I have to admit that I'm overwhelmed by cross-border taxes and part of me wishes that I had sought professional help months ago. That being said, this forum has been a great help and I appreciate any information that members can offer.
Here's my situation:
- Both my wife and I are Canadian citizens
- I worked and made CAN wages between Jan-Jul of 2010 (I have a T4 for these)
- I moved to the US (Cali) in Aug 2010 to start work for a US company on a TN-1 (I have a W2 for these)
- My wife worked and made CAN wages bewtween Jan-Oct 2010 (she has a T4 for these)
- My wife is on an extended leave (receiving no pay) from her Canadian company starting Nov 2010, with an expectation that she will return to Canada to work sometime in 2011
- My wife moved down to Cali on a TD in Nov 2010 and is not making any income (US or otherwise)
As for our returns, I plan to:
1. In the US file 1040 as a married-joint couple (reporting all worldwide income) and then to exclude our CAN income via form 2555. Even though we don't meet the substantial presence test, based on what I've read, I am able to use this option because of the Treaty between the US and CAN govenments.
2. For my CAN return, file a departure/exit return indicating that I've left the country and ceased my tax residency for myself
3. For my wife, file a CAN return but not indicate any exit/departure information as she intends to return to work in CAN in 2011
Does that sound correct or are there options that I'm not considering?
Thanks in advance.
Married, moved from CAN to US, and confused on filing
Moderator: Mark T Serbinski CA CPA
Sounds right.
For (2), you need to build your case for non-residency by almost NEVER going to canada while you are working in US.
The fact that you wife is returning to canada, and clearly has no intention of becoming non-resident means that you will be suspect of not being truly non-resident this you will need to establish CLEARLY by treaty that your are US residsnt, by havine MORE ties in US than Canada. You need to have a home there, your car and DL there, accounts there, etc.
Right now, it looks awfully temporary, which will raise CRA eyebrows.
For (2), you need to build your case for non-residency by almost NEVER going to canada while you are working in US.
The fact that you wife is returning to canada, and clearly has no intention of becoming non-resident means that you will be suspect of not being truly non-resident this you will need to establish CLEARLY by treaty that your are US residsnt, by havine MORE ties in US than Canada. You need to have a home there, your car and DL there, accounts there, etc.
Right now, it looks awfully temporary, which will raise CRA eyebrows.
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 the advice, nelsona.
Leaving these kinds of calls to the CRA based on subjective criteria is nerve racking.
I haven't run the numbers, but if the effective tax rate on my US return (federal + Cali state) is close to what my wife's and my tax rate would be in Canada, then countinuing to be a resident of Canada and paying taxes there and excluding the income on our US return might be a way to go.
Again, I haven't run the numbers, and I get the feeling that the effective rates won't line up, but is this an option?
Leaving these kinds of calls to the CRA based on subjective criteria is nerve racking.
I haven't run the numbers, but if the effective tax rate on my US return (federal + Cali state) is close to what my wife's and my tax rate would be in Canada, then countinuing to be a resident of Canada and paying taxes there and excluding the income on our US return might be a way to go.
Again, I haven't run the numbers, and I get the feeling that the effective rates won't line up, but is this an option?