Hi,
I moved from Canada to US to work (on TN first then transferred to H1B). The date we entered US is July 15. I thought I am a resident here in US since I moved everything here (family moved w/ me, house sold, etc) and have no plan to go back. But today I heard from a friend about the 183 day rule, and it's tricky for me!
I calculated all my days in US last year:
July 15 - Dec 31 170 days
2 Job interviews 6 days
visit my sister 3 days
get my TN visa 1 day
shopping 1 day (I don't really remember, LOL)
In 2010, visit my sister for about 20 days / 3 = 6 days
Total: 187days in the last two years.
So can I pass the 183 day rule with above work sheet?
Thanks!
183 days rule?
Moderator: Mark T Serbinski CA CPA
Youcan treat yourself as resident for entire 2011 if you wish, or you can treat yourself as resident from July 15th, the 183 day rule doesn't matter. Or you can treat yourself as non-resident.
Most in your situation do their US retunr all three ways, and pick the lowest, no way to tell wheich is best (but 95% of time it is full-year 1040).
This changes nothing for your Cdn departure return, which is based on leaving July 15.
Most in your situation do their US retunr all three ways, and pick the lowest, no way to tell wheich is best (but 95% of time it is full-year 1040).
This changes nothing for your Cdn departure return, which is based on leaving July 15.
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 so much for your advice!
Do you mean the 183 day rule doesn't apply to me (Canadians) at all? Or is it because in my case the days I lived in US is around 183 days that I can chose different options?
Even if I treat myself as resident for the whole year of 2011, I don't need to report my Canadian income before July 15. Is that correct?
Thank you again!
Do you mean the 183 day rule doesn't apply to me (Canadians) at all? Or is it because in my case the days I lived in US is around 183 days that I can chose different options?
Even if I treat myself as resident for the whole year of 2011, I don't need to report my Canadian income before July 15. Is that correct?
Thank you again!
It does not apply to Cdns who use the treaty.
Of course if you file a full year 1040 you MUST report all income worldwide, but you get to exclude Cdn wages using form 2555 and/or get tax credit using 1116.
Of course if you file a full year 1040 you MUST report all income worldwide, but you get to exclude Cdn wages using form 2555 and/or get tax credit using 1116.
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
If you decide to use only IRS rules, you are non-resident fore the beginning of the year, and resident for the second part of the year. This is known as dual status. You would need to file a 1040NR for the first part and 1040 for the second part. You would not be able to file as joit couple.
IRS Pub 519 describes how to do this, including how to determine wheich date you became US tax resident (which will likely be different that CRA deparure date for your Cdn return). Days in US prior to your move could make you resident for almost entire year (and
If you simply choose to file a full year 1040, then you are using treaty clause XVV. This allws joint filing, and you then reduce your US tax by 1116 and/or 2555
You do not need to use the residencny article IV in any event: CRA recognizes you moved on the day you and family went down to US, so there is no need to invke treaty on this. You are a departing resident, and should follow the instructions in the emigrant guide.
IRS Pub 519 describes how to do this, including how to determine wheich date you became US tax resident (which will likely be different that CRA deparure date for your Cdn return). Days in US prior to your move could make you resident for almost entire year (and
If you simply choose to file a full year 1040, then you are using treaty clause XVV. This allws joint filing, and you then reduce your US tax by 1116 and/or 2555
You do not need to use the residencny article IV in any event: CRA recognizes you moved on the day you and family went down to US, so there is no need to invke treaty on this. You are a departing resident, and should follow the instructions in the emigrant guide.
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
Sounds like full year 1040 is actually simpler. I don't find clause XVV in the treaty? Did you actually mean XXV or other clauses?
I had a look at the forms. So I'll report all my Canadian income in 2555 and exclude all or part based on the dates I lived in Canada. Then if there are still taxes I owe IRS on my Canadian income, I can use form 1116 to get some credit since I already paid tax to CRA. Is that correct?
In above case. Am I filing the tax return just the same as an American resident who went to Canada, worked there for half year and paid Canadian taxes to CRA, to file his US tax return? I ask this because I am using TurboTax. I want to make sure that software can handle my case. Otherwise, I'll probably need to find an accountant.
I bought some RRSP before I left Canada. I suppose I only need to report my Canadian taxable (line 260) income to IRS? I'll report my RRSP and defer tax on that. But later on (e.g. after two years) if I cash out my RRSP (paying 25% withholding tax to CRA), do I need to pay tax to IRS?
Thank you again for your great help!
I had a look at the forms. So I'll report all my Canadian income in 2555 and exclude all or part based on the dates I lived in Canada. Then if there are still taxes I owe IRS on my Canadian income, I can use form 1116 to get some credit since I already paid tax to CRA. Is that correct?
In above case. Am I filing the tax return just the same as an American resident who went to Canada, worked there for half year and paid Canadian taxes to CRA, to file his US tax return? I ask this because I am using TurboTax. I want to make sure that software can handle my case. Otherwise, I'll probably need to find an accountant.
I bought some RRSP before I left Canada. I suppose I only need to report my Canadian taxable (line 260) income to IRS? I'll report my RRSP and defer tax on that. But later on (e.g. after two years) if I cash out my RRSP (paying 25% withholding tax to CRA), do I need to pay tax to IRS?
Thank you again for your great help!
Article XXV.
Not at all correct. 2555 excludes Cdn wages only. 1116 is used for cdn taxes paid on other Cdn income.
You report your Cdn income by the rules of IRS, on the lines and schedules they belong: wages, interest, cap gains etc. In USD of course. It will not be the value on line 260, since thathas deductions that don't occur on 1040 (like RRSP for example).
Your description of how you are filing is correct.
RRSPs need to be reported on 8891, with electuion to defer.
The income you will be taxed on in US will be based on the book value of your RRSP on January 1 2011, since you are electing to report from that date, plus any contributions you make after that date.
Not at all correct. 2555 excludes Cdn wages only. 1116 is used for cdn taxes paid on other Cdn income.
You report your Cdn income by the rules of IRS, on the lines and schedules they belong: wages, interest, cap gains etc. In USD of course. It will not be the value on line 260, since thathas deductions that don't occur on 1040 (like RRSP for example).
Your description of how you are filing is correct.
RRSPs need to be reported on 8891, with electuion to defer.
The income you will be taxed on in US will be based on the book value of your RRSP on January 1 2011, since you are electing to report from that date, plus any contributions you make after that date.
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
btw,. your case is not particualarly special, dozens of posters on this site have gone thru your situation, you might want to do a little browsing before asking any more questions.
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 again!
I browsed a bit and found this is the same situation as me:
http://forums.serbinski.com/viewtopic.php?t=6326
For anyone who is interested, this is the doc about dual residency (need to file two tax return) and how to make a statement to file full year 1040:
http://www.irs.gov/businesses/small/int ... 33,00.html
I browsed a bit and found this is the same situation as me:
http://forums.serbinski.com/viewtopic.php?t=6326
For anyone who is interested, this is the doc about dual residency (need to file two tax return) and how to make a statement to file full year 1040:
http://www.irs.gov/businesses/small/int ... 33,00.html
Hello Nelson,
I really appreciate your great help and generosity. Finally I have some hope finishing my US tax return.
Now I started to work on form 2555 and 1116 and have some follow-up questions. (I did browsed a lot and read your previous answers, but inevitably still have some questions.)
I stayed half/half in Canada/US and made about 50k (wage only) and 75k respectively (so about 125k in total). I have a non-working wife and two little kids. So I assume full year 1040 MFJ would be the best for me?
I added foreign income and used 2555. Most of it was deducted (49.6k out of 50k) using FEIE. But the amount of refund is still much less than if I don’t add foreign income at all. (I had a impression that if the income is excluded, then it’s the same as if I didn’t have that income at all.) I found that the taxed income doesn’t change too much since my CDN income was excluded. But the tax changed a dramatically. My question is if this is normal/expected?
I found you recommended to use 1116 only in many occasions. So I also tried this. It gave me a little bit more than if I use 2555. If I didn’t do anything wrong, I might ended up using 1116 solely.
Regardless which form I might end up using. Here’s some question I had when filling those forms:
1, For RRSP in 2555, I read in one of your answers: “Unless your RRSP deduction was made thru your employer, it is not deductible. If it was made thru employer, you take it off your wage amount directly before entering it.†Can you elaborate on this a little bit more? In my case, my RRSP contribution were deducted from my payroll directly (A). Then my employer matched my contribution (B). Before I came to US, I did a lump-sum contribution by myself into the same group RRSP account (C). I guess C cannot be deducted since it’s not made through employer. But how about A and B?
2, In 2555: foreign housing expenses, can I put mortgage interest I paid here?
3, For 1116, I can include EI/CPP for my wage income as tax for this income. Since I only have wage income, my total tax to be enterred is federal tax + provincial tax + EI + CPP. Is that correct?
4, When filling 1116, I was asked to “Enter the amount of any foreign losses related to Canadaâ€. I sold some stocks before I came to US and had a capital loss. Can I applied it here? (This capital lost was not useful in Canada tax filing since I didn’t have a capital gain last year).
5, For 1116: Should I list itemized deduction or take credit? I suppose taking credit is the correct choice for me?
6, For 1116: “Enter descriptions and amounts for any other gross income you received from sources within Canada. Do notenter any income already reported on Form 1099-INT, Form 1099-DIV, Form 2555, or Schedules K-1â€. If I don’t use 2555, this is the full amount of my Canadian income. If I use 2555, this is the full Canadian income minus the amount excluded in 2555. Is this correct?
I have another question about my RRSP (not related to this tax filing):
Now the only account I left in Canada is my RRSP account with Manulife. I was told that if I cash it out now I need to pay tax at higher rate and it will be treated as my income. If I cash it out after two years, I only need to pay the standard non-resident withholding tax of 25%. Does this make sense to you? I thought I can cash it out and pay 25% as soon as I became a non-resident of Canada.
I really appreciate your great help and generosity. Finally I have some hope finishing my US tax return.
Now I started to work on form 2555 and 1116 and have some follow-up questions. (I did browsed a lot and read your previous answers, but inevitably still have some questions.)
I stayed half/half in Canada/US and made about 50k (wage only) and 75k respectively (so about 125k in total). I have a non-working wife and two little kids. So I assume full year 1040 MFJ would be the best for me?
I added foreign income and used 2555. Most of it was deducted (49.6k out of 50k) using FEIE. But the amount of refund is still much less than if I don’t add foreign income at all. (I had a impression that if the income is excluded, then it’s the same as if I didn’t have that income at all.) I found that the taxed income doesn’t change too much since my CDN income was excluded. But the tax changed a dramatically. My question is if this is normal/expected?
I found you recommended to use 1116 only in many occasions. So I also tried this. It gave me a little bit more than if I use 2555. If I didn’t do anything wrong, I might ended up using 1116 solely.
Regardless which form I might end up using. Here’s some question I had when filling those forms:
1, For RRSP in 2555, I read in one of your answers: “Unless your RRSP deduction was made thru your employer, it is not deductible. If it was made thru employer, you take it off your wage amount directly before entering it.†Can you elaborate on this a little bit more? In my case, my RRSP contribution were deducted from my payroll directly (A). Then my employer matched my contribution (B). Before I came to US, I did a lump-sum contribution by myself into the same group RRSP account (C). I guess C cannot be deducted since it’s not made through employer. But how about A and B?
2, In 2555: foreign housing expenses, can I put mortgage interest I paid here?
3, For 1116, I can include EI/CPP for my wage income as tax for this income. Since I only have wage income, my total tax to be enterred is federal tax + provincial tax + EI + CPP. Is that correct?
4, When filling 1116, I was asked to “Enter the amount of any foreign losses related to Canadaâ€. I sold some stocks before I came to US and had a capital loss. Can I applied it here? (This capital lost was not useful in Canada tax filing since I didn’t have a capital gain last year).
5, For 1116: Should I list itemized deduction or take credit? I suppose taking credit is the correct choice for me?
6, For 1116: “Enter descriptions and amounts for any other gross income you received from sources within Canada. Do notenter any income already reported on Form 1099-INT, Form 1099-DIV, Form 2555, or Schedules K-1â€. If I don’t use 2555, this is the full amount of my Canadian income. If I use 2555, this is the full Canadian income minus the amount excluded in 2555. Is this correct?
I have another question about my RRSP (not related to this tax filing):
Now the only account I left in Canada is my RRSP account with Manulife. I was told that if I cash it out now I need to pay tax at higher rate and it will be treated as my income. If I cash it out after two years, I only need to pay the standard non-resident withholding tax of 25%. Does this make sense to you? I thought I can cash it out and pay 25% as soon as I became a non-resident of Canada.
I obviously dod not read your entire post. Please, there is a limit.
Youare incorrect in your notion that excluding your income would result in the same tax as if you had not earned the income. The point of MFJ is to lower the US tax on your US income sufficiently that the extra US tax you pay on your Cdn income is oputweiged.
Feel free to try the various scenarios, but I'm not going thru your mechanics, there a reneough posts on this board abou that already, which I already warned you about browsing for your own answers.
On the RRSP question, once you are non-resident, the tax is 25%, no more, no less. Manulife does not know what they are talking about.
My advice is to take the money, and then make sure the withholding is 25%. If it is more or less, you can fix this with Cdn govt later.
Youare incorrect in your notion that excluding your income would result in the same tax as if you had not earned the income. The point of MFJ is to lower the US tax on your US income sufficiently that the extra US tax you pay on your Cdn income is oputweiged.
Feel free to try the various scenarios, but I'm not going thru your mechanics, there a reneough posts on this board abou that already, which I already warned you about browsing for your own answers.
On the RRSP question, once you are non-resident, the tax is 25%, no more, no less. Manulife does not know what they are talking about.
My advice is to take the money, and then make sure the withholding is 25%. If it is more or less, you can fix this with Cdn govt later.
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