dual status, closer connection, & terminating residency

[hector]

Hi. I lived in US from 2000-07 on H1B. I returned to Canada on June 10, 2007, am Canadian. I've been told by IRS phone-guy that I need to do a dual status return. But the section "Last Year of Residency" in Pub 519 (p.9) is making me confused about my termination of residence date.

Here's why. In 2002 my employer filed an ETA 750 for me, but I never took the permanent residence application beyond that. Decided to leave my job and return to Canada without pursuing GC any further. My employer wrote to withdraw the labor certification after I left, but not until November. i had to push them. I havent received any notice about whether the USCIS or dept of labor completed the withdrawal. The problem is that, according to pub 519, I need to be able to claim "closer connection" to Canada after leaving the US in order to use the June 10 date. But it also seems to say that to claim closer connection you can't have filed an ETA 750 (or any other GC forms.)

1. Am I reading this right? Since I'm not sure if the ETA 750 withdrawal was processed before the end of '07, does this mean I have to use December 31 as the residency termination date?

2. Also, pub519 says (in the same section) that you're considered a tax resident until you "notify the Secretary of Homeland Security" that you've terminated your residency and file Form 8854. Since I don't have a GC, I think the 8854 part doesn't apply to me. But what about notifying the Sec. of Homeland Security? Does this apply to H1B's? Or to H1B's who started but abandoned the GC application?

3. In another thread it says you can always file a full year 1040 instead of dual status, under the treaty. If I do this instead, do I need to include a special form to declare this treaty position (I forget the number)? Or do I just submit the 1040 on its own?

Thanks for any help.

[nelsona]

Don't over think this. As a departing Alien (you don't have a Green card), you have the choice of (a) filing dual-status 1040/1040NR, by showing that you have established residency in canada or (B) filing full-year return, reporting world income for 2007. You can use 2555 and/or 1116 for tax relief of any Cdn income.

9 out of 10 will find (B) optimal, because of the right to full deductions.

Its not really a treaty issue, its right there in 519.

And don't bother with IRS telephlunkies.