Canadian citizen, working on TN in US - tax questions

rob1 · Post by **rob1** » Mon Dec 24, 2012 12:26 pm

Hello all, I am a Canadian working in the US on a TN . I was reading on the internet about the taxation laws and find that there is so much conflicting information out there.

I left Canada on December 30th 2011, started employment in US from Jan 1st 2012.

From Jan 1st 2012 to today, Dec 24th 2012, I visited Canada 4 times, stayed there for nine days in all

I still own my home in Canada, no one is staying there. I also have my checking accounts and RRSP's intact .

I have a few questions regarding my income taxes for year 2012.

1. Am I considered a Canadian resident for tax purposes ? Will I have to pay income taxes to the CRA ? The difference of what i have already paid in the US and the higher tax rate in Canada .

I spoke to the CRA over the phone and they said I am considered a resident of Canada as I own my home , have bank accounts in Canada and I will have to file for 2012 in Canada as well.Please confirm .

2. I have not yet filed my tax return for 2011 ( have a refund coming ) in Canada, just did not get time to get it done .

I will be going to Canada sometime in Feb 2012 , plan to do both my US and Canadian tax ( for 2011 and 2012) at Serbinski in Toronto. Is an appointment required ? I have not yet decided what the dates of my travel are.

Thanks

nelsona · Post by **nelsona** » Mon Dec 24, 2012 5:10 pm

1. All depends on how many ties you have in US. This becomes a treaty issue.

The CRA is wrong, if you LIVED in US. An empty house incanada is a tie, but not as much as all your ties in US. Don't phone CRA telephlunkies, . They will ALWAYS say that you are resident.

2. Put a dec 30/2011 departure date on it, and conform to all departure requirements, such as deedmed dispostion, and telling all you Cdn financials that you are non-resident.

There is no need to be anywhere physocalluy to do taxes.

rob1 · Post by **rob1** » Mon Dec 24, 2012 5:31 pm

Thanks for the reply,

Yes, I was living and working in the US for all of 2012, except the 8 days ( 4 weekends) I traveled to Canada.

I have a US bank account (into which my pay comes in regularly), credit cards , state id card , health coverage documents)

My company will be transferring me to Canada in July or August 2013.

Can you please elaborate on the departure requirements ? Will I be penalized given that its one year sine I departed Canada ? Also the deemed disposition, does it have to do with selling my home ?

nelsona · Post by **nelsona** » Tue Dec 25, 2012 11:47 am

Deemed disposition is clearlt expalined in the "Emigrants" guide on the CRA website. You are not penalized.

The important thing is your living arrangeents in US. Were you in temp housing. If not, then you are US resident by treaty.

rob1 · Post by **rob1** » Tue Dec 25, 2012 7:15 pm

Thanks,

"living arrangements" in the US , I was living in an apartment provided by my company.

Can you please explain what CRA considers temporary housing ?

A person on TN status is a temporary legal resident , am I correct ?

nelsona · Post by **nelsona** » Tue Dec 25, 2012 10:24 pm

While TN does allow one to break Cdn tax residency, because it does not require one to keep a foreign residence, and allows one to "live" in US, given that you had a permanent abode in canada, but not one in US, it may be difficult for you to claim that you broke Cdn tax residency.

So, in my opinion, you never left canada, and should continue to pay tax there, particularly since you did not claim on your tax return to have left when you could have (last dec 30th).

You will get credit for the taxes you owed in US.

rob1 · Post by **rob1** » Wed Dec 26, 2012 10:50 am

Thanks for the reply.

So at the end of the day, I get taxed at the same rate as in Canada, just that I pay part of that in the US and part in Canada. All because I have a home in which no one lives in Canada.

I also have lost my OHIP coverage and end up paying 2K annually for medical insurance in the US .

nelsona · Post by **nelsona** » Wed Dec 26, 2012 12:45 pm

Yup. Not becuase you kept the house (as I already said), but because you did not get your own place in US. Now, if you PAID for this place in US, that would be a different story (another different story).

OHIP: You were physically out of Ontario too long. Now, as I have often advised, you probably should have contacted OHIP BEFORE leaving, and told them you were going to US temporarily, and they would have kept your OHIP active. Many people do this.

That said, you would still want to pay medicla coverage thru your employer, since OHIP will cover almost nothing of a lengthy or emergent hospital visit, so you would not have wanted to be without coverage.

I guess I shouldn't ask about what you did for car insurance/registration, etc.

Are you starting to see the need for some planning when you go cross-border?

rob1 · Post by **rob1** » Wed Dec 26, 2012 12:57 pm

I plan to keep my medical coverage in the US intact.

Will I get any tax credit in Canada for the amount I paid for private medical insurance in US ?

Will I also get any tax credit in Canada for the medicare and social security deductions in the US ?

I never knew going to work in the US for a few years would require so much planning.

It now makes more sense for me to ask my company to send me back to TO asap as there is no tax benefits , free corporate housing in the US does not matter as my home in TO is paid off.

Thanks

nelsona · Post by **nelsona** » Wed Dec 26, 2012 1:15 pm

Your premiums areconsidered a medical expense. You will only get a deduction for those above the 3% thresshold, so no.

FICA is considered a foreign tax eligible for foreign tax credit, along with your IRS and state tax as calculated on your US return.

Be careful that your housing is not considered a taxable benefit in US. It will also be taxable on your Cdn return. (it would be included on your W-2 if taxable)

rob1 · Post by **rob1** » Wed Dec 26, 2012 2:15 pm

I did travel in many US cities during the course of the year. I was put up in hotels paid for by the company . Will the hotel costs also count as a taxable benefit ?

Also, if my company does not include the accommodation costs on the W2 , I do not have to report that to the CRA . Is that correct ?

nelsona · Post by **nelsona** » Wed Dec 26, 2012 3:25 pm

No these are eleigible employment expenses that were reimbursed by the comapny. They are not reported on your W-2.

If your firm has determined that your housing expense is not taxable, then it will not appear on your W-2. The rules are not quite the same in US and Canada, so if your employer has not included them, then you *might* have to include them on your T1, but I'll leave that with you.

Personally, I think it is unlikely that your firm will determine that these perks are not taxable, and should already be including them (and deducting tax) on your paystubs.