Hi,
I will be moving back to Canada from the US after having lived here for about 3 years. I would appreciate any advice people on this board have on what I should be doing to navigate the tax waters safely.
Some background: I have been a TN Visa holder. I am unmarried and own no property in the US or Canada. My only assets are (i) cash and securities held in the US (ii) about $6,000 held in my one Canadian bank account. I filed an emigrant tax return when leaving Canada in 2006. I currently live in a state that does that have state taxes.
Following are several questions:
1. I want to make sure that I remain taxed at the favourable, federal-only rates for the income I earned while working in the US this year. Do I need to make sure that my employment terminates 183 days into the year? My new job in Canada will likely beginin August, but I may have the option of choosing my end date over here. What I leave the couuntry before July 1st? How will my US income this year be treated when I file? Do I need to pay Canadian rates on everything or only on what I earn after August? What aspects of the Tax Treaty should I focus on when determining what to do and what are the issues? Where do I file my return(s) in 2009?
2. What do I need to do to re-establish my tax residence in Canada? I discontinued OHIP coverage when I left. I turned in my Canadian drivers license and had it replaced by a state license. I had no personal effects in Canada when I left (I was recent university graduate). When I left, I had some student debt which I paid off a year after leaving. I left one bank account open (primarily to pay off my student debt) and there is been very little activity on this account over the past 3 years. Also have 2 credit cards that are open. Also not much activity on these.
3. How do I go about transfering my US assets into Canada? I have about $80,000 in cash that I would like to bring over the border. Anything that needs to be done to make this happen? Any forms to fill? Any tax implications? What personal effects? No big-ticket items, just clothes, some furinture, etc. Anything I can't bring in? Alcohol limits? Any issues with recent purchases? I want to make sure I buy everyhting I need here before moving back since it will be cheaper (golf clubs, new computer, etc). Also, what if I wanted to buy a car in the US today and then move in 3 months. Would I have to pay some sort of tax?
4. I have an IRA in the US. Should I leave this here? I'd like to do that if possible. Will this create any issues going forward when filing in Canada?
5. My 2009 return I think will be a bit complicated. I suppose it makes sense to have a professional accountant help me with this (this is how I came across this website). Anyone think that my situation is straightforward enough that I can do it myself?
6. Will I have generated RRSP credits while working in the US?
Thanks for your help in advance.
Moving Back to Canada from US - TN Visa Holder
Moderator: Mark T Serbinski CA CPA
One more question - what about moving expenses? Will these be deductible on my Canadian return? I suppose there is guidance on the CRA website, but anything I should be careful of? Anything I should start thinking about a few months before my move (saving certain types of receipts, etc)? What if I buy my one way ticket to Cananda on airline points? How would I determine the value and then deduct it?
Thanks!
Thanks!
2 basic rules for Cdns returning from working in US:
1. You taxability in canadacommences when you establish residentila ties there. So, you need to make sure that all your US income is recieved by you before returning. It doen't matter how many days into the year it is.
2. Anyone who was a US tax resident at the beginning of the year can choose to be considered US tax resident for the full year, or jst until the day they establish residnency elsewhere, whichever is best for you. It does not affect your Cdn tax, just how you file in US. If you choose part year esident, you don't getto file full 1040, and pay tax at the 1040NR rate. Most Cdn are better off filing full-year 1040, and then excluding the Cdn wages they get after returnong, rahther than filing dual-status.
1. Ansrwed above, No treaty issues.
2. Get an appaartment and mpve your stuff back. As I said, you wait to do this until you get all your US income.
3. Personal check on the account in USD, cashed into your Cdn account. Or use a brokerage that will transfer. Do not convert in the US. No forms unless you bring money in a suitcase.
For the moving of good the Cdn border department as guides for this. You are allowed to bring anything you owned for more than 6 months tax/duty free. The car would be taxable. See the CSBA (or CBSA) website.
4. My advoce would be to convert to a Roth before returning. I've addrssed this issue before.
6. No.
1. You taxability in canadacommences when you establish residentila ties there. So, you need to make sure that all your US income is recieved by you before returning. It doen't matter how many days into the year it is.
2. Anyone who was a US tax resident at the beginning of the year can choose to be considered US tax resident for the full year, or jst until the day they establish residnency elsewhere, whichever is best for you. It does not affect your Cdn tax, just how you file in US. If you choose part year esident, you don't getto file full 1040, and pay tax at the 1040NR rate. Most Cdn are better off filing full-year 1040, and then excluding the Cdn wages they get after returnong, rahther than filing dual-status.
1. Ansrwed above, No treaty issues.
2. Get an appaartment and mpve your stuff back. As I said, you wait to do this until you get all your US income.
3. Personal check on the account in USD, cashed into your Cdn account. Or use a brokerage that will transfer. Do not convert in the US. No forms unless you bring money in a suitcase.
For the moving of good the Cdn border department as guides for this. You are allowed to bring anything you owned for more than 6 months tax/duty free. The car would be taxable. See the CSBA (or CBSA) website.
4. My advoce would be to convert to a Roth before returning. I've addrssed this issue before.
6. No.
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 moving expenses to Canada are not deductible on your Cdn return. They will be on your US retur, if you file full year 1040 and if you earn wages after your move.
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
THank you very much for answering so quickly. Very helpful as I begin making preparations for the move.
Two quick questions:
1. You mentioned not to convert US to Canadian while still in the US. Is there a specific legal/tax reason not to do this? Hoping to convery sooner rather than later in case CAD keeps appreciating in value.
2. Looked through some of the other posts regarding the Roth IRA. Seems liike some brokerages wont allow you to keep the IRA with them if you are a non resident? Also, was there a specific post you can point me toward? Is there a specific advantge of converting to roth vs. leaving as a regular IRA in the context of moving back to Canada (or is it just more favorable in general to be in roth).
Thanks again for your time (realize that you are on the May break).
Two quick questions:
1. You mentioned not to convert US to Canadian while still in the US. Is there a specific legal/tax reason not to do this? Hoping to convery sooner rather than later in case CAD keeps appreciating in value.
2. Looked through some of the other posts regarding the Roth IRA. Seems liike some brokerages wont allow you to keep the IRA with them if you are a non resident? Also, was there a specific post you can point me toward? Is there a specific advantge of converting to roth vs. leaving as a regular IRA in the context of moving back to Canada (or is it just more favorable in general to be in roth).
Thanks again for your time (realize that you are on the May break).
1. I'm talking about the fees you will inur doning the conversion in US. You can do the conversion anytime, so if you want to convert now, into your existing Cdn account (doing the currency exchange either in Canada or thru a broker).
2. The reason to convert is the treatment of Rooth vs IRA. Your IRA will be taxed FULLY in canada on withdrawl, while yourRoth would not be taxed at all in either country. Of course you will pay US tax only on the conversion, but this is still likely lower than your Cdn taxrate will be. The other choice is to take themoney, but this will incur the same tax as conversion to Roth PLUS 10% penalty.
Therea rebrokerages that will maintain your IRA or Roth while in canada, but you need to establish this before you leave. Ask around.
2. The reason to convert is the treatment of Rooth vs IRA. Your IRA will be taxed FULLY in canada on withdrawl, while yourRoth would not be taxed at all in either country. Of course you will pay US tax only on the conversion, but this is still likely lower than your Cdn taxrate will be. The other choice is to take themoney, but this will incur the same tax as conversion to Roth PLUS 10% penalty.
Therea rebrokerages that will maintain your IRA or Roth while in canada, but you need to establish this before you leave. Ask around.
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
moving expenses
Hi,
Just to clairify this: so moving expenses to Canada from the US are only deductible on the US return? You mentioned that they are deductible only if I earn income afte rthe move - does this include Canadian income? I will no logner be earning income from a US source after the move. Am just a bit conrused because you mentioned that on the 1040 I would exclude Canadian income (so then can I still deduct the moving expenses)?
Thanks again for your advice.
Just to clairify this: so moving expenses to Canada from the US are only deductible on the US return? You mentioned that they are deductible only if I earn income afte rthe move - does this include Canadian income? I will no logner be earning income from a US source after the move. Am just a bit conrused because you mentioned that on the 1040 I would exclude Canadian income (so then can I still deduct the moving expenses)?
Thanks again for your advice.
Yes, it would include Cdn wages.
The point is that you will not get any tax relief for your moving expenses for moving to canada, since canada won't give you any. Your ability to deduct the expenses in US don't help you much.
So you need to be asking your new employer to pony up for the expenses.
The point is that you will not get any tax relief for your moving expenses for moving to canada, since canada won't give you any. Your ability to deduct the expenses in US don't help you much.
So you need to be asking your new employer to pony up for the expenses.
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
Got it. So since I will only be earning Canadian income after moving to Canada, even though I can deduct my moving expenses to Canada on my US return, there will not be any corresponding US income against which I can make the deductions.
Too bad my new employer won't be paying for moving expenses...
Too bad my new employer won't be paying for moving expenses...
Not quite right. The fact that your wages are Cdn does not prevent you from claiming moving expenses. However, the fact that you will most likely exclude these wages, by using form 2555 does prevent you from claiming moving expenses.
If you decide to include your Cdn wages, pay tax, take credit for cdn taxes, you can use the moving expenses on your 1040. But, as Isaid already, since canada does not give you credit, the tax savings on your 1040 don't really help you overall, so there is no point complicating your 1040 just to get a deduction that won't help you overall.
If you decide to include your Cdn wages, pay tax, take credit for cdn taxes, you can use the moving expenses on your 1040. But, as Isaid already, since canada does not give you credit, the tax savings on your 1040 don't really help you overall, so there is no point complicating your 1040 just to get a deduction that won't help you overall.
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
Roth IRA
Thanks, understood.
Have a few more questions on the Roth IRA and about my general situation.
I will be leaving the US on June 28, which is also the day when my apartment lease ends. I will begin working in Canada in mid July. In between, I will be flying straight from US and going on vacation. So I won't make my first entry to Canada until mid July.
Couple of questions:
1. I will likely receive one more paycheck (including SEP-IRA contribution) from my US employer on June 28. Am I still considered a US resident until the day I enter Canada or would the last day be June 28? In part, my concern is around the Roth IRA conversion. I want to wait until the last contriubtion is made to my account and then convert to Roth. Will there be a problem due to my nebulous resident situation? Is it advisable that I postpone the vacation after June 30? Does conversion to Roth happen right away or does it take a few days? Am just trying to maximize the length of my vacation. Also, other than the Roth, want to make sure that the jun 30 paycheck is only taxed at my US tax rate (no state income tax) vs. falling into Canadian income.
2. I've read through the forum and have a good understanding of the Roth IRA situation. The conclusion is that I should convert to Roth when I leave. My US income will be below the 100k limitation so it seems like I can convert. However, when I begin working in Canada in July and earn the wages for the rest of the year, my full year income will be in excess of 100k. Do you know if this creates a problem for converting to Roth?
Thank you.
Have a few more questions on the Roth IRA and about my general situation.
I will be leaving the US on June 28, which is also the day when my apartment lease ends. I will begin working in Canada in mid July. In between, I will be flying straight from US and going on vacation. So I won't make my first entry to Canada until mid July.
Couple of questions:
1. I will likely receive one more paycheck (including SEP-IRA contribution) from my US employer on June 28. Am I still considered a US resident until the day I enter Canada or would the last day be June 28? In part, my concern is around the Roth IRA conversion. I want to wait until the last contriubtion is made to my account and then convert to Roth. Will there be a problem due to my nebulous resident situation? Is it advisable that I postpone the vacation after June 30? Does conversion to Roth happen right away or does it take a few days? Am just trying to maximize the length of my vacation. Also, other than the Roth, want to make sure that the jun 30 paycheck is only taxed at my US tax rate (no state income tax) vs. falling into Canadian income.
2. I've read through the forum and have a good understanding of the Roth IRA situation. The conclusion is that I should convert to Roth when I leave. My US income will be below the 100k limitation so it seems like I can convert. However, when I begin working in Canada in July and earn the wages for the rest of the year, my full year income will be in excess of 100k. Do you know if this creates a problem for converting to Roth?
Thank you.
You will only be considered resident when you arrive in canada, so you are safe until then.
I will have to investigate whether you will meet Roth limit. Typically you will report all your wages for the year on your 1040, so you might be in trouble with the limit. So if you file dual status (part 1040, part 1040NR) you might have a different Roth limit.
I will have to investigate whether you will meet Roth limit. Typically you will report all your wages for the year on your 1040, so you might be in trouble with the limit. So if you file dual status (part 1040, part 1040NR) you might have a different Roth limit.
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 for looking into it. I know you mentioned that filing 1040 is typically beneficial so I suppose I would have to weigh that against benefit of getting a roth conversion in case there are differences in the limit when filing dual status.
you mentioned in an earlier post that the 1040NR tax rates are different? how different and where could I find out more? couldnt find anything through searches. If you dont mind, maybe you could give a quick example of why 1040 is typically beneficial vs. the dual status?
you mentioned in an earlier post that the 1040NR tax rates are different? how different and where could I find out more? couldnt find anything through searches. If you dont mind, maybe you could give a quick example of why 1040 is typically beneficial vs. the dual status?
For a single person they aren't much different. But you don't get standard deduction for 1040NR, and a few less things are deductible.
You can still do the Roth conversion if your file 1040NR, the same limit applies (and your Cdn wages would not count).
Now the only thing you need to check is the mechanism to convert your SEP to Roth, and if you can set up your new plan in time.
You can still do the Roth conversion if your file 1040NR, the same limit applies (and your Cdn wages would not count).
Now the only thing you need to check is the mechanism to convert your SEP to Roth, and if you can set up your new plan in time.
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