in canad. You will need a personal relationship with individuals at financial institutins in order to bypas the "no credit history" problem that moast TNers face when first moving, and TD spouse encounter throughout their stay.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Posts: 2
Joined: Tue Feb 03, 2015 5:02 am

Post by ceran » Tue Feb 03, 2015 1:33 pm

Thanks nelsona! Thought I'd already done a lot of research and checking already. Turns out I can't edit my post either to make corrections :(

Posts: 21
Joined: Wed Feb 22, 2012 7:01 pm

Post by MikeRitchie » Fri Feb 13, 2015 11:44 am

I know there's a lot of posts about this, but most of them are about Canadians moving to US.

I'm dual US/Cdn citizen, lived in Canada my whole life. I'm IRS-compliant to the best of my knowledge. I've been offered a job in the US, and I was curious if there are any special considerations for a USC moving from Canada to US?

I will be living and working in US, but apparently still be on Cdn payroll (so that the years of service count toward my DB pension). I'll be talking to a professional about this, but seems like something the CRA would flag as proof of Cdn residence.

Assuming that's no problem, I'll have the departure tax return with deemed disposition of securities. It sounds like I'll have to actually sell them anyway since Canadian brokers won't keep me if I'm a non-resident (although nelsona implied that Waterhouse is an exception?).

I'll close my TFSA (I've been filing 3520 for years now and have been able to avoid tax as I have sufficient other investment income / tax credits to wipe out US tax).

I plan on just leaving my RRSPs as is, and maintaining some C$ bank accounts (don't want to convert all my cash at this exchange rate, especially if I won't need it all, and I do plan on coming back).

My fiancée also has a job lined up in the US (we work for the same company). She's Canadian, and will either get a visa sponsored by the company, or we'll get married immediately and apply for a spousal visa (will speak to immigration specialist to determine which is fastest). Any other considerations from her end (beyond the normal in other posts)?

Posts: 16509
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Fri Feb 13, 2015 1:08 pm

the only considerations a USC has to be worried about (as aopposed to a CDn) are the following:

1. Things that you did not owe any US tax on in the past, now become taxable in US (like RESP, and TFSA as your pointed out), since you won't have foreign tax credit.
2. The way you and the IRS treat deemed dispositions as a result of departure are slightly differrent for US citizens.
3. Remebr that your RRSP taxability in US as based on growth over contributions, not growth after arrival in US.

There is no exception for non-retirement accounts in canada. You need to transfer the investments you can, ans sell the ones you can't.

the Cdn payrol will be an issue, not because of residency, but because of payroll tax. Work done in US by a US resident and employee is subject to SS and medicare tax, not CPP and EI. The company will need to set up a special payroll for you, or make you a contractor. It cannot be status quo.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Posts: 12
Joined: Sat Feb 07, 2015 1:43 am

Post by YankCanuck » Sat Feb 14, 2015 1:04 am

I am interested in your response #2. How does the IRS deem a disposition on US citizens returning to the US?

Posts: 16509
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Sat Feb 14, 2015 5:05 pm

As with a non-US citizens, US citizens are permitted to use the deemed disposition value as a new cost basis.

The difference is they have ALWAYS been allowed to do this, under a different part of the treaty, as long as they also deem the sale in the same year on their US return (and say so thru form 8833). They can make this election on a case by case basis.

Non-US citizens must use the provision in Rev Proc 2010-19, which is some ways are more flexible (since they weren't taxable in US before their move), but must be applied to everything that was subject to deemed dispo.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Posts: 21
Joined: Wed Feb 22, 2012 7:01 pm

Post by MikeRitchie » Thu Feb 26, 2015 2:00 pm

New related question: I just got a notice to pay instalments for 2015 (March & June). I'll be moving to US at the end of April. Should I make the instament payments? I expect that my exit tax return will be result in a refund since withholdings were assuming a full year of income.

Posts: 16509
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Fri Feb 27, 2015 6:06 pm

You do not ever have to pay install ments in you know you wil not owe tax. Besides you are leaving.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply