TN Visa 1040NR vs First Year Choice

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TN Visa 1040NR vs First Year Choice

Post by dhruvgpatel » Thu Feb 15, 2018 11:56 am

My wife and I both Canadian citizens moved to USA on 25th july 2017 based on my TN visa and her TD (spouse dependant) visa. Both of us worked in Canada for 2017 until mid July. In USA, I am working as an engineer on TN visa and wife is not working as she is on TD visa. We have not passed the SPT (<183 days) for 2017 but plan on staying in USA for entire year of 2018 and onwards. As I understand from IRS publications here are my choices:

1) File as a non-resident. Wife doesn't need to file a return.
2) Wait until I pass SPT for 2018 (file extension form 4868) and in the meantime apply for ITIN for wife and then file joint married return as resident aliens after 183 days have elapsed in 2018.

My questions:
a) Which of the two options gives better tax savings? If not clear, what is the rough estimated calculation to find out?
b) If I file as a US resident, how do I claim canadian taxes back since I have to pay tax even on canadian income in USA.
c) If I wait to file the return, should I apply for wife's ITIN ahead of time or wait until I file the return and just attach W7 form to the return?
d) My employer paid for relocation. Can I count relocation expenses towards tax deductions?

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Post by nelsona » Thu Feb 15, 2018 12:15 pm

You ALSO have the option by treaty , as Cdns , to simply filing a full year return, right now.

As long as you are willing to report world income for 2017 (you will be allowed to use the foreign earned income exclusion for your Cdn wages). You will then get the married filing joint tax rate and have access t oall deductions/exclusions/credist that any US citizen moving from Canada to US would have.

Just to correct the "first year choice" that you are looking at: it does NOT give you the privilege of filing a joint return. It gives you the dubious privilege of filing a DUAL-STATUS return (note that it is under the "dual-Status" section of the Publication 519), which is NOT joint and does NOT have the standard deduction. I see no advantage for filing this way.

What you are thinking about is the option to treat a non-resident spouse as resident for the purposes of filing a joint return. That is what I am suggesting you do, but you do not have to wait for SPT to do this. Waiting for SPT is only for the
first year choice" and is of little benefit to you.

So you 2 choices are really 1040NR reporting only your US income (easy, but high tax rate), of joint 1040 reporting all income and taking exemption for wages on 2555 and credit for Cdn taxes paid on other types of income on form 1116 (more difficult, but best taxrate and deductions).

The only way to know what is best is to run both scenarios completely. If you were coming to US in Sept/Oct time frame you would probably be best just using 1040NR, but will arrival in July you migh have big tax saving from filing jointly to get the better rate, given you can exclude your Cdn wages.

None of this impacts your Cdn tax filing. You file as a departing resident of your province, with a departure date of mid-july. You should NOT be reporting any US income on that tax return, since you left Canada.

Your relocation funds will be added to your income on 1040 or 1040NR, you can deduct the eligible portion, which will only be the cost of moving/storing your belongings and the cost of your trip to the new location.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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