Tax questions for Canadian w/ increasing US ties

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redfalcon
Posts: 3
Joined: Mon Nov 13, 2017 12:03 pm

Tax questions for Canadian w/ increasing US ties

Post by redfalcon »

Looking for pre-planning advice for tax/immigration situation. Trying to sort through all the information out there but it is often unclear and sometimes conflicting.

I am a Canadian citizen working in Canada and my wife is a US citizen working in the US. We have been married for over three years but we haven't done any paperwork for my Green Card yet. We have just been making frequent trips back and forth and I have remained below 120 days in any given year to avoid being a US resident for tax purposes under the Substantial Presence Test.

Next year we will be expecting our second child and I will be taking at least seven months of leave from work to be with my wife and children in the US in 2018. This will be done in two chunks to avoid going over six months during a single visit. I will be back to work for a couple months between the two leave periods.

The two leave periods plus trips before the birth will put me over 183 days in the US in 2018. That would make me a US resident for tax purposes and I wouldn't be able to claim the Closer Connection Exception. Also, since I'll be spending more time in the US going forward and the plan is for me to live in the US eventually, I thought this would be a good time to start the process for my Green Card.

So here are my questions:
1) Looks like I will be filing US taxes for 2018, but what am I filing? 1040? 1040NR with Form 8833? Help! Can my wife and I file as married filing jointly in the US?
2) Should I close my RRSP ($20K worth)and TFSA accounts? If so, should I do so before the end of this year or can I wait until some time next year?
3) Can I start the Green Card process while I am in the US as a visitor? I read somewhere that this is a no-no. If not, what is the best way to start the Green Card process that would give me the flexibility to go back and forth between the US and Canada while the application is being processed since I will need to do so to visit my family in the US and go back to work in Canada.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Post by nelsona »

First off, have you looked at filing with her already, as most couples, even with one not a citizen and not resident, ELECT to file jointly, reporting world income, because (a) that greatly reduces the US spouse's tax rate (since otherwise she must file married filing jointly -- or maybe head of household) and (b) usually incurs no tax on the non-US citizen, since they can avail themselves of foreign exclusion and/or foreign tax credits. Just a thought.

1. if you do end up fileing jointly, then of course it will be a 1040 MFJ.
2. You should close the TFSA, but the RRSP should be left until you actually move.
3. On the other forum.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
redfalcon
Posts: 3
Joined: Mon Nov 13, 2017 12:03 pm

Post by redfalcon »

Thanks for your reply!

For the RRSP, would your answer change if I intend to still work in Canada for a few years after getting my green card? I would still be going back and forth a lot, so presumably I wouldn't be able to take advantage of the non-resident withholding rates upon withdrawal and I would be stuck filing additional forms to the IRS for keeping the RRSP.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You will be filing foreign account form in any event. if you were working i ncanada You would then still want to be funding your RRSP, to reduce your Cdn tax burden, preferably by using your employers plan.
You only want to collapse your RRSP when you are a non-resident of Canada -- or have no other income.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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