Temporary relocation contract

nabstar · Post by **nabstar** » Sat Feb 18, 2017 5:19 pm

Hello all,

Question for you.

Present in Canada for first month of 2016. Then went on a temporary relocation contract for the next 9 months to the US, and then returned to Canada for the last two months. I thnk following needs to be filed.

1. Full year Cdn return - since it was temporary and ties remained (world wide income, claim FTC)

2. Full year Us return (since greater then 183 days). (include word wide income, claim FTC).

Does this make sense?

Now the problem comes down to the fact that they have TFSA and mutual funds in the TFSA.

I know in the ordinary situation , you have to do 3520 and form 8621, and FBAR.

Is there any way to get out of these. ? Maybe I do a dual status return and show his US residency from Feb - October. That way at end of year he is not resident alien.

Would that get me out of these tedious filings? Any other ways? Seems pointless to do these filings for such a short time period.

Would dual status route have a negative impact on his overall taxes.?

Thanks,

nelsona · Post by **nelsona** » Sat Feb 18, 2017 5:20 pm

Since you remained Cdn resident (you would have had to keep a hime in canad) you can use treaty to file 1040NR. That would simplify things for you.

nabstar · Post by **nabstar** » Sat Feb 18, 2017 5:24 pm

Thanks Nelsona.

Are you talking about the closer connection rule?

Don't you have to spend l< 183 days in US for this to apply.

nabstar · Post by **nabstar** » Sat Feb 18, 2017 5:53 pm

Actually I assuming you are referring to the tie breaker rules? That makes sense.

But what happens for FBAR, 3520, and 8621?

Are we OK to not prepare?

nelsona · Post by **nelsona** » Sat Feb 18, 2017 9:12 pm

I am not referring to closer connection. I said treaty. Did you fulfill the treaty requirements for Cdn residency, ie. maintain a physical abode available to you at all times?

nabstar · Post by **nabstar** » Sat Feb 18, 2017 9:35 pm

Thanks Nelsona. Yes I did.

Assuming I go the 1040NR route with treaty disclosure. Do you still have to prepare FBAR, 3520, and 8621?. (have TFSA with mutual funds).

nelsona · Post by **nelsona** » Sun Feb 19, 2017 11:00 am

You do realize that a 1040nr reports only US-sourced income, not foreign?
Please don,t ask me about FBAR etc again

nabstar · Post by **nabstar** » Sun Feb 19, 2017 12:59 pm

Yes I do.

But my understanding was that just because you use the treaty to qualify for 1040NR does not necessarily mean that you are free from doing the FBAR etc (since technically I did spend >183 days).

I was looking to clarify that.

nelsona · Post by **nelsona** » Sun Feb 19, 2017 8:54 pm

I would say only the FATCA form would be required, not FBAR,PFIC, or 3520.

nelsona · Post by **nelsona** » Sun Feb 19, 2017 9:11 pm

8938 FATCA does not exempt any "treaty non-residents" unless they are not required to file US return at all (no US income).

The other generally exempt 1040NR files EXCEPT for US permanent residents that elect to file a 1040NR by treaty, which is not your case.

nabstar · Post by **nabstar** » Tue Feb 21, 2017 1:12 am

Thanks nelsona.

I did do a little digging , and was wondering your comments on below:

1. 8938 - Per IRS "A specified individual who computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individualâ€™s taxable year reflected on the schedule to Form 1040, "U.S. Individual Income Tax Return," or the schedule to Form 1040EZ, "Income Tax Return for Single and Joint Filers With No Dependents," as applicable, that is required by Â§1.6012-1(b)(2)(ii)(a), if the individual complies with all of the filing requirements of Â§1.6012-1(b)(2)(ii)(a). These requirements include the requirement to timely file Form 1040 or Form 1040EZ, as applicable, and attach a properly completed Form 8833 to the schedule to such Form 1040 or Form 1042EZ. "

Doesn't that mean you don't need to file form 8938 in my situation?

Re: FBAR, PFIC, 3520.

Â§ 301.7701(b)-7 Coordination with income tax treaties. "(3)Other Code purposes. Generally, for purposes of the Internal Revenue Code other than the computation of the individual's United States income tax liability, the individual shall be treated as a United States resident."

Doesnt that mean FBAR, etc is necessary.

Sorry for all the text.

nabstar · Post by **nabstar** » Tue Feb 21, 2017 1:17 am

Sorry - I posted the wrong text re: 8938.

The correct one is:

Specified individual filing as a nonresident alien at the end of his or her taxable year

"A specified individual who computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individualâ€™s taxable year covered by Form 1040NR, â€œU.S. Nonresident Alien Income Tax Return,â€ or Form 1040NR-EZ, â€œU.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,â€ as applicable, if the individual complies with the filing requirements of Â§301.7701(b)-7(b) and (c). These requirements include the requirement to timely file Form 1040NR or Form 1040NR-EZ, as applicable, and attach Form 8833, â€œTreaty-Based Return Position Disclosure Under Section 6114 or 7701(b).â€