Hi,
This being my first post I would like to thank this forum and its participants for providing an invaluable source of information.
I am a Canadian citizen being transferred to US on L1 visa starting early November 2011. I will be commuting (flying to US on Monday coming back on Thursday) most weeks while working some weeks in Canada until late February 2012. In US, I will be living in hotels without establishing any permanent base, spending weekends and holidays in Canada with my family. In March, my family (wife is a USC) and I will terminate our house lease in Canada, close bank accounts, driver licenses, etc. and permanently relocate to US.
1. With regards to CRA, I understand that I am a Canadian resident until February 2012?
2. With regards to IRS, do I qualify as non-resident in 2011 and part-year resident in 2012 (non-resident until February 2012 and resident starting March 2012)?
3. If the answer to #2 is Yes, can I exclude my Canadian sourced income paid in January 2012 from US tax return?
The standard advice on this forum seems to be to attempt to qualify as resident for 2012 in order to file as MFJ, however, in my case, excluding Canadian income for January 2012 and MFS in US seems like a much better way to go. Any input would be greatly appreciated.
Thank you very much in advance
Vovochka
Residency status question
Moderator: Mark T Serbinski CA CPA
1. Yes
2. Yes, but, unlike canada, it is usually not advantageous to report as non-resident, you can elect to file as resident for all of 2011 if you wish, and will certainly file as resident for entire 2011. This has no bearing on how you file in canada.
3. You can, but as I said, you will likely fid it better to file a full 1040 for 2012, and even for 2012. Any Cdn source income you have will get tax credited on yoru 1040, or, for wages, excluded all together. YOu will file jointly in US with your spouse.
2. Yes, but, unlike canada, it is usually not advantageous to report as non-resident, you can elect to file as resident for all of 2011 if you wish, and will certainly file as resident for entire 2011. This has no bearing on how you file in canada.
3. You can, but as I said, you will likely fid it better to file a full 1040 for 2012, and even for 2012. Any Cdn source income you have will get tax credited on yoru 1040, or, for wages, excluded all together. YOu will file jointly in US with your spouse.
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 nelsona for the prompt reply. I am trying to do a rough estimate of which filing way would be best in 2012 and if I understand things correctly these are my options:
1. File jointly (as resident) entering Canadian and US wages, exclude Canadian wages using 2555 and use 1116 to get tax credit for Canadian taxes using pro-rata share of not excluded wages.
2. File jointly (as resident) entering Canadian and US wages and use 1116 to get tax credit for all Canadian taxes.
3. File separately (as dual status) specifying only US wages, Canadian wages not figuring in any way on US taxes (because they were earned as non-resident).
Also, in #1 do I get to exclude on 2555 all Canadian wages earned in Jan-Feb 2012 (up to a max of 91.5K) or some pro-rata share. I am confused about what to enter in "number of days in qualifying period that fall within 2012". Would any of this change if the Canadian income in Jan-Feb 2012 is a bonus paid for work done prior to Nov 2011 (I am reading the "Income earned in prior year" section of 2555 instructions)?
1. File jointly (as resident) entering Canadian and US wages, exclude Canadian wages using 2555 and use 1116 to get tax credit for Canadian taxes using pro-rata share of not excluded wages.
2. File jointly (as resident) entering Canadian and US wages and use 1116 to get tax credit for all Canadian taxes.
3. File separately (as dual status) specifying only US wages, Canadian wages not figuring in any way on US taxes (because they were earned as non-resident).
Also, in #1 do I get to exclude on 2555 all Canadian wages earned in Jan-Feb 2012 (up to a max of 91.5K) or some pro-rata share. I am confused about what to enter in "number of days in qualifying period that fall within 2012". Would any of this change if the Canadian income in Jan-Feb 2012 is a bonus paid for work done prior to Nov 2011 (I am reading the "Income earned in prior year" section of 2555 instructions)?
It is unlikely that you will be able to exclude any of your US wages from November on, because you are not spending the required time outside US during this period. Only your Pre-November income, eraned in canada while living there is eligible for this.
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
Could you explain why the following (from 2555 instructions, year 2010) would not apply:
"Foreign earned income received in 2010 for services you performed in 2009 can be excluded from your 2010 gross income if and to the extent the income would have been excludable if you had received it in 2009."
If it's a bonus earned in Canada prior to Nov 2011 but paid in Jan 2012. My take is that I can exclude 10/12 of it since I was a resident of Canada for 10 out of 12 months in 2011.
"Foreign earned income received in 2010 for services you performed in 2009 can be excluded from your 2010 gross income if and to the extent the income would have been excludable if you had received it in 2009."
If it's a bonus earned in Canada prior to Nov 2011 but paid in Jan 2012. My take is that I can exclude 10/12 of it since I was a resident of Canada for 10 out of 12 months in 2011.
That would be excludable, becaue it is foreign earned incoem. I;m referring to the wages you are earning for performing your new job.
btw, the exclusion is not calculated based on your months out of US, the LIMIT is.
If you wereeligible for 10 months and the yearly limit is 84K, then your exclusion limit is 10/12ths of 84K, 70K.
btw, the exclusion is not calculated based on your months out of US, the LIMIT is.
If you wereeligible for 10 months and the yearly limit is 84K, then your exclusion limit is 10/12ths of 84K, 70K.
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