This board is an amazing source of information. I still have a question with regards to the residency determination.
The whole family moved to the US July 13, 2008. I do not meet the Substantial presence test so that makes me a NR in the US for 2008. I am thus also a resident for Canadian tax purposes and thus must report my worldwide income of 2008. Obviously, in 2009, I will be a resident in the US for tax purposes and NR in Canada (we severed all ties).
My question is this: When do I report that I departed Canada. I'M thinking it can't be July 13 because I am still a resident for tax purposes, right? Or else, I indicate I departed at that date but I am taxed as a resident fro 2008? Is it Dec 31 knowing that I will be a US resident for all of 2009; or is it just when I will file my 2009 return that I indicate a date of departure?
Hope someone can sort it out for me! Thanks!
Residency determination
Moderator: Mark T Serbinski CA CPA
Your assesment is incorrect. You are a DEPARTING resident for 2009. You file a Cdn tax return following the emigrant guide, putting July 13 as your departure date. You will not report any US-source in come after July.
You bacame US residnet, by treaty, om that date.
For US, since you say you do not meet the SPT (are you sure? have you counted all days in US in the past 3 years, including visits?), you have a choice to either file:
1040NR, reporting only US-source income
1040NR/1040 dual status using the first-year choice
1040 full year joint return.
The issue with 1040NR or 1040NR/1040 is that your deductions are limited, and you must file married filing separately, which usually yields higher tax.
If you did meet SPT the 1040NR is out, anyways.
Most in your position, file a joint 1040 full year, reporting all world income, and then using 2555 to exclude Cdn wages and 1116 for other foreign tax credits.
You bacame US residnet, by treaty, om that date.
For US, since you say you do not meet the SPT (are you sure? have you counted all days in US in the past 3 years, including visits?), you have a choice to either file:
1040NR, reporting only US-source income
1040NR/1040 dual status using the first-year choice
1040 full year joint return.
The issue with 1040NR or 1040NR/1040 is that your deductions are limited, and you must file married filing separately, which usually yields higher tax.
If you did meet SPT the 1040NR is out, anyways.
Most in your position, file a joint 1040 full year, reporting all world income, and then using 2555 to exclude Cdn wages and 1116 for other foreign tax credits.
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
Thanks Nelsona for your time. You mean a departing resident for 2008 or 2009? If 2008 is correct I will not be taxed as a resident in any of the countries (that does not seem right given nobody will tax worldwide income).
I do not meet SPT because of J-1 exclusion in the years previous to 2008.
Thanks for the precisions.
I do not meet SPT because of J-1 exclusion in the years previous to 2008.
Thanks for the precisions.
Sorry, you are emigrant for 2008, not 2009 (my typo) on July 13. As i said, you are resident of US by treaty. You took the required steps on July 13. This overrides SPT.
You may still choose to file 1040NR for 2008, but, as i said, it is proabably not to your advantage due to the taxrate and no standard deduction.
At the very least, since you spent 31 days in US, and willnow met SPT (likely sometime in April), you can use the first year choice to file dual-status (1040NR for first part of year, 1040 for 2nd part).
But in my opinion, it would simply be best to file a pure 1040, full year, joint return.
The IRS can claim that you should file dual, but by the non-discrimination clause, Cdns can (or at least could until 2009) always file a 1040.
You may still choose to file 1040NR for 2008, but, as i said, it is proabably not to your advantage due to the taxrate and no standard deduction.
At the very least, since you spent 31 days in US, and willnow met SPT (likely sometime in April), you can use the first year choice to file dual-status (1040NR for first part of year, 1040 for 2nd part).
But in my opinion, it would simply be best to file a pure 1040, full year, joint return.
The IRS can claim that you should file dual, but by the non-discrimination clause, Cdns can (or at least could until 2009) always file a 1040.
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