Hi All,
After having done quite a bit of research on the CRA website, on this and various other forums, and by talking to an accountant, I find myself still scratching my head. I really hope someone can help.
I moved from Canada to the US in July 2010 to start working in the US. In 2010, I earned most of my income in the US as employment income. However, I still had some scholarship income (from the first half of the year) and interest income (from savings and a GIC in a Canadian bank account). I filed my own taxes in the US as a US resident. My family's accountant did my taxes in Canada after receiving my US return. I recently learned that she did not indicate a date of departure from Canada on my T1 and entered my residency on 12/31/2010 as Ontario.
I'm wondering now if I need to go back and file a T1 adjustment to correct this situation. If so, will I be subject to a departure tax? As of July 2010, I had approximately $26,000 in cash savings, TFSAs, and GICs sitting in a Canadian bank account. If I don't file this adjustment, and ultimately declare a later departure date, will I have to pay a departure tax on a larger sum of money?
Furthermore, I'm wondering how this decision will impact my filing for 2011. During 2011, I resided entirely in the US (though I visited Canada on a few occasions). My employment income was exclusively earned in the US, though I continued to earn interest on my Canadian savings, TFSAs, and GICs. I did not make any additional contributions to my TFSA during 2011. However, I wasn't aware that I had to inform my Canadian bank of my non-residency. I plan on doing that tomorrow. Depending on whether I re-adjust my 2010 return, how should I file for 2011? I assume I'll need to file because my tax withholding is likely wrong. Furthermore, I have outstanding tuition tax credits I would like to carry forward.
Finally, starting in August 2012, I will likely be moving to Hong Kong. I understand that HK doesn't have a tax treaty with Canada, and it may be in my interest to be a non-resident of Canada while living and earning income in HK. I'm not sure if this impacts my (re)filing decisions for 2010, 2011, and 2012.
Apologies about the confusing situation and all the questions. Please let me know if you need any clarifications. Thank you very much in advance.
Moved to US in 2010 Without Declaring Departure & Other
Moderator: Mark T Serbinski CA CPA
Re: Moved to US in 2010 Without Declaring Departure & Ot
[quote="Newbie88"]I moved from Canada to the US in July 2010 to start working in the US. In 2010, I earned most of my income in the US as employment income. However, I still had some scholarship income (from the first half of the year) and interest income (from savings and a GIC in a Canadian bank account). I filed my own taxes in the US as a US resident. My family's accountant did my taxes in Canada after receiving my US return. I recently learned that she did not indicate a date of departure from Canada on my T1 and entered my residency on 12/31/2010 as Ontario. [/quote]
Two points of clarification:
1. The third sentence should read: "However, I still had some scholarship income (from the first half of the year) and interest income (from savings and a GIC in a Canadian bank account) in Canada."
2. My accountant did not report my US employment income for 2010 on my T1 because she considered me a non-resident of Canada. For some reason, she just filled out the "Information about your residence" wrong (by not disclosing my departure date).
Two points of clarification:
1. The third sentence should read: "However, I still had some scholarship income (from the first half of the year) and interest income (from savings and a GIC in a Canadian bank account) in Canada."
2. My accountant did not report my US employment income for 2010 on my T1 because she considered me a non-resident of Canada. For some reason, she just filled out the "Information about your residence" wrong (by not disclosing my departure date).
You need to do three things;
1. Fix your 2010 Cdn return. It MUST have the departure date, or you are guilty of tax evasion for not having reported your US income. Plain and simple. You may owe a little more Cdn tax, due to reduction in your credits. I trust you were not recieving any GST payments, as this is not permitted either. Shame on your Cdn accountant.
2. You may need to file the requisite tax forms for departure, but unless you had stocks or mutual funds outside an RRSP or TFSA, you will not have any departure tax to pay.
3. I'm quite sure you did not file your US return correctly either, as you were not eligible to file a normal 1040, unless you also reported all your Cdn income on it. So that needs to be fixed.
For 2011, you should only need to file a normal US return, but you should be taking steps to get rid of your TFSA.
1. Fix your 2010 Cdn return. It MUST have the departure date, or you are guilty of tax evasion for not having reported your US income. Plain and simple. You may owe a little more Cdn tax, due to reduction in your credits. I trust you were not recieving any GST payments, as this is not permitted either. Shame on your Cdn accountant.
2. You may need to file the requisite tax forms for departure, but unless you had stocks or mutual funds outside an RRSP or TFSA, you will not have any departure tax to pay.
3. I'm quite sure you did not file your US return correctly either, as you were not eligible to file a normal 1040, unless you also reported all your Cdn income on it. So that needs to be fixed.
For 2011, you should only need to file a normal US return, but you should be taking steps to get rid of your TFSA.
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
[quote="nelsona"]You need to do three things;
1. Fix your 2010 Cdn return. It MUST have the departure date, or you are guilty of tax evasion for not having reported your US income. Plain and simple. You may owe a little more Cdn tax, due to reduction in your credits. I trust you were not recieving any GST payments, as this is not permitted either. Shame on your Cdn accountant.
2. You may need to file the requisite tax forms for departure, but unless you had stocks or mutual funds outside an RRSP or TFSA, you will not have any departure tax to pay.
3. I'm quite sure you did not file your US return correctly either, as you were not eligible to file a normal 1040, unless you also reported all your Cdn income on it. So that needs to be fixed.
For 2011, you should only need to file a normal US return, but you should be taking steps to get rid of your TFSA.[/quote]
Thanks! This is very helpful. A few quick clarifying questions:
1. Is the correct way to fix my 2010 Canadian return? Speaking to the International Tax Services office, I was told that I can either do a T1 adjustment or fax a letter explaining my situation to the Int'l Tax Services office. Do you have a recommendation one way or the other? I did receive GST tax credits in 2011 so I expect I will have to pay those back.
2. I went back and looked through my old bank statements and discovered some additional issues. As of Jul 2010, I had a GIC of $21k and savings of $1k. On Dec 31, 2010, I opened a TFSA and contributed $10k on Jan 4, 2011. If I go back and declare Jul 2010 as my departure date, I guess I shoudln't have been allowed to open my TFSA. What should I do now?
3. Given that residency status appears to be guidelines- rather than rules-based, could I say that I did not change my residency to the US until Jan 10, 2011? I travel back and forth to see family a fair bit and Jan 10, 2011 is the date I returned to the US after spending the holidays with my family. This would mean that I should declare my US employment income for 2010, but also that my TFSA contribution was not incorrect, right? And given the Cananda-US tax treaty, declaring my US income should not impact my 2010 Canadian tax assessment significantly?
Thanks so much in advance.
1. Fix your 2010 Cdn return. It MUST have the departure date, or you are guilty of tax evasion for not having reported your US income. Plain and simple. You may owe a little more Cdn tax, due to reduction in your credits. I trust you were not recieving any GST payments, as this is not permitted either. Shame on your Cdn accountant.
2. You may need to file the requisite tax forms for departure, but unless you had stocks or mutual funds outside an RRSP or TFSA, you will not have any departure tax to pay.
3. I'm quite sure you did not file your US return correctly either, as you were not eligible to file a normal 1040, unless you also reported all your Cdn income on it. So that needs to be fixed.
For 2011, you should only need to file a normal US return, but you should be taking steps to get rid of your TFSA.[/quote]
Thanks! This is very helpful. A few quick clarifying questions:
1. Is the correct way to fix my 2010 Canadian return? Speaking to the International Tax Services office, I was told that I can either do a T1 adjustment or fax a letter explaining my situation to the Int'l Tax Services office. Do you have a recommendation one way or the other? I did receive GST tax credits in 2011 so I expect I will have to pay those back.
2. I went back and looked through my old bank statements and discovered some additional issues. As of Jul 2010, I had a GIC of $21k and savings of $1k. On Dec 31, 2010, I opened a TFSA and contributed $10k on Jan 4, 2011. If I go back and declare Jul 2010 as my departure date, I guess I shoudln't have been allowed to open my TFSA. What should I do now?
3. Given that residency status appears to be guidelines- rather than rules-based, could I say that I did not change my residency to the US until Jan 10, 2011? I travel back and forth to see family a fair bit and Jan 10, 2011 is the date I returned to the US after spending the holidays with my family. This would mean that I should declare my US employment income for 2010, but also that my TFSA contribution was not incorrect, right? And given the Cananda-US tax treaty, declaring my US income should not impact my 2010 Canadian tax assessment significantly?
Thanks so much in advance.
1. Either way is fime. Read over the Emigrants guide form CRA, it expalins all tha tyou should be doing when you leave canada.
2. You should be closing the TFSA anyways.
3. I would not worry about the TFSA, other than declaring the income in US and filing the forms. You left in 2010. Period. It is rule-based: the treaty rules.
Yes, reporting your US income will DRASTICALLY affect your Cdn taxes, since the taxrate is lower in US, you will owe the extra in canada.
2. You should be closing the TFSA anyways.
3. I would not worry about the TFSA, other than declaring the income in US and filing the forms. You left in 2010. Period. It is rule-based: the treaty rules.
Yes, reporting your US income will DRASTICALLY affect your Cdn taxes, since the taxrate is lower in US, you will owe the extra in canada.
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
[quote="nelsona"]1. Either way is fime. Read over the Emigrants guide form CRA, it expalins all tha tyou should be doing when you leave canada.
2. You should be closing the TFSA anyways.
3. I would not worry about the TFSA, other than declaring the income in US and filing the forms. You left in 2010. Period. It is rule-based: the treaty rules.
Yes, reporting your US income will DRASTICALLY affect your Cdn taxes, since the taxrate is lower in US, you will owe the extra in canada.[/quote]
Ok that is all very helpful. One final question: why do you say I should be closing the TFSA anyways? Is it because it's subject to tax in the US so it doesn't make a difference whether I have a normal savings account or a TFSA in Canada? Are there any downsides to keeping my TFSA open?
2. You should be closing the TFSA anyways.
3. I would not worry about the TFSA, other than declaring the income in US and filing the forms. You left in 2010. Period. It is rule-based: the treaty rules.
Yes, reporting your US income will DRASTICALLY affect your Cdn taxes, since the taxrate is lower in US, you will owe the extra in canada.[/quote]
Ok that is all very helpful. One final question: why do you say I should be closing the TFSA anyways? Is it because it's subject to tax in the US so it doesn't make a difference whether I have a normal savings account or a TFSA in Canada? Are there any downsides to keeping my TFSA open?
2 reasons: your TFSA is taxable in US, so it is not a shelter, and more importantly, IRS considers TFSa and RESP and RRSps as foreign trusts which require mucho paperwork (in addition to normal FBAR) every year, and fines if you do not report even their existence. Normal bank accounts only require the FBAR reporting.
Close the TFSA and re-open when/if you move back to canada.
Close the TFSA and re-open when/if you move back to canada.
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
1040X.
What do you propose to change on your 1040? I dare say its a little out of your league to do this, unless you have read A LOT of threads on here.
Focus on your 2011 return, there will be time to fix 2010 once you get your Cdn departure return finalized.
What do you propose to change on your 1040? I dare say its a little out of your league to do this, unless you have read A LOT of threads on here.
Focus on your 2011 return, there will be time to fix 2010 once you get your Cdn departure return finalized.
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
Alright, I did some more reading, and you're right. The existence of a TFSA during 2010, 2011, and 4 days of 2012 are really going to haunt me. I have already decided to find a good accountant with ample experience in this field for my 2011 return.
Will I need to file the same forms in 2012 for the 4 days before I had a chance to close the account? And I still need to figure out what to do about 2010...
Has there been any precedent of the IRS cracking down on these cases? It seems like something very easy to overlook for Canadians moving to the US. It didn't dawn on me at all that a TFSA qualifies as a foreign trust until I stumbled upon this forum. I can't be the only one?
Will I need to file the same forms in 2012 for the 4 days before I had a chance to close the account? And I still need to figure out what to do about 2010...
Has there been any precedent of the IRS cracking down on these cases? It seems like something very easy to overlook for Canadians moving to the US. It didn't dawn on me at all that a TFSA qualifies as a foreign trust until I stumbled upon this forum. I can't be the only one?
Also have another problem...given the IRS requirements for accuracy (highest balance, year-end exchange rate, average exchange rate, etc.), I really need monthly historical statements to be able to furnish all the data from 2010 accurately. If I no longer have access to the paper statements from my bank, can't find them online (since the account has been closed since then, and my bank's historical e-statements don't go back far enough), and since TFSA income/balances don't show up on any CRA forms, what options do I have to procure this data?
Unless you walked into the bank with a barrel of money, there is a record of where your deposit came from, no? You know how much you deposited. Besides the trustee needs to keep track of your deposits in order to make sure you are not over-contributing, and how much contribution room you have.
You have the value on january 1st 2011, no?
It doesn't take a CPA to figure wat you made in 2010 2011 and 2012.
Keep better records. You will need them all through life.
You have the value on january 1st 2011, no?
It doesn't take a CPA to figure wat you made in 2010 2011 and 2012.
Keep better records. You will need them all through life.
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