First year US tax resident

[chelavnzuo]

In tax year 2017, I have incomes in both Canada and USA.
I worked in Canada from Jan to Apr 2017, and worked in USA from Apr to Dec 2017.

In tax year 2017 I am an US resident for tax purpose according to the substantial presence test on the IRS website. I am a Canadian non-resident for tax purpose.

My Canadian sources of income are:
1. T4 from Canadian company 1 from Jan to Apr 2017 (full time)
2. T4 from Canadian company 2 from Jan to Dec 2017 (part time, work remotely from Apr to Dec while I was in the States)
3. Canadian dollar capital gains from non-registered investment account from Jan to Dec 2017 (Canadian broker, Canadian dollar account)
4. US dollar capital gains from non-registered investment account from Jan to Dec 2017 (Canadian broker, US dollar account)
5. I also have RRSP, TFSA, and LIRA in registered investment account (Canadian broker, Canadian dollar account). I have never taken any money out so they are unrealized income.

My US sources of income are:
1. W2 from US company 1 from Apr to Dec 2017
2. US dollar capital gains from buying and selling US stocks (US broker, US dollar account)

When I file my tax return this year, I think I will do the following:
1. Report Canadian sources #1 to 4 to CRA because they are revenues generated in Canada.
2. Report US sources #1 and #2 to IRS because they are revenues generated in the US.
3. Not report Canadian source #5 because there’s no realized gain/loss.

Can someone confirm:
1. Am I reporting my sources income correctly?
2. Do I need to inform about my residency change to the Canadian broker and employers so they can provide me with the non-resident version of tax form?
3. Are there any considerations that I have overlooked?
Many thanks!

[nelsona]

Since you left Canada, you must do a departure return which includes the deemed disposition of your investments on the day you left. You will need to close that account

Assuming you are single, you will be filing a dual status 1040 which will include only US income plus any cap gains triggered after you entered US including the cdn income from the part time job. If you choose to file a full year return you will need to report all income for the year including Cdn income, and take credit for Cdn tax

Your TFSA is not tax free in US, so any internally generated income earned after April must be reported in US. You will want to close that account

[chelavnzuo]

[quote="nelsona"]Since you left Canada, you must do a departure return which includes the deemed disposition of your investments on the day you left. You will need to close that account

Assuming you are single, you will be filing a dual status 1040 which will include only US income plus any cap gains triggered after you entered US including the cdn income from the part time job. If you choose to file a full year return you will need to report all income for the year including Cdn income, and take credit for Cdn tax

Your TFSA is not tax free in US, so any internally generated income earned after April must be reported in US. You will want to close that account[/quote]


Thanks nelsona!

I think this is what I’m going to do now:
1. Hire a cross-border tax account for the 2017 filing
2. Pay the deemed disposition and any cap gains triggered after I became US resident
3. Liquidate my non-registered account and TFSA
4. Convert the remaining amount to USD, open an US broker account in US, and transfer over the money to invest in US

I have two more questions:
1. Are above steps reasonable and in the right order?
2. Will I get punished for not informing CRA about my departure and residency change until now? I really don’t know how long I’m going to stay in US, and on the day I entered US for work I have no idea about the terminology “Canadian non-residentâ€￾.

[nelsona]

Now IS the time to tell CRA, when you submit your return. There was no earlier time to do this.

[mocha_m]

Hi,

may I also ask why should close the investment account? Can the account be kept after leaving Canada?

[nelsona]

Cdn brokers are not permitted to hold investment accounts for US residents.

[chelavnzuo]

If I invested $100, and as of today it is $180, and as of the day I became a US resident, it was $150.

One way to do it is I liquidate everything today, that’s $180. I pay the tax on $50 to CRA as the departure tax, and I pay the additional tax on $30 to IRS as the capital gain I received after becoming US resident.

However can I pay the departure tax on $50, open a US broker account, in-kind transfer all the investment to that account, as to not liquidate everything and still keep the additional $30 unrealized?

The reason I'm asking this is that there's a lot of unrealized gain in my non-registered account, I'm wondering if there is a way to minimize the reaalized gain after the deemed deposition is paid.

Many thanks!

[nelsona]

Yes, you can transfer *some* investments to a US broker. Not Cdn mutual funds of course. Only investments that a US vroker would be able to trade. Your US broker would help you on that.

But, as you say, the $50 is taxed in Canada (deemed disposition) , and the $30 would be taxed in US, but only if you file a special procedure in US to prove what your deemed disposition was. Rev Proc 2010-19. Other wise the entire gain is taxed in US.

[nelsona]

Another reason why one takes care of these very soon after leaving US, not 10 months later.

[chelavnzuo]

Thanks again nelsona.

How do I file a special produce to prove that I have paid deemed disposition to CRA?

[chelavnzuo]

[quote="chelavnzuo"]Thanks again nelsona.

How do I file a special produce to prove that I have paid deemed disposition to CRA?[/quote]

Please disregard this question, I have found the answer. Thanks!

[smalhot05]

Very quick question please and this may have been answered before so I do apologize. Is filing a departure return = filing a Canadian return + specifying the date when one becomes non-resident of Canada. Kindly confirm and thank you very much (awesome forum).