Canadian Taxes After Move Back & Tie Breaker Rules Clarification

[tim1984]

Hi!

I moved back to Canada in July 2020 from the US and I wanted to clarify some things regarding Canadian taxes and tie-breaker rules.

For additional context:
1. I moved to the US working under a TN Visa in Feb 2018 and was considered a Non Resident by the CRA starting then (NR-73 determination).

2. In July 2020, due to covid I unexpectedly had to return to Canada and ended up remaining there and establishing ties (new Canadian job in Sept 2020, health card - Dec 2020, drivers license renewed - Aug 2020).

3. For 2020, US SPT was passed and I filed a Full Year 1040 Return (for all US income prior to the move). I also used the Foreign Earned Income Exclusion to exclude my income from my new Canadian job (Sept 2020 onwards).

Questions:
1. Do I have to pay taxes for all worldwide income (Jan to Dec 2020) to Canada? Or only worldwide income I earned after I entered Canada (July onwards)? (I got mixed answers from CRA agents on the phone and from some initial consults I did with an accountant)

2. I am confused about the type of resident I will be considered by Canada? (UFile is asking me to select an option from "Factual Resident", "Deemed Resident, "Non-Resident")

3. How do tie-breaker rules work? Is it determined as of Dec 31st for the year in question or is the situation throughout the year considered? Wondering, if it might be possible for me to potentially claim non-residency in 2020 for Canada and start residency in 2021 due to being considered a full-year resident in US for 2020 but not 2021 onwards.

4. Specifically, what is a definition of a permanent home? (In the US, I used to rent a place but moved in with my aunt for a few months due to covid before the move to Canada and that home is still available for me (a lot of my stuff is still there). In Canada, I don't rent or own a home either, I live at my parents place). -- In this situation is it fair to say I have a permanent home available in both countries?

5. In terms of economic relations (I technically worked longer in the US in terms of number of days and $ value earned. But I started a new job in Canada in Sept 2020). So I'm confused about where the "center of interests" is from an economic perspective. (I have bank accounts in both countries, retirement account only in US)

Thanks!

[nelsona]

1, No. you report world income from the date you established residential ties in canada.
2. You are a new resident, with an arrival date. It is in a different location in Ufile than those 3 incorrect options.
3. It is determined day-by-day. You returned to Canada and thus became Cdn resident at that time. This doesn;t affect how you filed in US, and how you filed in US doesn't affect your Cdn status.
4. You are a Cdn resident. no need to split hairs, you don't live and work in US anymore.
5.Again, you are Cdn residnt and not US, so you do not need to go further down the residency tie-breaker.

[tim1984]

Thanks so much for clarifying Nelsona! Good to know that the tie-breaker rules are considered on a day-by-day basis (seems like the focus is where you ended the year at).

I was also thinking about some of the following issues and would appreciate your thoughts:

1. Would I be considered a "Factual Resident" 2021 onwards?

2. Is there a specific type of return I should file for 2021 in the US to have a definite "end of residency" with the IRS. I was thinking of filing a 1040 NR return for 2021 to report some interest income ($500) I earned in the US bank accounts? Basically, just wanted some sort of paper trail to prove I'm no longer a US resident after 2020. To complicate things, I might be moving back to the US in late 2022/early 2023 and anxious about how often "residency" can change in the eyes of IRS/CRA.

3. Also curious if I would first pay the US taxes on this interest and then claim a foreign tax credit on the Canadian side? Or vice versa?

[nelsona]

You are a resident for the year 2021 onwards, assuming you do not return to US.

You have nothing to file in US for 2021. Bank interest is not reportable on 1040NR. So you simply include it on your Cdn return.

[tim1984]

Thanks Nelsona. I will report on Canadian taxes. But I am confused because the bank issued a 1099-INT to the IRS and I'm not sure if I would get in trouble if I don't file anything at all on the IRS side. So was wondering if there is a way to inform them I left the country.

[nelsona]

I wouldn't worry about it.