Please help, first year US/CDN tax

peterli · Post by **peterli** » Tue Feb 14, 2006 6:00 pm

Thanks in advance for any suggestion and information.

I read the CRA emigrate guide and some related posts, still feel unclear for
my family situation from the beginning:

We are Canada citizens lived and worked in Quebec. From 01/01/2005, my husband moved to USA for the new job. Our kids and I moved to USA on Septemper 2005, almost same time we sold out our living house in Canada. I worked in Canada till we left and no job since then.

--For my husband's Canada tax

Is he the deemed non-resident for the whole 2005 year and only need to report the Canada source income (just little bank interest)?

Or he is resident before sept.2005 and non-resident after then? Thus he needs to report his US income during his residency?

May i ask, by your experience, at least how many returns i need to fill for this first year?

nelsona · Post by **nelsona** » Wed Feb 15, 2006 3:04 pm

Unless he never set foot in canada between Jan and Sept, He left when you did. So he was resident in canada for the part year like you.

The number of returns you file will depend on how you elect to file in US, and on your state.

For canada you will have 2 returns each: 1 fed each and 1 QC each (you cannot file jointly in QC in a departure year).

On US filings see other threads on your choices.

peterli · Post by **peterli** » Wed Feb 15, 2006 3:20 pm

Thank you very much for the helpful reply. I think i will continue to find other questions. Really appreciate and wait for the help.

peterli · Post by **peterli** » Thu Feb 16, 2006 3:01 pm

More questions for my case:

Are we qualified for filing 1040 married jointly even though I am not satisifed the 183 days rule? I have no US income, only about 30K of Canada income for the first 8 month of 2005, is this a better way for us to lower the tax.

We both contributed some RRSP in the past years, and no plan to collapse it right now. We both need to file form 8899 and no tax for it this year, right?

Thanks for help.

nelsona · Post by **nelsona** » Thu Feb 16, 2006 10:28 pm

You can file full year by applying the GERMAN treaty to the Canadian treaty, and then using 2555, or simply by using foreign tax credits.

The 183 day test (SPT) is not required for this.

peterli · Post by **peterli** » Fri Feb 17, 2006 3:10 pm

I contributed some RRSP, should i remove this portion from my forigen earned income on form 2555 or not?

thanks as aways.

nelsona · Post by **nelsona** » Fri Feb 17, 2006 3:32 pm

In other words: if you earn $60K of Cdn wages and make $10K RRSP contribution, should you report $60K of wages on 1040, but only exclude $50k on 2555?

That is an interesting question, in that by reporting that income, then you are avoiding the issue that this RRSP income was never reported, and thus should all be taxed (I do not suscribe to this philosophy by the way -- Mark does).

This is not a bad idea, and is probably what I will do should I return to canada with US citizenship, especially if, when I don't exclude that portion, I would still be below the taxable level.

But as to your foreign wages (ie. what you report on line 1), your RRSP contribution in and of itself does not reduce it.

peterli · Post by **peterli** » Fri Feb 17, 2006 4:38 pm

Really helps me to avoid the mistake.
Now I get, just like your example, i should put $60k in my 1040 wages and $50k on my 2555's foreign income.

Sorry to bother you more questions:
1) can i use form 2555-EZ if i meet its requirement?
2) if i fill form 2555/2555-EZ then i'm not qualified for the Foreign Tax Credit, right?

nelsona · Post by **nelsona** » Fri Feb 17, 2006 5:03 pm

if you use the foreign earned income exemption, which applies to your wages, then you can't use foreign tax credit on those wages.

You would still use foreign tax credit method for any other income you had, and for any wages over your 2555 exemption limit.

I do not believe in using the EZ version of any tax form.

Besides, you should be doing this wth tax software in order to accurately learn the ropes of US tax.

peterli · Post by **peterli** » Fri Feb 17, 2006 5:39 pm

I see it's so difficult for me without these helps. By your advice, I will try tax software, especially the state tax. Thanks so much.

peterli · Post by **peterli** » Mon Feb 20, 2006 2:59 pm

Two more question to make sure:

Our house was on market before we left Canada, but it wasn't finally sold out until several weeks after we left. Which day is the exit day, leaving day or notary day?

For both Canada and Quebec, we don't need to report anything about the house selling related, right?

nelsona · Post by **nelsona** » Mon Feb 20, 2006 7:20 pm

CRA will usually accept the deaprture date in this case.

Yes, you do have to report the sale in both US and canada, but will not be taxed.

peterli · Post by **peterli** » Mon Feb 20, 2006 8:33 pm

Oh, i just realize it. May i ask, what forms we should use to do it? Why they need this?

Thanks as aways.

nelsona · Post by **nelsona** » Tue Feb 21, 2006 7:58 am

Go to the CRA and IRS websites.

All non-residents need to comply with these because CRA realizes it is harder for them to collect tax from non-residents, therefore they prefer to have large withholding up front.

Your accountant will be able to assist you in filling forms....