Canadian citizen working is US...income tax issues

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Canadian citizen working is US...income tax issues

Post by dhirenasha »

Hello Friends,

I m new to this forum and always appreciated and absorbing the info. Here's is my pie of the problem. Hope you can answer it.

I m a Canadian citizen who worked from Jan to June 2007 for a Canadian employer. From July 2007 onwards I m on a TN status working for a US food company. I still have accounts and vehicle registration in Canada. But my rented house is in US (stat of PA).I m married with a daughter. Take an example say I earned $30K CAD from Jan - Jun 2007 and 33K USD fom July to Dec 2007.

Q1: For tax purposes am I still a non-resident for US and would be filling 1040 NR and all my world income on the Canadian income tax?

Q2: Someone told me that 1040 NR (a) charges u a flat tax of 30% (b) I would get a refund of my taxes( federal,state,medicare,social security etc)?

Q3: Assuming that I m a Canadian , CRA would be taxing first on $30K CAD and then also would taxme on $33K USD?

Pl guide how to proceed....

ds
nelsona
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Post by nelsona »

Your best course is, since you live and work in US, is to declare that you have departed canada on July xx. This will make you an "emigrant". You should read the CRA guide on emigrants for how to file your Cdn taxes for 2007. In short you will only pay Cdn tax on Cdn income.

For US, you have some choices (none of which impact your filing in Canada). the best is probably filing 1040 full year, reporting all your income for the entire year, and then claiming the Cdn tax you pay as a credit (FTC), or excluding your Cdn wages altogether using the Foreign earned income exclusion(FEIE).

1040NR is not the best. And it is untrue that 1040NR will get you more taxes back, and it certainly will NOT get your medicare and SS taxes back: you owe those as an employee working in US regardless of how you file.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Post by dhirenasha »

Nelsona thanks for the reply...

So in short what u are telling me is:

(1) Delcare myself, my wife and daughter as an emigrant from Jul 2007 onwards...
(2) file Canadian taxes on Canadian income uptil Jul 2007.
(3) In US file 1040 (inspite of having bank accounts,vehicle in Canada),pay US taxes on the income earned in US and claim foreign tax credit for income tax paid in Canada....

Forms used would be emigrant related forms for Canada,. 1040 for US...

Correct me if u have any suggestions...

ds
nelsona
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Post by nelsona »

Just to be precise for (3), you report all your income on 1040 including Cdn. Then you would claim FTC.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Post by nelsona »

... and since you seem to be concerned about the ties remaining in canada, the only ones that count for residency are House and spouse. if you are living with your family in a tax treaty country like US, you have become non-resident of canada.

After that, OHIP and DL registration could be questioned. You should be giving these up, since they are soon invalid anyways.

But tax issues aside, having your car registered elsewher than you live is a recipe for disaster. Formally import your car and get it taggged in your state. If that can't be done for some reason, get rid of the car back in canada and buy one locally.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Post by dhirenasha »

Ths issue with importing the car would be that I m showing an imigrant intent at the border while I m on the TN visa. SO importing the car is out of question for sure...Now not importing the car Vs. having rental house and spouse in US, what to weigh more...I have'nt used my OHIP card since I have left..in July 2007.

Still trying to find why it would be a "receipe for disaster"....

1040 or 1040NR, question comes again!!!
nelsona
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Post by nelsona »

I guess you are new at this. Importing your car is NOT immig intent under TN, so rethink your ideas. There are plenty of immig websites where I and others can clearly outline what is and isn't immig intent, and trust us, car importantion is not one of them.

Not importing it makes it difficult to collect on an insurance claim. we've been at this a long time, so feel free to ask at other sites like canadatotwincities.com. Your Cdn insurance is invalid already, and your US one, even if you got it, would probably be denied, plus you can't sell the car nor sign it over to insuance if totalled.

As I said, for TAXES, spouse and house are all you need. The car is for other more pressing and practical reasons.

I still don't know why you are wondering about 1040NR... you might want to do little more reading of the 'cdns in US' websites
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Post by nelsona »

Besides, your married and 1040NR doesn't allow you to file jointly, thus elevates your US taxrate.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Post by dhirenasha »

HI Nelsona,

Checked with my insurance company and they had informed us that they would be OK and keep my insurance as is it. But seriously I m thinking of importing the vehicle and buying insurance the vehicle over here.

Regrding taxes, I think 1040 would be right for me, as It would be more benificial and practical rather then 1040 NR. Would be declaring myself emigrant since I have joined the company in USA ( not the TN visa date)

Well any insights....
nelsona
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Post by nelsona »

Given that insuarnce companies deny claims when you move from one locale to another, I would not trust what your agent said. After all an accident in Ontaio does not result in million dollar lawsuits as here in US.

The rule of thumb is that you should be registered, licensed and insured where you LIVE. Period.

Your emigration date is when you packed up.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Post by dhirenasha »

Hi Nelsona,

Looks like I m back to the drawing board...

For all the income earned until Jul 2007 I would be filling my Canadian taxes. But as I m filling 1040 in US I would be declaring my world income and claiming foreign tax paid on that income. I came to two different forms. Form 1116 (foreign tax credit)and form 2555(foreign earned income). And I m totally confused which one to fill and which to not to claim foreign tax credit.

Pl clarify if u can!!!
nelsona
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Post by nelsona »

Only your Cdn wages are eligible for 2555. all other income is only eligible for 1116.

It is obviously not easy to fill these forms, that is why a typicall first year tax return prep cost $1500-$2000.

Doing a full-year US tax return however, does allow you to use the off-the-shelf tax prep software, which handles all these.

And ufile.ca does handle -- perfectly -- an emigrant return for your Cdn taxes.

You had very little choice when it came to what was the best way to file for 2007 in US, you just got sidetracked by the 3 decisions out there.

In canada, you have no choice, so is just a matter of following questions in a software packages and reading emigrants guide (steps of which you shoudl already have followed).

What you need to worry about now is simply what every other US taxpayer worries about at this time: making sure you trigger any optional deductions (ste tax, mortgage interest, charity, medical expenses) before the end of the year or not .., and whether you want to make one more RRSP contribution in canada.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
dhirenasha
Posts: 57
Joined: Fri Nov 23, 2007 9:31 am
Location: USA

Post by dhirenasha »

Well I m not yet ready to spend say $2000 for filing my taxes. May be Mr. Mark S won't like this if he reads this, (i m just joking) but I m not going to put my brains to rest until I find a solution on my own. If not I can still pay $2000 and get it done....

For Canada for last 5 yrs I m using Intuit web tax which is a great software. I m sure it can handle my emigrant status since july 2007.

In USA, do u think Turbotax Federal software can handle all these complications arising from foreign tax and all that stuff....

Let me know if u know the answer....
nelsona
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Post by nelsona »

Did you read what i wrote?:

"Doing a full-year US tax return however, does allow you to use the off-the-shelf tax prep software, which handles all these.

And ufile.ca does handle -- perfectly -- an emigrant return for your Cdn taxes. "

Enough said
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cfn2007
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Joined: Sun Nov 25, 2007 9:14 pm

Post by cfn2007 »

Does UFile also handle an immigrant return perfectly (USA to Canada)? Can I assume (based on your comment) that UFile is a better choice for a part year Canadian resident than the other software alternatives (e.g. QuickTax)?
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