I have read various web articles on the subject issue and understand that many accountants do not advice people to add 401(K) Contribution to the Line 104 (Other Employment Income).
CRA Tax guide however instructs the Canadian Deemed Residents/Commuters to add 401(K) Contributuions to Line 104.
The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.
This weblink article however does not discuss the position on a Canadian Citizen/US Person who has residences both in US (With permanent establishmnet in USA by virtue of Green Card being Processed) and Canada and files taxes based on W-2 income i.e. Form 1040 (for Federal Tax) along with State Tax and pays Property Taxes in USA and at the same time has been assigned Factual Resident status in Canada (by virtue of having Family and Property in Canada).
For CRA to charge taxes on 401(K) contributions for such Canadian Citizen/US Person - Would it not be violation under the clauses of Article XXV
on Non Discrimination under the old treaty?
I would also like you to revert on your following comments in this web forum and would like to know how to claim DNR status for described Canadian Citizen/US person who, already on submission of Form NR73, has been assigned Factual Resident of Canada:
"Until about 2003, having DL, OHIP, even library card and passport, was used in a points system toi determine tax residency. CRA (not me) felt that this betrayed INTENT (their word, their definition) to return to canada, and thus would deny a determination of non-residency, even for those clearly moving to US.
This practice is no longer followed however, and the notion (and the legal definition) of deemed non-resident (DNR) has become clearer. It applies solely to those who maintain substantial Cdn residential ties, much more that DL and OHIP, but who ALSO have the requisite ties in another treaty country, like US. It has gotten to the point that even those with spouses and houses in canada can be come deemed non-resident, and be treated axactly like a non-resident (departure return, deemed disposition, no more reporting of world income)."
I would like to thankyou for your invaluable insight and advice.
Thanks,
401(K)/IRA Deductions in Candian Tax Return
Moderator: Mark T Serbinski CA CPA
Your reading of the non-discrim clause is incorrct. Since both a US citizen and a Cdn citizen living in canada would have to declare and pay tax on their 401(K) contribs, no discrimination existed.
That is why the treaty protocol had to be implemented, and why 401(k) contribs are from 2009 onwards, are no longer taxable.
As to changing your status from factual to DNR, I would need to know what you put on the NR73. If you meet the treaty standard of 'centre of vital interests' being in US, the you are DNR.
Remember DNR is by definition, a person who has sufficient ties to be considered Cdn resident, but who ALSO meets the treaty definition of US resident by the tie-breakers in the treaty.
The mere fact that you have property in US, pay states tax, and even have a GC, does not mean your centre of vital intersts is in US. You need to spend much of your time there and as ittle time in Canada as possible.
That is why the treaty protocol had to be implemented, and why 401(k) contribs are from 2009 onwards, are no longer taxable.
As to changing your status from factual to DNR, I would need to know what you put on the NR73. If you meet the treaty standard of 'centre of vital interests' being in US, the you are DNR.
Remember DNR is by definition, a person who has sufficient ties to be considered Cdn resident, but who ALSO meets the treaty definition of US resident by the tie-breakers in the treaty.
The mere fact that you have property in US, pay states tax, and even have a GC, does not mean your centre of vital intersts is in US. You need to spend much of your time there and as ittle time in Canada as possible.
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
... and any accountant who instructs a client not to include their 401(k) contributions on their Cdn return, has absolutely no legal basis for doing this, until 2009.
They might as well tell you to write-off you goldfish as a dependant.
They might as well tell you to write-off you goldfish as a dependant.
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
401(K)/IRA Deductions in Candian Tax Return
Since May 24th 2004; I have been living in MI, USA and purchased the property in MI, USA on Aug 31, 2004 in my own name and at the same time purchased a Condo for the family in Canada jointly in Spouse and own name. Spouse and kids have been living in Canada since May 2004 and I visit my family on some weekends/long weekends or during vacation periods.
In the year 2004 I had income in Canada from Employement Insurance from Jan 01 - May 21 of 2004. The real source of income was W-2 Emplyement Wages since May 24, 2004 based on TN Visa. According to the direction from IRS/CRA at that time; I reported US income on Form 1040 in year 2004 and reported world income ( US income plus Employment Insurance Income in Canada) on T-1 General to CRA.
Based on advice from CRA filed 'Determination of Residence Status" Form NR-73 on April 06, 2005 and explained the facts about Canadian Moprtgage, PEO Memebership, Credit Cards and RRSP A/c to CRA and and 100% source of income based W-2 wages in USA; on the basis of which was assigned Factual Resident Status in canada in year 2005 and for years 2005/6/7 have filed Form 1040in USA /T-1General to CRA based on Residencies in both USA and Canada.
So far I have Maintained Health Card based on Residency/Paid Taxes in Canada and changed Drivers Licence to Michigan State in Nov/Dec 2004. Converted from TN Visa to H-1 B on Nov 15, 2005 to initiate Green Card Process.
Based on the information I have from this web forum and the treaty document about "Close Ties/Centre of Vital Interest in USA "(by virtue of 100% Employment Income and ownership of property in USA); I should have not been assigned Factual Resident Status in Canada in Year 2005 and should have been assigned DNR.
The only hitch in the year 2005, I had was with Canada Immigration, to be considered as Resident in Canada, as I had put in sponsorship application for my parents in Nov 2003 and obtained immigration for parents in Aug 2007. Also I wanted to complete 10 years of straight Residency in Canada to be cleanly eligible for "Old Age Security" Pension.
With the current situation as explained, Can I claim Deemed Non Resident Status(DNR) for the year 2008 by refiling NR73 and save on Canadian Taxes for year 2008 and future years and in such case at the most I may loose Health Insurance in Canada? In that case I should still be able to take Std Deductions on Sch A/Form 1040 B for the Mortgage Interest in Canada.
Thanks for your responses so far.
In the year 2004 I had income in Canada from Employement Insurance from Jan 01 - May 21 of 2004. The real source of income was W-2 Emplyement Wages since May 24, 2004 based on TN Visa. According to the direction from IRS/CRA at that time; I reported US income on Form 1040 in year 2004 and reported world income ( US income plus Employment Insurance Income in Canada) on T-1 General to CRA.
Based on advice from CRA filed 'Determination of Residence Status" Form NR-73 on April 06, 2005 and explained the facts about Canadian Moprtgage, PEO Memebership, Credit Cards and RRSP A/c to CRA and and 100% source of income based W-2 wages in USA; on the basis of which was assigned Factual Resident Status in canada in year 2005 and for years 2005/6/7 have filed Form 1040in USA /T-1General to CRA based on Residencies in both USA and Canada.
So far I have Maintained Health Card based on Residency/Paid Taxes in Canada and changed Drivers Licence to Michigan State in Nov/Dec 2004. Converted from TN Visa to H-1 B on Nov 15, 2005 to initiate Green Card Process.
Based on the information I have from this web forum and the treaty document about "Close Ties/Centre of Vital Interest in USA "(by virtue of 100% Employment Income and ownership of property in USA); I should have not been assigned Factual Resident Status in Canada in Year 2005 and should have been assigned DNR.
The only hitch in the year 2005, I had was with Canada Immigration, to be considered as Resident in Canada, as I had put in sponsorship application for my parents in Nov 2003 and obtained immigration for parents in Aug 2007. Also I wanted to complete 10 years of straight Residency in Canada to be cleanly eligible for "Old Age Security" Pension.
With the current situation as explained, Can I claim Deemed Non Resident Status(DNR) for the year 2008 by refiling NR73 and save on Canadian Taxes for year 2008 and future years and in such case at the most I may loose Health Insurance in Canada? In that case I should still be able to take Std Deductions on Sch A/Form 1040 B for the Mortgage Interest in Canada.
Thanks for your responses so far.
Deduction 401(K)/IRA contribution on Canadian Return
Please also explain why most of the articles regarding non eligibility of claiming 401(K)/IRA deductions on CRA Return refer to Commuters(eg people living in Windsor and working in Detroit) and People who file Form 1040 NR?? as per the following statement:
The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.
The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.
Deduction 401(K)/IRA contribution on Canadian Return
Please also explain why most of the articles regarding non eligibility of claiming 401(K)/IRA deductions on CRA Return refer to Commuters(eg people living in Windsor and working in Detroit) and People who file Form 1040 NR?? as per the following statement:
The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.
The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.
Quite simply because commuters are the most likely people to be affected by this: Living in canada and working in US.
If you were working in US and not commuting, you would most likely be living there, and this would not be taxable in Canada on your US wages at all.
And you keep referring to severl 'articles'. Can you point these out; I'd be glad to go thru them and correct.
If you were working in US and not commuting, you would most likely be living there, and this would not be taxable in Canada on your US wages at all.
And you keep referring to severl 'articles'. Can you point these out; I'd be glad to go thru them and correct.
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
Check the web article at http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Check the web article at http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Check the web article at http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Before enforcement of new treaty on Dec 15 2008 the same pdf document contained Table 2 for Commuters/folks filing 1040 NR. If you give me a email/fax number I can send that to you.
I have lived and worked in Michigan USA since May 24, 2004 and maintained family in Toronto. So according to your assessment I can claim DNR status since year 2005 as I had partial Employment Insurance Income in Canada in year 2004 (about CD 8.5K) : I think it would be hard to convince CRA as CRA is the one who assigned me Factual Resident Status.
Let me know if you can represent me to file this case.
Secondly as I was not a commuter and was living in USA for the entire period : per your response it would still not make me eligible to deduct 401(K)/IRA Contribution for the years prior to 2009 Tax Return?
Thanks
Cdn taxpayers are not eligible to deduct 401(k) contributions on their Cdn returns. period -- before 2009. That is why the table was removed for 2009
It would not matter if you were a commuter, a part-time resident, or a US citizen. Don't get hung up on the word commuter. What you should be focussing on is determining your correct status.
The fact that CRA at one time determined that you were a resident shows (a) why it is important NOT to file NR73, and (b) that was your status at that moment in time. Can you point to any factors that have changed since you submitted the NR73, and when ? Did you give up OHIP, your ON driver's license? If not you will be hard-pressed to come up with a date at which you became DNR.
I suspect however, that with the new changes to the 401(k) reules, you are probably now not so benefitted from DNR status.
It would not matter if you were a commuter, a part-time resident, or a US citizen. Don't get hung up on the word commuter. What you should be focussing on is determining your correct status.
The fact that CRA at one time determined that you were a resident shows (a) why it is important NOT to file NR73, and (b) that was your status at that moment in time. Can you point to any factors that have changed since you submitted the NR73, and when ? Did you give up OHIP, your ON driver's license? If not you will be hard-pressed to come up with a date at which you became DNR.
I suspect however, that with the new changes to the 401(k) reules, you are probably now not so benefitted from DNR status.
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
... and are you going to give me anothewr example of an article that talks about 401(K) deductibility. Our discussion about an article that no longer exists is not very productive.
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
After having started discussion with you and your opinion on "Vital Interest" I have gone through Para 24, 25, 26 of Pub IT221 R3 and it looks like may be I can claim Deemed Non Resident Status under Subsection of 250(5) of the Income Tax Act beginnig of year 2005.
The Form NR73 I had filled was on April 06, 2005 and factual Resident Status was assigned on June 16 2005. the key what I am finding in the letter of June 16, 2005 from CRA is "In our opinion, you have maintainedsignificant residential ties with Canada. YOU DID NOT INDICATE TO US IF YOU WERE TAXABLEON YOUR WORLD INCOME IN ANOTHER COUNTRY."
I think I missed on the Part that : "World Income was being Taxed in USA" to be filled in Form NR 73.
I filed NR 73 to detrmine Residence status as I was advised by CRA telephonically to avoid issues I had in 2004 where in I reported US Income in USA on 1040 and World Income to CRA on T 1 General.
I converted my Driving licence from Ontaio to Michigan in Oct 2004.
I have kept OHIP Card valid to date and as per your comments earlier people have been able to claim DNR even with Spouses, Home, OHIP Card and DL in Canada; if they are working and living in a treaty Country.
Please let me know if I can qualify to be a DNR under Subsection of 250(5) of the Income Tax Act beginnig of year 2005 and claim back the taxes paid in Canada by virtue of lack of understanding of the tax treaty.
Thanks
The Form NR73 I had filled was on April 06, 2005 and factual Resident Status was assigned on June 16 2005. the key what I am finding in the letter of June 16, 2005 from CRA is "In our opinion, you have maintainedsignificant residential ties with Canada. YOU DID NOT INDICATE TO US IF YOU WERE TAXABLEON YOUR WORLD INCOME IN ANOTHER COUNTRY."
I think I missed on the Part that : "World Income was being Taxed in USA" to be filled in Form NR 73.
I filed NR 73 to detrmine Residence status as I was advised by CRA telephonically to avoid issues I had in 2004 where in I reported US Income in USA on 1040 and World Income to CRA on T 1 General.
I converted my Driving licence from Ontaio to Michigan in Oct 2004.
I have kept OHIP Card valid to date and as per your comments earlier people have been able to claim DNR even with Spouses, Home, OHIP Card and DL in Canada; if they are working and living in a treaty Country.
Please let me know if I can qualify to be a DNR under Subsection of 250(5) of the Income Tax Act beginnig of year 2005 and claim back the taxes paid in Canada by virtue of lack of understanding of the tax treaty.
Thanks
Other Articles I have mentioned on this thread regarding 401(K) deduction are at :
http://www.centa.com/CEN-TAPEDE/2003/ex ... 86-01.html
And about Commuters from Canada are from Tax Alert No 14 published by Ernst & Young TA 2007-14 — The Impact of Proposed Changes to the Canada-U.S. Income Tax Treaty on Employers and Employees (2007/10/10)
Thanks[/img]
http://www.centa.com/CEN-TAPEDE/2003/ex ... 86-01.html
And about Commuters from Canada are from Tax Alert No 14 published by Ernst & Young TA 2007-14 — The Impact of Proposed Changes to the Canada-U.S. Income Tax Treaty on Employers and Employees (2007/10/10)
Thanks[/img]