Summary of requirement for Tax for first year under TN Visa

[Alwaysdream]

I apology if my question may have been posted in this form before, but I’m trying to summarize what I know about Tax for first year under TN visa.
I’m Canadian citizen working in USA under TN, I still keeping my home in Canada, I arrived USA Nov 2007, Please review my understanding and help me with my questions
1- For Canada, I will be filing Canadian Tax and Report USA income under world income. Correct?
2- For Canada, I should also deduct USA tax, but my question how I know the tax I will be paying and I did not file USA tax yet or I just use what I have in W2, are the Social and Medicare deductible?
3- For USA, I will be using form 1040NR, along with 8840 to report close connection to foreign country.
4- The issue that under 1040NR I do not have much to deduct except the moving expenses for my personnel belongs, in the same time I want to use these expenses when filing next year (2008) as it will make my current taxed income below zero if I use them at once, so the question, can I use these moving expenses for Tax year 2008, although the move was in Nov 2007?
5- I’m W2 contractor under current TN, can I deduct expenses of setting up an office in my rented apartment and deduct the rent, computer, high speed internet (with work usage percentage?)

[Alwaysdream]

Please I need your help in above question and urgently in
1- Can I defered my moving expense to 2008 even if the move were done in 2007.
2- Can I claim office expenses if I'm W-2 contractor?

[nelsona]

I'let you know now that almost all your points are wrong -- and that calls for urgency are viewed with disdain.

Are you bleeding?

[Alwaysdream]

so what is the right, please

[nelsona]

Merely keeping your home in canada does not necesarily mean you are a Cdn resident. Since US has a treaty with canada, having a job and home in US, especially if family is not left behind, usually forces you to be non-resident of canada (or deemed non-resident, which is the same thing nowadays)

So, 1 and 2 will depend on this.

3. Form 8840 does not apply to you, since you have not met SPT. Form 8840 is for those who meet SPT but have not stayed 183 days. If you are truly Cdn resident for 2007, you merely file 1040NR. If you stayed more than 183 days (like in 2008) and were still considered Cdn resident by treaty, you would either file 1040 or 1040NR with form, 8833.

8840 applies only to snowbirds who stay between 150-180 days per year, but not more.

4. You can only use moving expense (and you need to read the definition of moving expenses) against wages earned after the move. If the expense outstrop your wages, then you carryforward the expenses to the next year.
BTW, you can't deduct moving expenses to US on your Cdn return.

5. In short. No. You are an employee, so you could only deduct expenses NECESSARY for your job, not optional. And even if these were deductible, they are part of miscellaneous deductions, which are cut back severely. And since they aren't eligible in canada, they woin't benefit you anyways.

So, you first need to determine if you are a Cdn resident or not. If you are, then US tax deductions are meaningless to you. If your aren't you shoudl should be filing a 1040i nUS and a departure return in canada.

[Alwaysdream]

Thank you so much for your reply, but I only spend two months of 2007 in USA, so I think I should be treated as canadian resident.
The expenses that I tried to add to form 1040NR are:
Driving my car from Toronto to US for moving personnel staff, and lodging in the way (950 mile drive done 3 times)
Renting apartment and use part of it as office (if this is allowable)
Job search expenses as this is my first Job in USA.
So while filing 1040NR I add also 2106EZ, but your feedback make me a little confuse now, can you please help me more.

[nelsona]

It does not matter if you moved on december 30th. If you are now living in US, you became a non-resident of canada on the day your left.


So you should be looking at the "Emigrants guide" from CRA for your 2007 Cdn taxes.


Moving expenses for your US return are pretty straightforwardly described in the IRS literature. Just the final MOVE is deductible, not several trips, not job search. Forget the appartment setup, that is your costs, and if moving expenses are going to use up your wages, then why worry about these other expenses, which are 'doubtful' at best.

You *can* file 1040NR, but the other options in IRS Publication 519 may be better for you. That will be up to you to decide. I have written extensively on this topic of first year taxes.

But, I've already saved you a big headache by informing you taht you US wages are not subject to Cdn tax, since you are no longer resident there.

[Alwaysdream]

Again Thanks alot,
I read publication 519 and I think I read that I have the choice to be treated as alien-resident, but what made me hesitated is the consequence of giving up my resident status of Canada on
1- Selling my home (which I left) as non-resident (I found many topics talk about holding 25% of capital gain, then taxed on this on USA, so many advise you sell it first as resident)
2- My RRSP (There are many topics say that it is better to withdraw them after you become non-resident, but what is the harm of leaving them, as non-resident are you allowed to, there is chance you still back?)
Being on TN means there is no gaurantee that I can stay for more than 2008, do you think saving some Tax dollars will worth the headache of declaring non-resident of canadad, giving up your driving licsense and Health Card? Shouldn't it better to wait and see if we can stay longer in US?

[nelsona]

Your health card and DL are no good anymore anyways.

You can sell your house a full year ater leaving with no tax. And it was your home, so why would you be taxed 25% in any event.

Your RRSP is not a tie to canada.

You mustn't have been reading this bbad info on this site.