Remain Factual Tax Residents to Canada or Emigrate?

[utterlyconfusedbytaxes]

My husband and I have been living in the California under his J-1 visa since mid-year 2009 – I was a J-2 and not working – at that time we filed an NR-73 with the CRA and were determined to be Factual Tax Residents of Canada – this allowed us to continue to contribute to RRSPs, TFSAs, RESPs etc.

As of Spring 2013, my husband took a job under a TN Visa, I am under a TD Visa.

Husband RRSP self-directed: ~$150k
My RRSP self-directed: ~$150k
Joint self-directed non-RRSP: ~$30k (mix of ETF's and stocks)
Husband TFSA: ~$10k
My TFSA: ~$15k
Cash (joint): ~$300k
RESP's for each child: ~$20k per child – opened under by my mom.

We are trying to determine what tax status we are under from both the US and Cdn perspective.

From CRA's point of view, determination of residency is subjective based on the individual. After speaking with two different CRA International Tax specialists, they both said that even if we do not hold significant ties to Canada (i.e. residence, immediate family), our secondary ties (namely financial and external family ties) plus the temporary status of the work visa (i.e. not a green card or permanent resident visa) can make enough of a case to be deemed a Factual Tax Resident of Canada.

We don't know which way to go for filing for 2013 for CRA.

Should we consider ourselves Factual Tax Residents of Canada for at least 2013 to see if there is anything we should do before we officially emigrate in 2014 (i.e. liquidate stocks and ETFs in the non-RRSP account, figure out what impacts there are to RESPs)? Is there any benefit to this to the disadvantage that we'd likely be paying more tax overall in 2013 (Canada and US combined)?

From an IRS point of view, as soon as my husband's visa status changed to a TN, he now has to declare all world-wide income, namely income from his RRSP and would likely file a 1040.

But for my case, what would I do? I do not have a SSN, I have an ITN. All income from the joint accounts we hold have been claimed by me with the CRA, but how would this be declared with the IRS? Under my husband's world-wide income? What about my RRSP income?

We are trying to determine whether we can file our taxes ourselves or get some professional help. On top of all this, we moved in 2013 and had significant medical expenses that we'd have to claim.

Any input would be greatly appreciated!

[nelsona]

Under J status, teh IRS does not consider you a tax resident, thus you could never be considered a Cdn non-resident, even if you had no more Cdn ties.
Now that you are off that status, you DO meet IRS definition of resident, and now, are non-residents of canada. As of the day your spouse got TN status.

It doesn't matter how much little ties you have in canad at that point. You live and work in US, and are considered a tax resident there, so by treaty you are a non-resident of canada.

His TN and your TD are equivalent in IRS eyes. Besides your spouse will want to file a joint tax retunr or else he will pay higher US taxes.

So, you moved to US in Spring 2013. You need to get rid of TFSA and move your non-RRSP to US brokerage. RESP is fine since its is under your mom's name.

RRSP handling and FBAR are discussed elsewhere at length. I'm sure you've looked at this over the last 5 years at some point.

[utterlyconfusedbytaxes]

Thanks nelsona -- just to clarify, are you saying then that Tax Residency status from an IRS and CRA perspective must be the same? I thought these could be mutually exclusive.

While we understand moving to a TN will make us no longer a non-resident from an IRS perspective, that doesn't mean that's the case for the CRA (according to calls in to the CRA International office).

I'm just trying to get a sense of whether there is any benefit to staying a Factual Tax Resident to Canada for this 2013 year, there's a possibility that in a year or two we might return to Canada so would it make sense to bring down all of our non-registered assets? Also, with the Canadian $ as it is right now, we'd lose in the exchange rate as well.

[nelsona]

By treaty, and that is what you are dealing with here, yes, the tax residency can only be in ONE country. Canada will not let you go until you meet another countries residency standard (on J1 you could not), but, in fact, will then "kick you out", by determining you a "deemed non-resident" at the very least, or, like you, since you habeve no residential ties in Canada, a simple non-resident.

What sometimes confuses people is that IRS allows non-residents to file a resident 1040, even if they reside in another country. Canada does not allow this.

You should NEVER take the work of CRA or IRS telephlunkies.

The answer to residency is in this simple question: do you and your spouse live in US legally, and do you have a place to live in US?

[utterlyconfusedbytaxes]

thanks a lot, appreciate the clarification.