US Citizen Recently Married to a Canadian Citizen

[parisail]

Hello,

This is my first ever post to any discussion board.

I am a US Citizen living and working in New York City. My husband is a Canadian citizen living and working in Toronto. We were just married in Toronto in May 2005 and he has sponsored me for Canadian permanent residence - I hopefully will be landing in Canada within the next few months.

Do I have to file a Canadian tax return for 2005 simply because I now have a husband in Canada (I have no Canadian income) or does my Canadian filing obligation begin after I become resident in Toronto with him and get a SIN? Does he need to file any new Canadian tax paperwork simply because he is now married to me?

Also, my husband has no US income, and therefore does not have (nor want ) an ITIN number, so I believe I must file my 2005 US and New York State tax returns as "Married Filing Separately", and not claim him. If this is correct, how do I account for him on my return? Do I simply list his name in the box for huband and in place of an SSN/ITIN number write in "non-resident alien"?

Any insight on these matters would be greatly appreciated as I am anxious to get all the paperwork done correctly for both countries right from the start!

Thank you.

[nelsona]

Cdn Taxes:

You do not (yet) have to file a Cdn tax return, bacuse you have not started to live in Canada. Since you still live and work in US, treaty allows you to be deemed non-resident. This is only because you were never previously in living in Canada, and are a US citizen. (A Cdn living in Canada would not be considerd as having left if they left their spouse behingd in Canada while they worked in US). Haveing or not having an SIN is not really an issue in canada - residential ties are.

Your husband however does have to indicate that he is married on his return, and must list your world income on page 1, so that he will not accidentally qualify for any benefits reserved for copules with low joint income (ie. GST refund, Child tax benefit, spousal dedcution, etc). He is not entilted to these.


US taxes:

Your husband is entitled to an ITIN, and should get one. You will get this when filing your return and submitting a W-7 requesting the ITIN. You will always be filing in US for the rest of your life, and their wil be occasions when it will be useful to file jointly, or even claim him as a dependant, and thus require the ITIN, so get it done now.


Your goal should be to produce the lowest tax rate for YOU in the US, and this would most likely be accomplished by filing a full joint return, reporting all income form all sources for both of you. he would then exclude his Cdn wages by using form 2555, and using foreign tax credits (form 1116) on the rest of his income. This should yeild no extra taxes for him, and lower your taxes by filing jointly. I believe any other method, like filing MFS, would raise YOUR taxrate. In any event, you would be using him as a dependant on either return, so the ITIN still needed.

I suggest you test both methods: MFJ, excluding his wages; and MFS, filing for yourself (but listing him as dependant) and see how much more it will cost you using MFS. Then you can decide whether it is worth filing jointly.

In either case though, get an ITIN.

[Gofigure49]

The poster indicated that her husband did not want an ITIN. Understandable, since he then has to report his world-wide income to the U.S. He may not want to at this point, nor is he obligated to. As long as her income stays below 80K U.S. and it's Canadian source, she is not disadvantaged by filing as Married, filing separately. She is not even obligated to enter his name. If their situation changes, they can apply for an ITIN for him.

[nelsona]

Since we are focussing on what the poster said, note that she is still IN US, thus is working in US, and has US source income, and cannot exempt her income.
Having an ITIN does not oblige a non-resident spouse to file thir income.

however, being married does force a married person to file as such, and maried filing separately will yield a MUCH higer tax rate in most cases, one that can be avoided simply by filing jointly and excluding his income.

When she does move to Canada, she will be able to file MFS quite easily, and even have him as a dependant or not.

It's THIS YEAR's taxes that are problematic, but easily solved, by getting an ITIN and filing.

[parisail]

I am very appreciative of the prompt and detailed responses to my post, and particularly the interest in assisting me to minimize my tax burden.

However, as my income and therefore my tax burden for 2005 is fairly low, I am mostly concerned at this point with filing my tax forms in a manner acceptable to the IRS. Getting an ITIN for my husband certainly has merit, but I would like to understand all of our options.

Can I file MFS without naming my husband at all? If I leave the boxes for husband's name and SS# blank will my return be returned?

If my husband must be named, and he does not get an ITIN, what do I write in to explain the lack of a number? I understand he is entitled to an ITIN but is he REQUIRED to get one so I can file my US taxes?

Finally, mention has been made of the ability to claim my husband as a dependant. Am I correct in thinking I can only do this if he gets an ITIN? What factors do I consider in deciding whether I am eligible to claim him this year or in future years when I am resident with him in Canada? Or him to claim or not claim me on his Canadian return? Is this an issue of financial support or is residence a factor?

I love being married, but I truly had no idea how complicating a factor it would be come tax time!

Thank you again for helping me through this.

[nelsona]

However, as my income and therefore my tax burden for 2005 is fairly low...

You'd be surprised how it will increase as a MFS filer.

Can I file MFS without naming my husband at all?

Proabaly not.

As long as he is breathing, living in Canada, and doesn't have US-source income, he is your dependant for US purposes, regardless of income. For Cdn tax purposes, you would only be a dependant if your income is low (there is no joint filing in Canada).

He married a US citizen, thus IRS becomes a factor in his life.

[Gofigure49]

He is NOT REQUIRED to apply for an ITIN. You just leave it blank. I would write his name in but nothing else. However, as Nelson points out you do not get the benefits of joint filing. If your income is low then it may not be that significant and if you are moving to Canada and if all your source income is Canadian in the future and under 80K you may not need the benefits of joint filing. You will though have a life-long commitment to file a U.S. tax return unless you become a Canadian citizen and renounce your U.S. citizenship while you have a low net worth. Lots to think about. If I were young and still had lots of future decisions to make about jobs, final residences, etc., I'd probably have him apply for an ITIN, especially if there is any thought of both of you returning to the U.S. at some point.

[nelsona]

Renouncing US citizenship (as opposed to merely rescinding your Grren Card) carries HEAVY restrictions as to re-entry into US (basically, your next visit to US is likely to be in a pine box), so is not to be treated lightly.

Time to get hubby up to speed

[flyonthewall]

I can attest to not wanting to get on the wrong side of the IRS. A friend of mine married a "foreign" woman. They lived in her country and when his company wanted to transfer him to the States, the IRS somehow held up approval of her and the kids papers until my friend had filed all his tax returns going back over twenty years.

If he has a choice, I wouldn't blame this lady's husband if he wants to stay off the IRS's hitlist. From what I can read, it seems the husband has most of the income and the wife doesn't care about the potentially higher taxes for her for the year when she still has US income. So unless he is required by law to get the ITIN, what benefits would he get by subjecting himself to IRS scrutiny via the ITIN?

[nelsona]

For one thing, Congress came 'this close' to removing the Foreign Earned Income exemption 2 years ago. Had it done so, only the foreign tax credit route would be available, and then filing MFS would likely be taxed higher than Canada!

Secondly, by filing jointly, if they have any children, they are entitled to a $1000 per child REFUNDABLE tax credit (ie. they do not have to owe any US tax to get the credit).

So now such intransigence is looking more and more expensive.

According to IRS Pub. 501, when you file MFS "You also must enter your spouse's social security number and full name in the spaces provided." An ITIN would be the only acceptable substitute to this requirement. There are exceptions to the need for ITIN, but being married to a US citizen isn't one of them.

As I said in my initial response on this thread:

I suggest you test both methods: MFJ, excluding his wages; and MFS, filing for yourself (but listing him as dependant) and see how much more it will cost you using MFS. Then you can decide whether it is worth filing jointly.

In either case though, get an ITIN.

[Gofigure49]

I can only tell you by personal experience. My spouse did not want to be treated as a U.S. citizen for U.S. income tax purposes. My spouse did not apply for an ITIN. We filled in the name, left the number blank and filed. There were no repercussions.

[nelsona]

Could be.

Do you have kids? You are giving up $1000 each by not filing jointly.

[Gofigure49]

No kids...no U.S. source income. Every situation is unique. This was the right decision for us.

[Gofigure49]

If the goal of the taxpayer is to pay the least amount of tax then she should absolutely get an ITIN for her husband and file a joint return. The Married filing separately option yields the highest tax rate of all choices. Unlike Canada you cannot file a single return if you are married. He then has to decide if he wants to cooperate in this decision.

If the goal is something else, then the taxpayer has the choice of filing Married filing separately.

[nelsona]

Prety much what I said a week ago.