TFSA, benefit to USC / Canadian Resident?

stewak2 · Post by **stewak2** » Tue Oct 20, 2009 6:43 pm

USC / Canadian resident, commuting to work in US.
Up to now I have not taken advantage of TFSA, on assumption that what I saved paying to CCRA I would just end up paying to IRS since US treats TFSA as any other bank account.
I read elsewhere on this forum that in fact it does make sense for someone in my situation to have a TFSA, but I'm not sure how it would work to my advantage?
In my case I usually ending up owning slightly more to CCRA than I've paid to IRS...so I'm guessing the argument is increasing my US taxable income is in effect a freebie since it would reduce my CCRA payable?

nelsona · Post by **nelsona** » Wed Oct 21, 2009 3:21 pm

It depends if at the end of the year you owe more tax in canad or US.

From what you describe, you use up all your IRS tax, so you need to lower your Cdn tax further (a TFSA would be fine).

jhuang1213 · Post by **jhuang1213** » Mon Aug 17, 2015 1:24 pm

I am reading thru the threads regarding TFSA in this forum (BTW very informative). This one is most applicable to my situation so I try to follow it up with my own question:
I am living in Canada and commuting to States to work daily. I am filing Pro forma 1040NR per advices in this forum. Now I am thinking of opening TFSA. What's the filing requirement for this new investment as 1040NR filers? And do I need to report income from TFSA (it is not US related income and I selected to be non-resident status)?

Thanks

nelsona · Post by **nelsona** » Mon Aug 17, 2015 1:46 pm

Obviously, this income is considered Cdn-sourced, and is thus not subject to tax on your 1040NR.

However, the internal income of the TFSA (income, dividenrds and cap gains) would appear on your pro forma 1040, used to determine your 1040NR taxrate, just like all other Cdn-source income. It cannot be excluded from pro forma like your RRSP income can.

As such a TFSA will slightly increase your 1040NR taxrate. I would doubt that this would impact your overall tax-rate, as you would get a commensurate slightly higher tax credit on your Cdn return to compensate.

Since you are ultimately filing a 1040NR, you would not be subject to any FBAR or FATCA or PFIC reporting requirments on this TFSA.

nelsona · Post by **nelsona** » Mon Aug 17, 2015 1:49 pm

jhuang,
I notice from other posts that you are a US GC holder. Is this correct?

US GC holders are NOT entitled to filing a pro from 1040. They must submit a TRUE 1040 and are subject to FATCA, FBAR, PFIC rules, etc.

How have you been filing in the past?

jhuang1213 · Post by **jhuang1213** » Mon Aug 17, 2015 2:17 pm

Nelsona
I used 8833 to claim NR status even with GC since my GC is commuter GC and permanent establishment is in Canada. IRS seems no problem with that in the past 4 years. I will double check with IRS then based on your advice.

For 1040NR filers, what's needed declare TFSA? Just FBAR?

Thanks

nelsona · Post by **nelsona** » Mon Aug 17, 2015 2:24 pm

No, you are fine. Commuter GC status allows for filing 1040NR. Thanks for clearing that up.

You are still subject to FBAR (as you probabaly realize) so just add TFSA to FBAR. PFIC and FATCA do not apply.

nelsona · Post by **nelsona** » Mon Aug 17, 2015 2:29 pm

Sorry, just to correct.

GC holders who use treaty to file 1040NR (like you) ARE ALSO subject to FATCA and PFIC, as this is NOT based on filing status but on having a GC or citizenship.

So, you should be detertmining each year whether you are subject to FBAR, PFIC and FATCA.

http://www.tax-power.com/foreign_mutual_funds.htm

http://blog.intltaxcounselors.com/2012- ... uirements/

Sorry for the bad news.

jhuang1213 · Post by **jhuang1213** » Mon Aug 17, 2015 4:45 pm

Thanks, Nelsona.
I also read 3520 is needed. For NR filers, do they need that form?

Thanks again

nelsona · Post by **nelsona** » Tue Aug 18, 2015 6:31 am

Yup.
The treaty only gets you 1040NR instead of 1040. Every other nuisance that US citizens face you still have to go thru.