Me and my wife on TN, both have SSN, our two kids don’t have SSN. We came to US in Dec. 30, 2007.
Here are our questions:
1. We want to file tax return so both kids are dependents (TD) – how to do that? What do kids need so that we can file taxes?
2. We sold a house (primary residence) in Canada in February 2008. Do we need to pay any taxes in US?
3. Looking for a very good accountant in Seattle area.
Canadian family in US - first time tax filing
Moderator: Mark T Serbinski CA CPA
In US, You will file a full-year 1040 reporting all world income.
Your house sale is not taxable, since it was your residence in canada before moving, you did not rent it out and you sold it within 3 years of moving to US.
You will file W-7 forms along with your 1040 and your kids will be issued ITINs. You list them as your dependents with no tax number, and IRS will take care of it. You will have to paper file.
Your Cdn taxes might need adressing too.
Given the date you left Canada, and assuming you did not file a departure return last year (technically you should have, writing 12/30/07 as departure date) you should be filing a Cdn tax return, with a departure date of 01/01/08. You should not have any income to report, unless you received Cdn wages during 2008 (even if it was for 2007). You will need to comply with various departure requirements, if you did not already do so. You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.
Your house sale is not taxable, since it was your residence in canada before moving, you did not rent it out and you sold it within 3 years of moving to US.
You will file W-7 forms along with your 1040 and your kids will be issued ITINs. You list them as your dependents with no tax number, and IRS will take care of it. You will have to paper file.
Your Cdn taxes might need adressing too.
Given the date you left Canada, and assuming you did not file a departure return last year (technically you should have, writing 12/30/07 as departure date) you should be filing a Cdn tax return, with a departure date of 01/01/08. You should not have any income to report, unless you received Cdn wages during 2008 (even if it was for 2007). You will need to comply with various departure requirements, if you did not already do so. You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.
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
Your Cdn taxes might need adressing too.
Given the date you left Canada, and assuming you did not file a departure return last year (technically you should have, writing 12/30/07 as departure date) you should be filing a Cdn tax return, with a departure date of 01/01/08. You should not have any income to report, unless you received Cdn wages during 2008 (even if it was for 2007). You will need to comply with various departure requirements, if you did not already do so. You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.
_________________
I don’t know what “departure return†is. What we did: we wiled tax return with our Canadian accountant in March 2008 (we were in US already at that time) and told her that we left Canada on Dec 29, 2007. She specified that day on the tax return forms. Later in 2008 my wife received a letter from Canadian government saying that she is not eligible for Canadian Child Tax benefits since she is not resident of Canada.
Please provide your opinion on following:
1. You wrote: “You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.â€
Question: Can we consider that we informed Canadian Government that we are non-residents?
2. We sold our Canadian house (the primary residence) in Feb. 2008 – my accountant told me we don’t need to file Canadian taxes on that since it is a primary residence.
3. Also, my wife received Canadian T4 for year 2008 with small amount on it ($1200 CAD) for the work she did at the end of 2007 right before we left Canada – this money was forwarded to her account in 2008. I asked my Canadian accountant about that and she told that all I need to do is to show this income when I file income tax in US and don’t do anything in Canada in terms of that.
4. You wrote: “You will need to comply with various departure requirements, if you did not already do so.â€
Question: What the requirements are? Where can I read about that?
Thank you!
Given the date you left Canada, and assuming you did not file a departure return last year (technically you should have, writing 12/30/07 as departure date) you should be filing a Cdn tax return, with a departure date of 01/01/08. You should not have any income to report, unless you received Cdn wages during 2008 (even if it was for 2007). You will need to comply with various departure requirements, if you did not already do so. You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.
_________________
I don’t know what “departure return†is. What we did: we wiled tax return with our Canadian accountant in March 2008 (we were in US already at that time) and told her that we left Canada on Dec 29, 2007. She specified that day on the tax return forms. Later in 2008 my wife received a letter from Canadian government saying that she is not eligible for Canadian Child Tax benefits since she is not resident of Canada.
Please provide your opinion on following:
1. You wrote: “You may have a penalty for selling your house if you did not inform Govt that you were non-resident at the time of sale.â€
Question: Can we consider that we informed Canadian Government that we are non-residents?
2. We sold our Canadian house (the primary residence) in Feb. 2008 – my accountant told me we don’t need to file Canadian taxes on that since it is a primary residence.
3. Also, my wife received Canadian T4 for year 2008 with small amount on it ($1200 CAD) for the work she did at the end of 2007 right before we left Canada – this money was forwarded to her account in 2008. I asked my Canadian accountant about that and she told that all I need to do is to show this income when I file income tax in US and don’t do anything in Canada in terms of that.
4. You wrote: “You will need to comply with various departure requirements, if you did not already do so.â€
Question: What the requirements are? Where can I read about that?
Thank you!
You need to look at the emigrants guide from CRA.
Deperture return. If your cct wrote 12/29-07 as departure date on your 2007 return, then that is your departure return. At the same time you make a departure return there are 'departure taxes' due on any investments you held at the time of leaving (excluding your home and your RRSPs). Did you have any investments and was such a form and tax paid?
Selling home. As a non-resident, you were supposed to file a compliance form with CRA during the weeks leading up to the actual sale. Failure to file these forms is penalized. It does not matter whether tax was owed (no tax is owed), you had to file these special forms during the course of the sale.
Your 2008 employment income. It is reportable in canada, and must be reported. However, since it is less than $10,000, it can be deducted on line 256 as a treaty deduction. I'm concerned that your acct would tell you that you did not have to report it. It must be reported and then deducted. As a non-resident, you do not get your personal deduction on T1, so one cannot say that simply because it was less than $9000 no tax is owed. Use Ufile.ca to do that non-resident return, it will take 10 minutes and is free. Your Cdn accountant doesn't deserve any money for it.
Deperture return. If your cct wrote 12/29-07 as departure date on your 2007 return, then that is your departure return. At the same time you make a departure return there are 'departure taxes' due on any investments you held at the time of leaving (excluding your home and your RRSPs). Did you have any investments and was such a form and tax paid?
Selling home. As a non-resident, you were supposed to file a compliance form with CRA during the weeks leading up to the actual sale. Failure to file these forms is penalized. It does not matter whether tax was owed (no tax is owed), you had to file these special forms during the course of the sale.
Your 2008 employment income. It is reportable in canada, and must be reported. However, since it is less than $10,000, it can be deducted on line 256 as a treaty deduction. I'm concerned that your acct would tell you that you did not have to report it. It must be reported and then deducted. As a non-resident, you do not get your personal deduction on T1, so one cannot say that simply because it was less than $9000 no tax is owed. Use Ufile.ca to do that non-resident return, it will take 10 minutes and is free. Your Cdn accountant doesn't deserve any money for it.
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
>> At the same time you make a departure return there are 'departure taxes' due on any investments you held at the time of leaving (excluding
>> your home and your RRSPs). Did you have any investments and was such a form and tax paid?
We still have two RESP (registered education saving plans) for my kids; my wife had a pension plan with her employer but she closed this plan and pulled all the money ($2,500 CAD) after we moved to US (in Feb 2008), I have a couple of pension plans in Israel which I did not touch for long time (no adding money no fetching move from these plans.)
Question 1: Are any of those considered investments?
Question 2: I don’t think such a form was filled and any tax paid on investments. (My accountant did not tell me about that.)
Do I need NOW to file this form? Do I need to do anything at all?
>>As a non-resident, you were supposed to file a compliance form with CRA during the weeks leading up to the actual sale. Failure to file these >>forms is penalized. It does not matter whether tax was owed (no tax is owed), you had to file these special forms during the course of the sale.
The layer that did my house sale in March 2008 assumed I am still a resident, so I believe he did not file a compliance form with CRA. The sale was about the same time I filed my Canadian income tax for 2007; also I did not know should I consider myself a resident or not.
Question 3: what does establish my residency with Canada? Provided I left Canada on Dec 29, 2007 and sold my house in March 2008, and did not file a compliance form with CRA regarding my house sale – what do I need to do NOW?
>>As a non-resident, you do not get your personal deduction on T1
Question 4: what is T1?
Thank you!
>> your home and your RRSPs). Did you have any investments and was such a form and tax paid?
We still have two RESP (registered education saving plans) for my kids; my wife had a pension plan with her employer but she closed this plan and pulled all the money ($2,500 CAD) after we moved to US (in Feb 2008), I have a couple of pension plans in Israel which I did not touch for long time (no adding money no fetching move from these plans.)
Question 1: Are any of those considered investments?
Question 2: I don’t think such a form was filled and any tax paid on investments. (My accountant did not tell me about that.)
Do I need NOW to file this form? Do I need to do anything at all?
>>As a non-resident, you were supposed to file a compliance form with CRA during the weeks leading up to the actual sale. Failure to file these >>forms is penalized. It does not matter whether tax was owed (no tax is owed), you had to file these special forms during the course of the sale.
The layer that did my house sale in March 2008 assumed I am still a resident, so I believe he did not file a compliance form with CRA. The sale was about the same time I filed my Canadian income tax for 2007; also I did not know should I consider myself a resident or not.
Question 3: what does establish my residency with Canada? Provided I left Canada on Dec 29, 2007 and sold my house in March 2008, and did not file a compliance form with CRA regarding my house sale – what do I need to do NOW?
>>As a non-resident, you do not get your personal deduction on T1
Question 4: what is T1?
Thank you!
No, none of these were subject to departure tax. Look over the Emigrants guide to see if such a form was required if you had no other assets. I doubt it. In any event if you had no investments when you left you owe no tax. Don't worry about it. What needed to be reported was stocks, bonds, property,etc. If you had none, so be it.
When your spouse withdrew her pension, how was the Cdn tax deducted? It should have been withheld 25%. It does not need to be reported on a T1, since ithe 25% tax (if that was paid) is the final tax.
You became non-resident on dec 27 2007, because that is what was written on your return, and that is when you left canada. You are liable for a penalty for failure to comply with non-resident sale of property. There is no point complying now, since you have reached the maximum penalty. Let it go, and see if CRA catches it. If they do, pay the fine, If not, good for you.
A T1 is your Cdn tax return.
Now, turning to your US tax:
Her pension income (pre-tax) is reportable in US, as his her Cdn wages. She can get credit for any Cdn tax paid by filing form 1116. As i mentionned above, the wages should be reported in Canada also, but can be excluded (on line 256 of T1) by treaty. She should not owe any other tax to canada at this point, aunless there was something inorrect on the pension payout
RESPs: Unfortunately RESPs are not sheltered in US, and thus you now need to report any income they generate every year on your 1040. You also need to file a form 3520 for each RESP. Big headache. See if you can tranfer ownership of these to one of the grandparents living in canada.
Cdn pensions/RRSPs. You don't indicate that you have any of these, but RRSPs need to be reported on Form 8891 to avoid yearly taxation in US.
Isreali pensions: I haven't a clue what you need to do to comply with any US regulations on your isreali pensions, but I'm pretty sure something needs to be reported.
When your spouse withdrew her pension, how was the Cdn tax deducted? It should have been withheld 25%. It does not need to be reported on a T1, since ithe 25% tax (if that was paid) is the final tax.
You became non-resident on dec 27 2007, because that is what was written on your return, and that is when you left canada. You are liable for a penalty for failure to comply with non-resident sale of property. There is no point complying now, since you have reached the maximum penalty. Let it go, and see if CRA catches it. If they do, pay the fine, If not, good for you.
A T1 is your Cdn tax return.
Now, turning to your US tax:
Her pension income (pre-tax) is reportable in US, as his her Cdn wages. She can get credit for any Cdn tax paid by filing form 1116. As i mentionned above, the wages should be reported in Canada also, but can be excluded (on line 256 of T1) by treaty. She should not owe any other tax to canada at this point, aunless there was something inorrect on the pension payout
RESPs: Unfortunately RESPs are not sheltered in US, and thus you now need to report any income they generate every year on your 1040. You also need to file a form 3520 for each RESP. Big headache. See if you can tranfer ownership of these to one of the grandparents living in canada.
Cdn pensions/RRSPs. You don't indicate that you have any of these, but RRSPs need to be reported on Form 8891 to avoid yearly taxation in US.
Isreali pensions: I haven't a clue what you need to do to comply with any US regulations on your isreali pensions, but I'm pretty sure something needs to be reported.
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
As the summary of your responses today I understand that although we left Canada in Dec 29, 2007 and lived complete year 2008 in US I still need to file Canadian tax return only for my wife, because she had one payment in January 2008 from her Canadian employer for the work she did in 2007. Also my wife pulled her pension plan in 2007 and paid 25% tax – I understand that she does not need to report her pension plan at all in her T1 for 2008 because it was a final tax. I (husband) did not have any Canadian income in 2008 so I will not file my Canadian income tax for 2008.
Question 1: did I understand it all right?
>> You became non-resident on Dec 29 2007, because that is what was written on your return, and that is when you left Canada. You are liable for a penalty for failure to comply with non-resident sale of property. There is no point complying now, since you have reached the maximum penalty. Let it go, and see if CRA catches it. If they do, pay the fine, If not, good for you.
Question 2: How big is the fine. How is it calculated. Is it legal to do nothing now and just wait what happened? Is there any instruction that says “if you failed to comply with non-resident sale of property and found out you needed – then go ahead and do it now�
What does it mean “have reached the maximum penalty�
>> Cdn pensions/RRSPs
We don’t have RRSP for sure.
Question 3: Both of us were employed in Canada and paid to CPP – I don’t exactly understand what it is but I think it is a mandatory payment to Governmental pension plan – do I need to declare anything like that at all for US tax return?
Thanks!
Question 1: did I understand it all right?
>> You became non-resident on Dec 29 2007, because that is what was written on your return, and that is when you left Canada. You are liable for a penalty for failure to comply with non-resident sale of property. There is no point complying now, since you have reached the maximum penalty. Let it go, and see if CRA catches it. If they do, pay the fine, If not, good for you.
Question 2: How big is the fine. How is it calculated. Is it legal to do nothing now and just wait what happened? Is there any instruction that says “if you failed to comply with non-resident sale of property and found out you needed – then go ahead and do it now�
What does it mean “have reached the maximum penalty�
>> Cdn pensions/RRSPs
We don’t have RRSP for sure.
Question 3: Both of us were employed in Canada and paid to CPP – I don’t exactly understand what it is but I think it is a mandatory payment to Governmental pension plan – do I need to declare anything like that at all for US tax return?
Thanks!
1. Yes. Your wife will file a non-resident return, report only the wages, and then deduct it be treaty. No tax.
2. The penalty is $X per day for a maximum of Y days. You have certainly past Y days, so there is no point to file. Have yo bothered to look on the CRA website at Emigrants guide. It will point you to all you need to know.
3. CPP will be paid to you when you retire. Nothing to worry about right now in either country.
2. The penalty is $X per day for a maximum of Y days. You have certainly past Y days, so there is no point to file. Have yo bothered to look on the CRA website at Emigrants guide. It will point you to all you need to know.
3. CPP will be paid to you when you retire. Nothing to worry about right now in either country.
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
>> RESPs: Unfortunately RESPs are not sheltered in US, and thus you now need to report any income they generate every year on your 1040. You also need to file a form 3520 for each RESP. Big headache. See if you can transfer ownership of these to one of the grandparents living in Canada.
Question: those RESPs just sit there – I don’t pull money from them and don’t pay money into them anymore. Which income related to RESP should I report? Is it something that I am getting when the RESP company invests my money in the market? Should I pay any tax in US for that income if I don’t pull money from it throughout the year? What if the RESP does not generate any income but the company loses my money because of the bad economy?
Thanks SO MUCH for all you hard work helping us at this forum! It is really great job!
Question: those RESPs just sit there – I don’t pull money from them and don’t pay money into them anymore. Which income related to RESP should I report? Is it something that I am getting when the RESP company invests my money in the market? Should I pay any tax in US for that income if I don’t pull money from it throughout the year? What if the RESP does not generate any income but the company loses my money because of the bad economy?
Thanks SO MUCH for all you hard work helping us at this forum! It is really great job!
The income it is generating: interest, dividends, distributions.
Plus it is considered a foreign trust and thus has onerous reporting requirements.
Plus it is considered a foreign trust and thus has onerous reporting requirements.
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
It looks that my both RESP plans produce income or interest – there are lines in the annual statement of the plans that shows income (interest) earned on the principal and income (interest) earned on the governmental grant. I did not take any money from any of those accounts during 2008 – so all this income is sitting there and I did not cash it.
[b]Question 1:[/b] do I need only to report this income or report and pay US taxes on this income? It does not make any sense for me to pay taxes on money that I did not cashed. Can I do it using 1040 form?
[b]Question 2:[/b] depending on your answer on Question 1, what form should I use to report the income, what form should I use to pay the tax from this income?
[b]Question 3:[/b] each RESP account has more than 10,000 UDS on it. Do I need to report these accounts even if they don’t produce any income at all? What form should I use to report these account in these case?
Thank you!
[b]Question 1:[/b] do I need only to report this income or report and pay US taxes on this income? It does not make any sense for me to pay taxes on money that I did not cashed. Can I do it using 1040 form?
[b]Question 2:[/b] depending on your answer on Question 1, what form should I use to report the income, what form should I use to pay the tax from this income?
[b]Question 3:[/b] each RESP account has more than 10,000 UDS on it. Do I need to report these accounts even if they don’t produce any income at all? What form should I use to report these account in these case?
Thank you!
1. Yes, you do need to report the income in US, as RESPs are not sheltered in US. Theyt are like any other bank account or investement account.
2. You report the income on the interest line of 1040, based on entering it on schedule B, like any other interest your earned from any other non-sheltered investments you have.
3. The existence af all your foreign accounts ALSO need to be reported on the TD F90-22.1 because you have foreign accounts worth more than $10K. All accounts need to be reported, even small ones.
The existence of your RESPs ALSO need to be reported on Form 3520.
2. You report the income on the interest line of 1040, based on entering it on schedule B, like any other interest your earned from any other non-sheltered investments you have.
3. The existence af all your foreign accounts ALSO need to be reported on the TD F90-22.1 because you have foreign accounts worth more than $10K. All accounts need to be reported, even small ones.
The existence of your RESPs ALSO need to be reported on Form 3520.
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
>>> 1.Yes, you do need to report the income in US, as RESPs are not sheltered in US. They are like any other bank account or investment account.
>>> 2. You report the income on the interest line of 1040, based on entering it on schedule B, like any other interest your earned from any other non-sheltered investments you have.
Questions 1: so I will pay taxes on the RESP’s income each year. What happens when my kids will borrow money from the RESP – should they pay the taxes again?
Question 2: I’ve looked through the form TD F90-22.1 and it looks now clear to me. I understand that it goes to the Department of the Treasury and I have time until June 30 to file it – it does not need to be filed with the tax return. Is it right?
>>>> The existence of your RESPs ALSO need to be reported on Form 3520.
Question 3: I looked through Form 3520 and I don’t quite understand the idea behind it. Why do I need to file this form after I paid taxes on the income produced on RESP and after I reported all my accounts on TD F90-22.1? Which section of the 3520 applies to my RESP? Do I need to file 3520 each year for my RESPs?
Question 4: I’ve “neglected†my Israeli pension plans for years – I did not bother even to change the address on the accounts after I moved to from Israel to Canada. So I don’t have the statements for years. I am afraid I will not be able to collect all the information about the income generated on this plans before April 15. Can I file an amendment to my income taxes after April 15 and report more income for 2008? Does this incur any penalties from IRS?
Question 5: Is there a way that someone else will review the work of my accountant before I file my taxes? I am afraid she is not competent enough, but since I will be traveling after April 3rd, I don’t have much time to find another accountant now. If I go to IRS office in Seattle can they review the accountant’s work before I file my return?
Thanks!
>>> 2. You report the income on the interest line of 1040, based on entering it on schedule B, like any other interest your earned from any other non-sheltered investments you have.
Questions 1: so I will pay taxes on the RESP’s income each year. What happens when my kids will borrow money from the RESP – should they pay the taxes again?
Question 2: I’ve looked through the form TD F90-22.1 and it looks now clear to me. I understand that it goes to the Department of the Treasury and I have time until June 30 to file it – it does not need to be filed with the tax return. Is it right?
>>>> The existence of your RESPs ALSO need to be reported on Form 3520.
Question 3: I looked through Form 3520 and I don’t quite understand the idea behind it. Why do I need to file this form after I paid taxes on the income produced on RESP and after I reported all my accounts on TD F90-22.1? Which section of the 3520 applies to my RESP? Do I need to file 3520 each year for my RESPs?
Question 4: I’ve “neglected†my Israeli pension plans for years – I did not bother even to change the address on the accounts after I moved to from Israel to Canada. So I don’t have the statements for years. I am afraid I will not be able to collect all the information about the income generated on this plans before April 15. Can I file an amendment to my income taxes after April 15 and report more income for 2008? Does this incur any penalties from IRS?
Question 5: Is there a way that someone else will review the work of my accountant before I file my taxes? I am afraid she is not competent enough, but since I will be traveling after April 3rd, I don’t have much time to find another accountant now. If I go to IRS office in Seattle can they review the accountant’s work before I file my return?
Thanks!
Additional questions:
1. When converting Canadian dollars into US dollars for tax return filing purpose what rate should I use – the today’s USDCAD rate (about 1.28) or the rate that was at the time of the actual money transaction? For example when my wife received her payment in Jan 2008 the rate was about 1.0.
2. I sold my Canadian house on Mar 13, 2008 (exactly one year ago.) I paid about $7,000 CAD mortgage interest in 2008. Can I deduct it from my US income? The mortgage was taken in Canadian bank. (I know in US the interest on mortgage is tax deductible.) Can I write off my US income the property taxes I paid in 2008 for my Canadian house? Can you, please, refer me to the law that regulates that?
Thanks!
1. When converting Canadian dollars into US dollars for tax return filing purpose what rate should I use – the today’s USDCAD rate (about 1.28) or the rate that was at the time of the actual money transaction? For example when my wife received her payment in Jan 2008 the rate was about 1.0.
2. I sold my Canadian house on Mar 13, 2008 (exactly one year ago.) I paid about $7,000 CAD mortgage interest in 2008. Can I deduct it from my US income? The mortgage was taken in Canadian bank. (I know in US the interest on mortgage is tax deductible.) Can I write off my US income the property taxes I paid in 2008 for my Canadian house? Can you, please, refer me to the law that regulates that?
Thanks!
1. You use the rate in effect at the time you got the money. If the income (or expense) was several occurences over aperiod of time, you can use an average rate over that time. The bank of canada website has a tool which can give you rates on any day or range.
2. Yes, any mortgage interest you paid in Canada is deductible on schedule A. In general, since US citizens are taxable worldwide, there is no restriction on where income or expenses are incurred to be eligible. In fact this is generally true for Cdn taxes as well.
As to you request to give you chapter and verse references on what the law is, sory mac. Start at IRS.gov and read for yourself.
or, rwad more of the information on this board. less questions more reading.
2. Yes, any mortgage interest you paid in Canada is deductible on schedule A. In general, since US citizens are taxable worldwide, there is no restriction on where income or expenses are incurred to be eligible. In fact this is generally true for Cdn taxes as well.
As to you request to give you chapter and verse references on what the law is, sory mac. Start at IRS.gov and read for yourself.
or, rwad more of the information on this board. less questions more reading.
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