Good day,
I wanted to double check my accountant's logic regarding the CDN side of my 2006 return. I received employee income as a resident of Canada from Jan-Mar 2006 which I claimed on my US return, as well as independent contractor income as a US resident through the remainder of that year. I paid federal and state tax and set up estimated payments for 2007.
I am a TN-1 holder and I've submitted my W8-BEN for contract purposes.
When I asked what my responsibilities to Canada were she said that the US return had taken care of it and since I claimed my Canadian income on the US return I wouldn't have to file any return. This seems strange to me that the CRA and IRS would somehow know each others' business.
Was I supposed to file a 2006 return in Canada? Would it be for the Canadian amount, the total amount, or zero? Please give me some guidance.
2006 Dual Returns?
Moderator: Mark T Serbinski CA CPA
Man, some professionals are idiots.
Look at the CRA website, and you will see that you are classified as an EMIGRANT, and thus had to file a departure return, with a departure date, for 2006. You are ALWAYS required to report and pay tax on Cdn-source income (either on a Cdn return, or by flat non-resident tax) IN CANAD.
You should have filed that return, in April, rpeorting your Cdn-source wages for the year, plus any other Cdn-source income you received before leaving canada. For Cdn-source income after leaving (like bank interest), there should have been flast tax taken off before being given to you.
When you do your 2006 Cdn return, you will have some tax. You are not entitled to the full personal exemption, so if you made more than $2000, you owe tax (you do still have your T4s don't you?) You can use this tax, as well as your CPP and EI as foreign tax on your 2006 IRS return.
In 2007, you are fully non-resident, so would only report a Cdn tax return if you earned money in canada that was not subject to flat tax (like wages, real estate income, etc). Otherwise you do not file a Cdn return, so long as you have informed any Cdn payors that your are no longer resident.
For future reference, the notion that reporting income on one return meaning you don't have to report it elsewhere is complete and utter nonsense.
Look at the CRA website, and you will see that you are classified as an EMIGRANT, and thus had to file a departure return, with a departure date, for 2006. You are ALWAYS required to report and pay tax on Cdn-source income (either on a Cdn return, or by flat non-resident tax) IN CANAD.
You should have filed that return, in April, rpeorting your Cdn-source wages for the year, plus any other Cdn-source income you received before leaving canada. For Cdn-source income after leaving (like bank interest), there should have been flast tax taken off before being given to you.
When you do your 2006 Cdn return, you will have some tax. You are not entitled to the full personal exemption, so if you made more than $2000, you owe tax (you do still have your T4s don't you?) You can use this tax, as well as your CPP and EI as foreign tax on your 2006 IRS return.
In 2007, you are fully non-resident, so would only report a Cdn tax return if you earned money in canada that was not subject to flat tax (like wages, real estate income, etc). Otherwise you do not file a Cdn return, so long as you have informed any Cdn payors that your are no longer resident.
For future reference, the notion that reporting income on one return meaning you don't have to report it elsewhere is complete and utter nonsense.
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
Thank you for the quick response. I had a feeling something was up with that.
She used my CDN income as foreign income on the US return, I think that she just covered her end and didn't do Canada. I'll see what I can do about filing that return and hopefully the penalties aren't very severe.
Can you forecast what a late 2006 filing would do to my CDN tax liability for the 2007 year? I'd hate to be double-taxed cuz I took somebody's word at face value.
She used my CDN income as foreign income on the US return, I think that she just covered her end and didn't do Canada. I'll see what I can do about filing that return and hopefully the penalties aren't very severe.
Can you forecast what a late 2006 filing would do to my CDN tax liability for the 2007 year? I'd hate to be double-taxed cuz I took somebody's word at face value.
Thank you for the quick response. I had a feeling something was up with that.
She used my CDN income as foreign income on the US return, I think that she just covered her end and didn't do Canada. I'll see what I can do about filing that return and hopefully the penalties aren't very severe.
Can you forecast what a late 2006 filing would do to my CDN tax liability for the 2007 year? I'd hate to be double-taxed cuz I took somebody's word at face value.
She used my CDN income as foreign income on the US return, I think that she just covered her end and didn't do Canada. I'll see what I can do about filing that return and hopefully the penalties aren't very severe.
Can you forecast what a late 2006 filing would do to my CDN tax liability for the 2007 year? I'd hate to be double-taxed cuz I took somebody's word at face value.
You will not be taxable in canada on your non-Cdn income, from the day you left in 2006. the most you will be liable for is interst and penalties for filing late (but that is only if you still owe taxes to Canada -- unlikley if your wages were correctly withheld). You should be getting a refund. Unless you worked in Canada or had real estate income from canada, you should not have to file in 2007.
Then you can claim the tax on your 2006 amended 1040.
The fact that she declared the income as 'foreign' really doesn't matter if she didn't claim any foreign tax credit along with it. she could only clim foreign taxes if she actually saw your 2006 Cdn tax return (duh!).
If you are going to pay someone to do your taxes, then they should be doing ALL your taxes for the year in question.
Then you can claim the tax on your 2006 amended 1040.
The fact that she declared the income as 'foreign' really doesn't matter if she didn't claim any foreign tax credit along with it. she could only clim foreign taxes if she actually saw your 2006 Cdn tax return (duh!).
If you are going to pay someone to do your taxes, then they should be doing ALL your taxes for the year in question.
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
The simplest question you should have asked this @$#% was "if I don't have to report the income I earned in canada on a Cdn return, how do I get the tax that was withheld in Canada back".
Once her eyes stopped rolling in the back of her head, she would have had to do a little research.
Once her eyes stopped rolling in the back of her head, she would have had to do a little research.
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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Mark T Serbinski CA CPA
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Hmm..
If you were a resident of Canada for part of a year, and then departed from Canada, you will need to file a departure return in Canada in that year. On that return, you will need to declare capital gains and losses arising from "deemed dispositions" of capital property owned anywhere in the world at fair market value as of the date of your departure.
This return will be your final return to Canada, and will close your filing responsibilities to Canada.
If you were a resident of Canada for part of a year, and then departed from Canada, you will need to file a departure return in Canada in that year. On that return, you will need to declare capital gains and losses arising from "deemed dispositions" of capital property owned anywhere in the world at fair market value as of the date of your departure.
This return will be your final return to Canada, and will close your filing responsibilities to Canada.
Mark