Canadian works in US in the first year

[regina]

Hi, first of all, thanks for the forum, this is awesome.
Probably this has been answered somewhere, but here's my situations and looking for some advise.

My husband has been working in US since end of March, 2007. We joins him from Canada in end of May, 2007, after we sold the house back in Canada. We cut all the Canadian ties since then, such as stop Child allowance, cancel Canadian accounts, clasping most of RRSP accounts (paid 30% withhold taxes) other than locked-in ones. Just want to make sure we would be the non-tax residence. We are single income. Here are my questions.

1) When shall we declare we are the non-tax Canadian residence, March or May? This would determine when the oversea income starts count?

2) I guess we should file taxes on both side separately? But how can we tie the taxes both together? Mean, using the US taxes (deduct from payroll) to offset Canadian tax? Is that in the form somewhere? Havenot seen form yet.

3) What's the best way to do this, we are looking for an accountant, too.

4) For the withholding RRSP taxes (30%), is there a way to get some relief (tax return) from filing taxes?

We would have more questions, but these are the first to get things start ...

Appreciate any helps!

Thanks!

[nelsona]

Please tell me you waited until after the move to sell RRSPs. Otherwise your tax on these will be much higher than if you had waited. Other than selling your house, there was little else you had to do to become Cdn non-residents.

Your deparure taxes in canada are all addressed in the CRA's emigrant guide. Please read it carefully.

1. Your departure date is may. If your husband left in march, and quickly got a home in US, and did not come back every weekend to Canada, he could claim he left in March. You will indicate this on your returns. US income after this date is not to be reported. Cdn income that should have had flat tax withheld is not to be reported either. This would inclyude any bank interst or RRSP withdrawls made AFTER leaving.

2. You can file jointly in US, but you have to report all income for the year, and then exclude the Cdn wages. Form 2555.

4. The key is when those RRSP withdrawls were made. If made before you left, they will be included in your Cdn income tax return, and you probably will owe a little more that was withheld. If the withdrawl was made after leving (as it should have been), the most you would pay is 25%. You would write a letter (NR7?) to CRA to get this back. You, if not working for the whole 2007, could get money back from YOUR RRSP withdrawal.


I have written extensively on taxes in the year of move. Try to search these. You need to read the Emigrants guide first.

[regina]

Thank you so much, nelsona.
Just read the Emigrants guide, and it's helpful too.
The RRSP point you brought up is interesting. We made withdraws after May, after we left Canada, the bank withheld 30% tax, donot know where they get that rate from. That's the RRSP under my name, and I am not working for couple of years, now. Did you mean I can get 5% back (30-25)? or sth else? start filling in the NR7-R form now.

We sold our house in May, right before we left Canada. Do you think we need to pay any tax for that income from this selling? Remember we signed a form with lawer while selling the house, and stated that we were resident, then the tax was waived.

If above is true statement, then my husband's non-resident status might better starts from May, too?

[nelsona]

I would hold off on the NR7 just yet. Since you were not working after you left canada, you can use the 217 election, include your RRSP on your return (and the tax that was held back) and quite likely pay less than 25% tax on teh RRSP.

I would run the numbers, and if the added tax is less than 25% of the RRSP you should just clam it thru the return. Note that a 217 return is a little complicated when done in the year of the move since some of your income is taxed by the province and some is taxed with the non-resident surcharge. If it does turn out to be more than 25%, then file NR7 and get the 5% back.

But it would definitely be worth it to reduce your tax below 25%.

As to your house sale affecting your husbands residence, I would still cliam March for him. Your home wasn't taxable in any event, even if sold a year after leaving. same for US tax.

[regina]

as mentioned above, we thought we have collapsed RRSP after arriving in U.S. This morning I called Scotia and was told there are about $100.00 in our RRSP, which came from a rebate campaign mid Jan,2008. I don't know what to say, it is good to have some extra money but i remember requested to close RRSP last July and actually paid $125+tax for closing the account. Now they told me it is a fee for full withdrawal, but the account still exists. Will this small amount affect us in terms of tax calculation? They said they could reverse the rebate and take the money back.

nelson, any advice? Thank you.

[nelsona]

You need to close the account in order to avoid lots of future paperwork in the US. It has no bearing on your Cdn residency. It is the US paperwork that you want to avoid for $100. It has no impact on your 2007 taxes as it was paid to your account in 2008 anyways.

At this pointy I would insist they give you the money, with no more thna the 25% tax withheld, no fees or anything else.

Then INSIST that he account be closed.