How to file - TN Visa / US res alien + CDN emigration

gorbek · Post by **gorbek** » Mon Apr 04, 2016 2:20 am

I'm seeking some help on the subject topic. There is a lot of information on the forum for particular circumstances, which I have found very helpful, however I'm having some issues, and want to clarify my approach is correct.

My situation:

I'm a Canadian who moved to the States under a TN Visa early May 2015 and earned US income from May-December. Prior to May, I was earning Canadian income. Based on the substantial presence test I consider myself a US resident alien. I only received Canadian income while living in Canada and only US income while in the States. I don't own property in either country, nor do I have investment income to claim.

Canadian Filing:
I am filing my Canadian taxes by adding the emigration form in UFile with departure date (May '15) and income earned in Canada based off my employer provided T4. I'm also reporting USD "net income" as non-Canadian sourced non-resident income which occurs post emigration date (Should I be doing this?).

US Filing:
I'm reporting all income from my W-2 and including Canadian sourced income from prior to my arrival to the States. Since I'm adding foreign income from prior to arriving in the states, I figured I need the Form 2555 to be exempt from taxation on this, however filling the 2555 out (using TurboTAX) I don't get any reimbursement for declaring the Canadian income.

Is the process I'm following incorrect?

Appreciate any help!

Thanks -

gorbek · Post by **gorbek** » Mon Apr 04, 2016 2:54 am

Also - I should mention I've left an RRSP/TFSA behind in Canada, untouched since moving to the States. Is this okay or require additional reporting?

nelsona · Post by **nelsona** » Mon Apr 04, 2016 10:51 am

I'm quite sure you will find your situation described in detail among these posts.

Happy browsing on april 4th.

gorbek · Post by **gorbek** » Tue Apr 12, 2016 2:04 am

Hi Nelsona,

Appreciate your help on these forums - I still seek clarification with the above.

I've gone through my US return several times now, using the above approach. My US return shows a refund before I include both my form 2555 and report my prior canadian income to arriving in the USA. As soon as I add my 2015 Canadian income and the form 2555 exclusion, I all of a sudden have a higher taxable income and now owe money to both Fed and State.

Am I doing something wrong, or is this just how it works?

Appreciate your help on this, I was under the impression the 2555 income exclusion would mean I won't have to pay more tax, but turbotax seems to think otherwise!

nelsona · Post by **nelsona** » Tue Apr 12, 2016 10:38 am

Once you invoke 2555, you go to a different method of calculating your tax. Sometimes, especially if your foreign income kicked you into a higher bracket, the result is more tax that if you did not include it. It is called the anti-stacking provison.

As is always pointed out, you have the choice to file dual-status, reporting only your post-arrival income on a 1040, but you get not joint filing if married, and no standard deduction.

Obviously you pick the one that gives the lowest US taxes.

It does always mean that your Cdn income would be tax-free, especially when you arrive close to the middle of the year. That is the unfortunate result of anti-stacking, and arriving in US in May-Aug of a year.

gorbek · Post by **gorbek** » Wed Apr 13, 2016 1:32 am

Thanks Nelsona - Assuming someone only made money from Canadian sources before arriving in the US, and then that same person only makes US income for the remainder of the year, would dual status always yield the same tax refund, if not better than the 1040+form 2555 option?

nelsona · Post by **nelsona** » Wed Apr 13, 2016 11:47 am

Did you not read what I said?

Filing dual-status does NOT allow for joint filing, and does NOT give standard deduction. It is a PUNITIVE tax base.

Again, do both methods and CHOOSE the one that yields the lowest US tax.