Canadian on TN in US first year tax

Tracy · Post by **Tracy** » Wed Mar 12, 2008 11:46 am

Hi, I have some tax questions regarding our own situation.
My husband had been working with TN visa in US since March 5th, 2007 and changed his visa status as H1 on September 2007. He had income in Canada from January to February, 2007. My son and I joined him and moved to US on June 30th, 2007. He only came back to visit us three times before we moved. I had a job in Canada and quit the job before coming to US and had income from January to May, 2007. I know both of us need to do income tax in Canada and US. Now my questions are:
1. When we file US return, which form is the correct one: 1040, 1040A or 1040NR
2. I changed our home address from Quebec to Alberta because we didnâ€™t have a permanent address in US at that time and still keep the home address there. Now when I file Canada return, do I need to use tax form in Quebec or Alberta?
3. Can I claim my Canada student loan interest on filing US tax?

My questions might sound â€œstupidâ€; any replies will be greatly appreciated.

nelsona · Post by **nelsona** » Wed Mar 12, 2008 12:05 pm

1. In all likelyhood, you will file a joint 1040, reporting all income form the year 2007, and then excluding your Cdn wages (form 2555) , and taking tax credits for the rest of your Cdn income (Form 1116). Never use 1040A, even in the future. You could both choose to file partial 1040 and 1040NR could be used as part of a dual-status return, but will yeild higher tax than needed. You can look at this on IRS Pub 519.

But, you are allowed, and probably should file a joint return, 1040.

2. You both left QC for US, so your departure return for canada (see the emigrant guide on CRA website) will be based on departing QC. I would not try the 'fake' AB address, even though it may mean leas taxes. BTW, the AB address is meaningless for any purpose. You live in US. You must tell all Cdns with which you have any financial dealings that you are no longer resident. Bank, RRSP, etc.

You will both have to fill out Cdn and QC returns. His with a departure date of March 5, yours with departure date of June 30. neither of you should have to report any US income on these returns. Remeber to fulfill all the requirements of an emigrant return.

3. Yes.

Be warned that US/Canada taxes will be very dificult, and that it is unlikley that you will complete these CORRECTLY by the deadlines. Don't worry about that.

nelsona · Post by **nelsona** » Wed Mar 12, 2008 12:05 pm

... the will be difficult only for 2007. After that your taxes will be as simple as most other Americans.

Tracy · Post by **Tracy** » Thu Mar 13, 2008 11:48 am

Thank you so much for your reply. I think I will use 1040 for our tax return. Now I have another question: on 1040 39b â€œif your spouse itemizes on a separate return or [color=red]you were a dual-status alien[/color], see page 31 and check hereâ€, should we check this box or not? What is the difference by checking it or just leave it blank?

You mentioned two forms: 2555 & 1116, where I can find those forms â€˜cause the tax package that I got doesnâ€™t include these two forms.

Carson · Post by **Carson** » Thu Mar 13, 2008 12:50 pm

Forms can be downloaded here:

http://www.irs.gov/formspubs/lists/0,,id=97817,00.html

nelsona · Post by **nelsona** » Thu Mar 13, 2008 2:02 pm

These 2 forms are included in the 2 consumer software packages.

do NOT attempt to do these by hand.

Tracy · Post by **Tracy** » Thu Mar 13, 2008 3:21 pm

If I cannot do these two forms by hand, what would you suggest that I should do? What is the consequence if I just ignore those two forms on filing 1040? Sorry for so many questions.

nelsona · Post by **nelsona** » Thu Mar 13, 2008 4:12 pm

... pay the $20 for software, I thought that would have been obvious.

Tracy · Post by **Tracy** » Tue Mar 18, 2008 9:25 am

Thank you for your instructions and your replies really help me a lot!
Do you mind recommending a better software for me to file US tax? I used UFILE in Canada. Form 2555 and 1116 really hard to figure out by hand. I tried several times.

nelsona · Post by **nelsona** » Tue Mar 18, 2008 9:57 am

taxcut turbotax, same diff. turbotax has 8891 if that helps.

I would use the boxed version, not online.

Tracy · Post by **Tracy** » Thu Mar 20, 2008 2:20 pm

Thank you very much, Nelsona!

Tracy · Post by **Tracy** » Fri Mar 21, 2008 11:23 am

While I am doing our tax return by using the software, I encounter one question which will give us a very different result. Based on our situation above, does my husband and I need to do bona fide resident test or physical present test?

Thanks a lot for your prompt response!

nelsona · Post by **nelsona** » Fri Mar 21, 2008 5:40 pm

For the time you were in canada before moving your qualify for both, unless you spent a lot of time in US, in which case, you are bone fide. The result, as long as one is true, will not change, your Cdn wages are exempt by 2555 for the entire period before you moved

Tracy · Post by **Tracy** » Sun Mar 23, 2008 9:11 am

Thank you very much, Nelsona. now I understand. I have one more question (I hope this is the last one) that on form 2555 Part one General Information question 9 "list your tax home(s) during your tax year and date(s) established ___", should I only fill in our current address in U.S. or should I fill in two addresses, previous one in CA and current one in US? The answer doesn't effect the result, but I just want to make sure. Thanks in advance for your answer!

nelsona · Post by **nelsona** » Sun Mar 23, 2008 11:56 am

Obviously you need to show that your tax home was in canada, and that it was established between whatever year you were in Cnada until the day you left canada in 2007.