I'm interested in hiring you to file our taxes in both the US and Canada for 2009. Please give me an estimate and let me know if you require a retainer fee up front.
Here are the details regarding our situation:
- My wife and I moved to Arizona from Vancouver in February 2009. I have a TN Visa (3 year), Wife on TD Visa.
- We own (mortgaged) a townhouse which remains vacant, but we do not plan to sell. We will consider if you suggest significant tax savings, but we would like to keep it as a vacation home for now. Currently money gets transferred from my US bank to Canadian bank to pay the mortgage and utilities.
- We own (mortgaged) a condo which is rented out: located in Vancouver
- My Wife has a First Time Home Buyer loan from her RRSP that she still needs to pay back, she has very little income in 2009 and probably no income in 2010.
- Our combined RRSP accounts have ~$80k, plus we have another $10k in TFSA, I also have a company 401k.
- I have my Arizona Drivers Licence and my wife is in the process of obtaining one
- We are planning to rent while we are located in Arizona..
Let me know if you have any other questions or suggestions. After reading through your very informative site, I wonder if we were supposed to cancel our BC Health Insurance. I'm not sure if that's required or what the process is.
david ingram replies:
Your wife should pay back the RRSP loan or be prepared to put it on her final tax return and pay the tax on it. That is likely the best if she has low income in 2009.
Your BC medical is no longer valid and should be canceled officially. Hopefully, you have a good Medical plan with your employer in Arizona.
You will need to file a departing tax return as defined further on.
You need to file a form NR6 and have a Canadian resident accept the role of agent for the rental house. see the following:
david ingram replies:
There is nothing new about the NR-6. I do not know when it was brought into play but I have been filling them in since the late 70's and the following was printed in my 1989 book.
RENTAL PROPERTIES - CANADA - OWNED BY U.S. RESIDENT
More important perhaps is the problem with rental properties in Canada. When owned by a non-resident, they are subject to a 25% withholding (or 15% if living in Bangladesh) tax. If the renter does not pay this tax, the government can come along two or three or 15 years later and demand the tax.
Imagine the consternation of a tenant of a house in the British Properties in West Vancouver, or Rosedale in Toronto. Assume the tenant has been paying $2,000 a month for a $500,000 house owned by a Hong Kong resident. After three years of paying $24,000 a year to the `non-resident', they finally buy a house and move. Two months later, there is a knock on the door and a National Revenue representative is standing there demanding 25% of $72,000 for NON-RESIDENT withholding tax (this is a true story by the way, only the owner was in London).
There is a way around this problem. The tenant can ask to see, or rather DEMAND to see a copy of the landlord's filed and accepted NR6 form. (See forms in back of book). This form allows the tenant or agent of the landlord to deduct a lesser amount (or nil if a loss) than 25% of the gross rent. It allows for expenses to be taken off and the tax can then be withheld at 25% of the net, rather than the gross. The property management division of david ingram & Associates Realty Inc. files about 300 of these NR6 forms a year. (This is only necessary if you are paying directly to a landlord whom you KNOW to be a non-resident of Canada. If you are paying to an agent or Canadian Resident, you are okay.)
Please note, the NR6 MUST BE FILED BEFORE the first rent cheque is received or 25% of the gross rent must be remitted. For years, we were in the habit of filing `this years' NR6 late with last years tax return. In 1989, National Revenue stopped accepting this sloppy practice and demanded them on time.
IF YOU SIGN THIS FORM AS AN AGENT, AND THE OWNER DOES NOT FILE HIS OR HER RETURN BY JUNE 30TH OF THE FOLLOWING YEAR, YOU, THE AGENT, ARE RESPONSIBLE FOR THE 30% OF THE GROSS RENT WITH NO REFUND PROVISIONS FOR ANYONE.
RENTAL PROPERTIES - UNITED STATES - OWNED BY A CANADIAN
If paying 25% of the GROSS rent to Canada sounds bad, cheer up. The United States taxes the Canadian 30% in the same situation. To avoid this, the Canadian needs to notify the U.S. Government that he wishes to be taxed as a business rental house on the "net income" received. But if you do not notify the IRS in advance, the IRS CAN tax you at the 30% of gross rate.
What you have to do is get the 2002 to 2006 returns in as soon as possible or be prepared to pay 25% of your gross rent as tax plus penalties and interest if the CRA catches you (remember the US IRS charges 30% in the same circumstances).
Get someone to prepare the returns. If you would like us to do them for you, that is what we do. Then get your NR-6 in with a Canadian resident signing as an agent. You might even try making your tenant the agent. Remember, if you file the NR-6, you can claim your rental expenses and 25% is only withheld on a profit if any. Therefore, if the gross rent was $1,000 and the expenses were $900, the agent only has to remit $25.00 a month.
If there is a loss on a monthly basis, no tax has to be remitted.
Just remember, it is NOT the amount of the mortgage payment that is deductible. Only the interest portion is deductible so it is possible to be out of pocket each month because of the principal portion of the rental payments, but still owe tax.
When the actual return is prepared, you can use depreciation to reduce any profit to zero and you will get back any tax that was deducted.
Also remember, that the figures have to be converted to US dollars and put on a schedule E of your 1040. This will usually result in a refund on your US and New York 201 returns.
We can prepare the Canadian and US return amendments if necessary - see below.
The following are older questions dealing with people with TN visas.
I haver attached a suggested price list at the end and we would be pleased to look after your 2009 departing Canada / arriving in the US and Arizona returns.
Note that you will have 4 Canadian returns to do. Each of you will have to do one up to the date of your leaving Canada and a second to report the rental income from the rental house,.
XXXXXXX XXXXXXX wrote:
I am trying to figure out what to do for my 2008 Canadian taxes.
My husband and I are Canadian citizens living in the US since November 2007. We own a home in the US, have US driver's licenses, US healthcare, and have paid taxes as a resident (1040) as we have been here for over 183 days in the 2008 tax year.
I'm confused as to what I have to do for Canadian 2008 taxes. We own a home in Canada (no one lives there, we simply pay for the mortgage) and have sold it effective June 2009. My US income has never left the US. I have never bothered to cancel AB healthcare as it was free this year (but my son does not have it) but I believe it is not longer valid as I have not resided in Canada this past year. I received the 100/month child tax benefits and was on EI Mat leave for 6 mos of the 2008 year but can cancel and pay back the money for child tax benefits if required. I realize I have to file Canadian income tax for 2008 (EI-mat leave and child tax benefits) for myself. My US earned income has never left the US, so I am not sure what I have to use as an exchange rate or if I even need to include it since I haven't lived in Canada? My husband's US income has never left the US either.
Is it mandatory to include my US income under the TN-1 visa job?
I have a US tax bill and now if I do include it, it appears the Canadian gov't wants another 15% on top of what I've already paid in the US.
I'm hoping I'm missing something and just have to declare my CAD income, but don't want to do anything illegal.
Any advise would be greatly appreciated! I am willing to pay for a consultation fee in order to clear up this confusion as well.
david ingram replies:
You are taxable on your mat leave and should not have received the child tax benefit. When you left Canada, you and your husband should have reported a departing date on page one of the T1 return and filed form T1161 and maybe T1243 and T1244 as well. This would have listed your house and any investments for the purpose of the departure.
If the house has just been sold, you will have to file Forms T32062 and T2062A and T2091 for the sale. Failure to file the T1161 has already garnered a penalty of $2,500 plus interest each if the CRA wants to enforce it.
Failure to file the T2062 within ten days of your sale in June will also engender a $25 a day fine (min $100) to a maximum of $2,500 for being 100 or more days late.
By keeping your AB Medical and the empty house and collecting the Child Tax Benefit, you have done some of the things that give the Canadian Government the right to tax you.
Pay back the Child Tax Benefit as soon as possible. File 'your' Canadian tax return and report the US income on the return. (Fill in schedule A and Schedule B to report your world income). Exempt the US earned income on line 256 of the return under Article IV of the US Canada Income Tax Treaty.
You also had to report the Maternity leave on your US 1040.
This older question will likely help.
I started working in the states last April for about 8 months with a TN visa. I was wondering if I have to pay taxes on income earned in the states to Canada as well?
david ingram replies:
You should file a departing Canada Income tax return with form T1161 and maybe a 1243 and 1244 if you have left any assets behind.
These older questions will help a bit
david ingram replies:
As described, you have no tax to pay to Canada and should not have bought an RRSP for 2007.
Basically, you should be filing a departing Canada return and look at T1161 to see if it is necessary to file it - Usually, you would file it is you own a summer cottage, home, non-RRSP mutual fund or brokerage account or are leaving a share of a family business or farm behind.
For the US, you would file a US1040. there is no tax return in Texas, Nevada, Alaska, Florida for you to file.
If your intention is to come back to Canada, you should likely NOT buy a ROTH. If you want a tax deduction buy a conventional IRA or participate larger in a company 401(K)
We charge $900 to $3000 for US Canada tax returns
There is a more detailed list further down below.
I am Canadian citizen and have been working in USA on TN-Visa since 2004. I have a valid Canadian driver license, no medical card, working bank account and has no property. All my family is staying with me in USA.
1) Am I suppose to file a Canadian taxes every year.
2) If I do, what would be the roughly tax break up like 20% paying in Canada and 80% in USA.
3) What would be your fee to file Canadian and USA taxes.
Thanks & regards.
david ingram replies:
You should have filed a departing Canada return in 2004. there is no need to file a 2005, 2006, or 2007 return as you have described your situation.
If, on the other hand, the Canadian government asks you for a return for any of those years, you, as a Canadian citizen, are required to file. Report all of your US income on the T1 and then deduct it all on line 256 of the return under Article IV of the US - Canada Income Tax Convention (treaty).
This older question and answer may help
I moved to Nevada for a job July 2006, and still work there now. Do I do my
taxes in Canada and us separately? My earnings for 2006 in Canada were very
david ingram replies:
You have more than one choice.
1. a) You file a departing Canada tax return including form T1161 and 1243 and 1244 if you left more than $25,000 worth of assets behind.
You file a 1040NR Dual Status Statement for the US and then a 1040 Dual Status Return to report the US income only. The statement is there to separate out any US income you may have received BEFORE you actually went to the US. You can NOT claim the standard deduction on a Dual Status Return You can only use itemized deductions on a Dual Status Return.
2. a) You file Canada as in 1a) above.
b) You file a 1040 tax return reporting your world income for the year including the Canadian income. Then you file US form 1116 to claim a foreign tax credit for the tax, CPP and EI you paid to Canada. This allows you to claim the standard deduction on the US return.
Good luck. Remember that you can always send the returns here by fax, courier snail mail or pdf email.
david ingram replies
If you are applying for an H1B visa and intend to get a green card and your family is not moving unitl the resident alien cards come through, you should be filing as a US resident and not paying tax in Canada. If you have a house, it should be put in your wife's name only. You would file a US joint return with your wife and claim your children as dependents.
If you are not intending to stay in the US and are still spending a lot of time in Canada, you would file as a Canadian resident and claim a foreign tax credit for the taxes, FICA and Medicare taxes you pay to the US after filing your US 1040.
There is an in between position where you might be a factual resident of Canada where you report your US income to Canada but deduct it then on line 256 under Article IV of the US Canada Income Tax Convention. In this case you would be a tax resident of the US and file a joint US return with your wife.
You need to sit down in person or by phone with someone who really understands it.
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$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund.
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