residency starting date question for dual tax year

guy · Post by **guy** » Tue Apr 04, 2006 5:31 pm

Hi, I'm a Canadian on a TN living in the US. I got my TN on Oct 31st 2005 but before that I had spent a significant amount of time in the US as a visitor for pleasure. I have spent ~200 days in the US in 2005. So I do meet the substantial presence test. I plan on filing as dual-status. I understand that the 1040NR is used as a statement only in this case since I have no US source income before November. What do I fill in on lines C, D & E on page 5 on 1040NR. A visa was not required to visit the US since I am a Canadian so I'm guessing that I put N/A and "pleasure" in those blanks with "TN" for current status. As for the residency date. I was first in the US for about 5 days in feb for my spring break but I have been here pretty consistenly since May 28th. I think I should put May 28th as my start date and exclude the days in feb in my attached statement. But maybe I should just put my TN start date as my residency date??? Perhaps dual status is not right for me. How is one supposed to fill in 1040NR if he/she was not present or just a visitor before there work started? The example in pub 519 is of a guy who had a short work assignment in the US before becoming a permanent resident so it's not totally helpful.

nelsona · Post by **nelsona** » Wed Apr 05, 2006 5:52 am

Your status prior to your TN was B2. This is a perfectly legitimate status to use on 1040NR.

Given you spent so much time in US before working, I presume you made little income in canada for the year, thus I may suggest that you simply file a full-year 1040 (as allowed by treaty, and by IRS regs) and report all your 2005 income. You would then either exclude your Cdn wages from before may, or include them and use 1116 to get tax credit.

This would undoubtedly yield lower US tax than filing a 1040NR.

guy · Post by **guy** » Wed Apr 05, 2006 11:53 am

thank you so much nelson. I made little Canadian income and pretty much all of my time in Canada was as a student. However, from pub 519 it looks as if I need to file dual-status unless I am married. I suppose this must be in the treaty as you say. Can someone point me to resources on using the treaty?

guy · Post by **guy** » Wed Apr 05, 2006 12:55 pm

Okay, I looked a little further. I need to figure out my canadian income and fill out form 1116.

Do I need to file anything to show that I'm using 1040 because of the tax treaty?

also, do I need to disclose the value of my canadian bank account in schedule b

guy · Post by **guy** » Wed Apr 05, 2006 9:56 pm

okay, i'm planning on filling the following items
1040
1116
8891 for each RRSP

I think that is all I need

I have one question right now: Can I claim my tuition on line 34. This is my first year and I am a US resident under the SPT. However the 1040 instruction say that you can only claim it if you were a US resident for all of the year. I'm lost in the semantics. I'm choosing to be a resident for the whole year under the US-Canada treaty but I was a student from jan-may while in Canada.

nelsona · Post by **nelsona** » Wed Apr 05, 2006 11:03 pm

I would file full-year 1040 but exclude any Cdn wages using 2555, instead of including them and then taking credit on 1116.

guy · Post by **guy** » Thu Apr 06, 2006 1:22 pm

I'm not sure if I can use 2555, the language is confusing. I spent less that 330 days in canada in 2005 but I'm not sure if it means the current tax year or just any 12 month period (say 2004 or june 04-may 05).

as for 1116, I don't know my exact amount of canadian taxes paid on my income yet because they haven't been filed yet. I was paid in full. I think all I can do is file an ammended return after my canadian taxes are finalized if I want by foreign tax credit. Since I only made ~ $5300 Canadian in 2005. I'm not sure how much difference it will make if I just didn't bother with the credit. I'm going to read the doc again but so far I'm majorly confused.

nelsona · Post by **nelsona** » Thu Apr 06, 2006 1:29 pm

2555 can be used for any year-long period. Typically the year would end when you arrived in US.

$5300 added to your US income will cost you about $1500 in US tax, so you had better be doing something!

And you should be completing your Cdn and US taxes at the same time. if you aren't ready to file US, wait until you are, even if past April 15th, as wlong as you don't owe any US taxes you will be fine. I would not submit the return simply to correct it three weeks later. you have until August.

guy · Post by **guy** » Thu Apr 06, 2006 1:39 pm

okay, do I need to file an extension 1040-es?

guy · Post by **guy** » Thu Apr 06, 2006 1:50 pm

I think I got it. By reading the other threads on this site and nelson's advice. I can file 2555 as a bona fide resident of canada for the 12 months ending May 29th 2005. This covers my canadian income from 2005 that I would like to exclude. Because of the treaty I can be treated just like a US citizen for that period and use 2555. I won't need to do 1116 because I've already excluded that income

nelsona · Post by **nelsona** » Thu Apr 06, 2006 2:09 pm

You would need 1116 for any other type of Cdn income, like interest cap gains, etc.

guy · Post by **guy** » Thu Apr 06, 2006 2:29 pm

Nelson, sorry I can't find the "germany" thread or others to answer this question so I need to ask you.

Do I need to file 8833 to show that I am using the treaty to use 2555 like a US Citizen and 1040 for the full year?

nelsona · Post by **nelsona** » Thu Apr 06, 2006 2:57 pm

The treaty position is overkill in my opinion.

guy · Post by **guy** » Thu Apr 06, 2006 3:03 pm

not sure what you mean, but I'm hoping you mean that I can send it all without 8833s and they probably won't come after me.

nelsona · Post by **nelsona** » Thu Apr 06, 2006 3:23 pm

yup.

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residency starting date question for dual tax year

residency starting date question for dual tax year

2555 and 1116