TN since october, 2005, WIFE and the kid stayed in Canada

[octane99]

My case: TN since october, 2005, WIFE and the kid stayed in Canada for school in 2005 and 2006. They may come to join me in early 2007.

First, thank you very much Nelson and other active members in the forum. Your posts and expertises help us a lot.

TAX year 2005:

my case is not so difficult, as I did not make too much money, in Canada, I only have some $4000 EI benefits, is US I made $17000. For both IRA and CRA, I believe I can get most money back. But what I did in Tax year 2005 may affect my 2006 TAX. Therefore, I write down my plan and welcome all comments.

For US tax 2005:

As Nelson said, there is no advantage at all to report US tax as a NR. I would pay about $200 if I report as a NR. I did not meet the SPT in 2005, but according to PUB519 page 9, after I have met the SPT in 2006 in this may, I can make a first year choice to treat me as a resident for the last two months in 2005. Then I can treat my wife as a resident ( page 10) even if she never stays in USA in 2005. Finally, in page 9, we both can choose to be treated as a US resident for the entire year. I did the math in TurboTax, I would pay zero US TAX. I called an IRA agent (1-215-516-2000, this is a number specially for Non-Resident ) and confirmed I can do that.

If my memory serves, I remember Nelson said in one reply that a Canadian does not need to meet SPT and can treat him or her as a US resident for tax purpose if he or she wants to do so. I asked the above agent in IRA, this is not true. I will appreciate if Nelson can tell us more about this.

For Canada Tax 2005:

Easy. I am a canadian resident anyway. So I report world income. And I deserve all the benefits including Child benefits and GST return. The only question I want to ask is shall I tell CRA that I left Canada at the end of October (Or last day 2005 because now I plan to report as Canada NR in 2006) in my 2005 tax return ? I report my whole year world income in 2005, I deserve whole year benefits. I am not sure if I tell CRA that I left canada ( While my familys stay), will they reduce my child or other benefits?


TAX year 2006:

What I concern most is my TAX year 2006. I would earn much more, and my wife can earn some money in Canada too. We must carefully plan our tax.

For US tax 2006: My original plan was that I report married separately to US and my wife treat herself as non-resident again, so she do not need to report her canada income in US. I called that number and the agent said I can do that, but if I keep swithing back forth as a NR and Resident for my wife, this may raise a flag. The IRA may audit me. Well, if all I am doing is legal, I am OK with that. But then I saw Nelson's reply that we can exclude her Cdn wages by 2555. That is so great. Then I can still report as married filling jointly. I do not have time to research 2555 yet, If there is some trick or restriction for using that, please let us know.

For Canada Tax 2006: This is most uncertain part so far. Technically, if your family are in Canada, you have ties with Canada and you are factual Canada resident anyway. But there is a concept called deemed non-resident. According to the website:

http://www.cra-arc.gc.ca/E/pub/tg/t4056/t4056-e.html

"If you left Canada in 2005 and keep residential ties in Canada, you are usually considered a factual resident. However, if you are also considered to be a resident of another country for the purposes of a tax treaty, you may be considered a deemed non-resident. The ordinary effects of ceasing to be a resident of Canada will apply as if you were an emigrant."

'In general you become a deemed non-resident at a time when your residential ties in the other country are such that, under the tax treaty between Canada and that country, you are considered to be a resident of that country and not a resident of Canada."

Therefore, in 2006, I can argue that I am a resident of USA, so I am a non-resident of Canada for tax purpose. I called CRA international office, they said I could be but I have to complete a form NR-73 to let them decide if I am a non-resident. Nelson strongly suggest not to file NR-73 because it is all on their hands and they may revoke their decision too. Therefore, my question is: can I just let the CRA know that I left the canada at the last day of 2005, then I just do not file 2006 canada return ( Of course, my wife will report my income in her Canada return 2006)?

Hope my information is useful and welcome all comments.

[nelsona]

Your post is a bit long... You will paty Cdn tax on your US incoem for 2005 and 2006: until your wife and family move to US.


While you can file a 1040 as a resident (don't bother phoning IRS.. the telephlunkies are idiots), this does not change your Cdn residential status.

It is treaty article XXV if your wondering. You will owe quite a bit in Canada, since you made over $25000


The key to 'deemed non-resident' is that you have to meet the centre of viatl interests, but your wife and kids ARE your centre. If they were planning to leave, but were staying for a month or two to sell house, that is one thing, but they are PLANNING to STAY in canada for quite a while, so they and you have never broken ties yet.

So, for 2005, you should just file an NR return, and claim the US tax as a credit on your return. If the US tax is too high for you to claim it all, then do a 'non-discrimination' return, which is a 1040NR but using the 1040 MFJ tax rate and deductions.

I have described this elsewhere. here and on grasmick.com

[octane99]

I can't thank you more, Nelson. You are right, the treaty overrule all. You are right too, the IRA and CRA agents are idiots, many times, I had to guide them through the publications or articles.

I will read more about treaty and then ask questions. Have a nice weekend!