Hi Everybody,
We are GC holders moved to US from Canada in the Summer; our problem is that we crossed the border in March to get the paperwork started and received the GC , returned to Canada, sold the house, packed, etc; we effectively moved in July still earning Canadian income until June.
My problem is it gets so complicated pro-rating the few months when we where residents in both, file foreign income/tax credit etc so I was contemplating just filling in each country for the part (six months for Canada the rest of the year in US).
Is there a big risk of being caught (besides having a GC we didn’t actually live in US anyways) so the fairness seems to be on our side.
Best Regards,
Juanita
Few overlapping months on residency – just ignored them?
Moderator: Mark T Serbinski CA CPA
Really, for US you will want to file FULL YEAR 1040. That is the best way to file in US. So, you will, by necessity WANT to do decalre some Cdn income on your US return and claim foreign tax credits or exclusions.
Filing dual status like you want to do is (a) not that easy, especially since off the shelf tax software doesn't support it very well (b) costs more in tax, since you can't file jointly and must itemize, and (c) you may find that your residency starting date is even EARLIER than your GC date anyways, and you may be taxable in US from early in the year (the first day you were present in the US in 2008.
You'll see, filing full year 1040 married joint will save you a lot of US tax over filing dual status. You can even use the foreign earned income exclusion (Form 2555) if you want to simplify.
It is NEVER a good idea to claim you are not taxable in US when you have a GC, even for a few months. You can have a foreign residence, like you did, but should never claim that you were not subject to US tax.
For canada, you will only report Cdn income anyways, as you didn't earn anything from US before you left, and your departure date of July is pretty clear cut., so that part will be simple.
Filing dual status like you want to do is (a) not that easy, especially since off the shelf tax software doesn't support it very well (b) costs more in tax, since you can't file jointly and must itemize, and (c) you may find that your residency starting date is even EARLIER than your GC date anyways, and you may be taxable in US from early in the year (the first day you were present in the US in 2008.
You'll see, filing full year 1040 married joint will save you a lot of US tax over filing dual status. You can even use the foreign earned income exclusion (Form 2555) if you want to simplify.
It is NEVER a good idea to claim you are not taxable in US when you have a GC, even for a few months. You can have a foreign residence, like you did, but should never claim that you were not subject to US tax.
For canada, you will only report Cdn income anyways, as you didn't earn anything from US before you left, and your departure date of July is pretty clear cut., so that part will be simple.
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
Wow, thanks a lot for the fast and very informed reply nelsona…
A follow up question(s) : In this case if I earned say 50K CAD until June, paid say 10K CAD tax on it what should be OK to report in US as earnings/foreign credit (got the GC and first day in US mid March)? I’m obviously looking to a lower amount otherwise we’ll fall under higher bracket tax in the US.
Also, for the exchange rate is there an early average it should be used or it has to be at the precise date? The TurboTax I have is not detailed on this…
Cheers,
Juanita
A follow up question(s) : In this case if I earned say 50K CAD until June, paid say 10K CAD tax on it what should be OK to report in US as earnings/foreign credit (got the GC and first day in US mid March)? I’m obviously looking to a lower amount otherwise we’ll fall under higher bracket tax in the US.
Also, for the exchange rate is there an early average it should be used or it has to be at the precise date? The TurboTax I have is not detailed on this…
Cheers,
Juanita
As I said, you can exclude your Cdn wages by using 2555. Or you can include them and use 1116. Your choice. Any other Cdn income tax will use 1116.
If you file jointly, your tax bracket should not be appreciably higher than if you file separately, which you would need to do if filing part-year resident. Plus you get standard deduction.
Bank of canada has a exchange rate calculator which can give you average rates for any period. You put in start/end dates and arte is calculated. For income tha tyou recieve regularly, IRS accepts avaergae rates, for singel instance income, you report based on the rate in effect that day.
If you file jointly, your tax bracket should not be appreciably higher than if you file separately, which you would need to do if filing part-year resident. Plus you get standard deduction.
Bank of canada has a exchange rate calculator which can give you average rates for any period. You put in start/end dates and arte is calculated. For income tha tyou recieve regularly, IRS accepts avaergae rates, for singel instance income, you report based on the rate in effect that day.
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