Husband in US, Kid and Wife in Canada - Child Benefit

[octane99]

I worked in USA since the end 2005. For tax year 2005 and 2006, I reported my world income as Canada resident since my wife and kids stayed in Canada ( Which I believe it is a mistake, I should file a departure return in 2005 to CRA).

Then my wife and kid move out the first day of 2008. For tax year 2007, I tried to file a departure return. So CRA called me and then I said I started to work in USA since 2005 ( which they should know as I reported my world income). The lady told me I should file my 2005 for departure return and file 2006 as NR. Anyway, this is my case and CRA may correct this for me or I may file a change later.

The problem is that CRA is asking all the child benefits back from July 2006 to Dec 2007. I do not think this is right because my wife and kids stayed in Canada at that time and the CCTB amount was based on right amount ( world income) which I reported.

Shall I file a dispute or wait till my return get corrected first?

Thanks.

[nelsona]

See, CRA is now taking the aggressive (and corect, by law and treaty) position that once you meet the treaty standard for residency in US, you have left canada.

Now, that is YOU; why your spouse would no longer be entitled to cctb is another story. You'd have to look into the rules for that. perhaps she should have been the one filing and claiming this along.

[Greg]

What I did was file T400 (Notice of Objection) this can be easily done through “MY Accountâ€￾ on CRA web site. I’m also preparing form RC193 (Service Complaint)

My Situation is almost the same as yours. My wife and my self have always filed our “World Incomeâ€￾ with CRA. And if they just take time to look they can see that for tax years that they are saying NON-Resident it’s 100% US source income. Why would we file US source income if we are NON-Residents.

And for the year 2005 (The year they supposedly say we moved to the US) why would I add the entire year’s worth of earnings with we moved in July 2005. Is this not the reason they want us to attach our 1040 and W2 to our T1 return.

So I guess according to them I can file an amendment to tax years 2005, 2006, 2007 and get the majority of my money back that I paid taxes on because we where a non-resident the eyes of CRA.

[octane99]

What I felt bad is the time I wasted to prepare Canada Tax and now I need to correct them. Plus I bought RRSP for my TAX year 2007.

Nelson, as a NR, If I bought RRSP in 2007, can I collapse it in 2008 and then file a NR for 2008 to get all money back ( 7000 income from RRSP - 7000 RRSP) ?

Also, from Treaty perspective, I filed joint-return to US since 2005 but my wife actually stayed and went to school in Canada. Does this mean that my wife meet the Treaty standard and a NR in 2005 and 2007 too?

Many Thanks.

[nelsona]

How one actually files in the US does not determine one's residential status in canada.

From what you say, you were non-resident of canada (technically a "deemed non-resident") and your spouse was a purely Cdn resident.

As to your RRSP, once you made the contributions you can only take it out by paying the required 25% NR tax. So leave it now.

I guess the 'mistake' you both made was filing for CCTB yourselves, instead of letting your resident spouses do it.

[octane99]

I did not. My wife get the CCTB not me. They are asking my wife to give it back that is why I feel it is not right.

[nelsona]

Hey, I agree with you.

Have you read the requirements for CCTB? I do not believe that they require BOTH parents to be resident, do they? If not, and if she correctly reported your income on her return (page 1) then CCTB should be hers until SHE became non-resident. That is non-resident by fact or treaty, not simply by filing as a resident like you did.

[octane99]

Thanks, I just called.

It seemed when they updated my departure date. They also updated my wife's departure date to 2005 too. The agent told me CCTB will correct this.
I will wait and see.

You are right about RRSP. The rule is for 25% tax for non-resident. I asked if I bought by a mistake and never used it. What I can do? He said you can try to send CRA a letter to explain. I guess CRA will say no. Anyone has similar experience?

[nelsona]

I think the best you can do is not use it on your 2007 return (amend your 2007 return to remove the deduction). If and when you ever go back to canada, simply use it then.