Credit for tax on foreign income from US - T2209 - T2036 - Factual Resident or not - Canadian-US-Global Income tax help - david

 

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My_question_is: Both

question: I am a Canadian citizen. I work in the US(W-4; no income in Canada. I own a house in Canada. In order to do my job I had to rent an apartment in in the US. Canadian taxes: can I get a deduction for the rent that I pay here in the US? Thank you.

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david ingram replies:

If you have just taken a job on a temporary or long term basis in the US with the intention to return to live in Canada as soon as possible and your spouse and children have remained in Canada with no intention of following you to the US,you are a factual resident of Canada and likely taxable in Canada.  If this is the case, your US Federal taxes, US Medicare, US FICA (Social Security) and Connecticut State and maybe New York state taxes are a foreign tax credit on schedules 2209 and 2036 of your Canadian return as a foreign tax credit.

If you are down in the US and intend to stay in the US and are working at getting your spouse and children down to join you, then you are a  factual resident subject to Article IV of the US / Canada tax treaty and would not be taxable in Canada.  You would report the US earned income on line 104 and subtract it again on line 256.

The rent on the apartment and your back and forth expenses to Canada are NOT deductible in either case on either the Canada or the US 1040 as described.

Hope this helps.

An older Q & A follows as well.  We are here to help you with your returns when the time comes.


My_question_is: Applicable to both US and Canada
Subject:        where do I file taxes
Expert:         taxman@centa.com
Date:           Wednesday January 30, 2008
Time:           01:33 AM -0000

QUESTION:

I have been living in the San Francisco since august 2005. I work for an American company. I fly home pretty much every weekend to Vancouver where my wife and kids live. I am on a H1B visa. Do I need to file in both the U.S. and canada every year or after this amount of time can I just file in the U.S.

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david ingram replies:

I am surprised that you are on an H1B.  I would have thought that the hotel would have transferred you on an L1 visa which is easier and faster for a manager with a multinational corporation.

If your intention is to stay in the US and you are waiting for your wife and children to join you, then you are a factual resident of Canada who has to file a Canadian return but would exempt everything on Line 256 under Article IV of the US / Canada Income Convention (Treaty). It helps in this case if your family flies down to join you in the US as often as you fly home.

If you are not intending to stay in the US and are just there for a short time and your family has no intention of moving, you are likely taxable in Canada because you are really commuting to a job in the USA.

You would likely do well to spend a few dollars and spend an hour with me.  The difference is thousands because you get to file a joint return in California.

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This older question will help as well

My_question_is: Applicable to both US and Canada
Subject:        Taxation
Expert:         taxman@centa.com
Date:           Wednesday January 16, 2008
Time:           08:37 PM -0000

QUESTION:

Hello There,
I was wondering if I could get some guidance.
I had left Canada in 2000 to work in the US on an LI (spec knowledge)Visa. I had lived there and work there and still do since then. However in 2002, My wife pursued her grad studies in BC,Canada and we exchanged visits.
Here are some facts:
1. I spent more than 10 months in the US (for residence determination).
2. I have had permanent residences in 2 separate states in the US all these years.
3. I have filed and paid US taxes and have been deemed a US resident for tax purposes.
4. I have maintained a bank account in Canada to pay for my wifes Tuition.
5. Every year since 2001 at Canadian Tax time (when my wife files her Canadian Tax return), I call revenue Canada and give them these facts and asked them if I have to file a Canadian Tax return and they respond with a No I do not have to do anything. However they ask me to call the International tax office and confirm. I do just that and they respond that I do not have to do anything as i am not a resident. (I wish I had taped them).

In any event I have recently received a letter from CCRA stating that I owe taxes from 2002-2006. I have informed them that i am a resident of the US for tax purposes. However because of my significant ties (My Wife, and bank account) I have been determined to be a factual resident.
Here are my questions.
1. What form do I need to fill out?.
2. Do they expect me to declare all my US income, after converting it to Canadian dollars (when I did not have the luxury of using all that converted amount which was very high in the former years), as I had spent most of it in USD living in the US.
3. How can I be a resident of two separate countries for tax purpose that have a tax treaty?.
4. CCRA refuses to listen to my questions (besides trying to find out what form to fill out) and simply states that in spite of being  a US tax resident, due to my significant ties, i am a factual resident of Canada and have to file and pay the horrendous amount of taxes assessed. I checked all the forms and they are correct
5.
6. I have a CCRA collections officer chasing me, while i am trying to get answers to my situation.
What are my options besides filing, which I intend to do as I do not want to face criminal charges.
Any help or advice would be appreciated.

Thanks and Cheers

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david ingram replies:

I agree that you are a factual resident of Canada BUT, and it is a BIG BUT, you are A FACTUAL RESIDENT SUBJECT TO THE BENEFITS OF A TAX TREATY as described in the government's own T1 General guide.

For the 2005 year it is the top left hand paragraph "D" on page 10.

1.    File the Canadian returns and report all of your income and exempt it all on line 256 under Article IV of the US / Canada Income Tax Convention (Treaty).
.
2.   yes

3.   You can't be under the treaty  - However, intent is important.  If your wife is just studying and intending to move to the US when finished and you have a green card application in process, you are absolutely (in my opinion) only taxable in the US.  It also helps if she spends as much or more time visiting you in the US as you spend coming up to Canada to visit her. I tell people in your position to stay out of Canada and have your family visit you in the US.

4.    I disagree if you are intending to stay in the USA.      -- If, on the other hand,  there was never any intention to stay in the USA and you are intending to come back to Canada in a year and your wife never visited you in the USA and you made no effort to get a green card, the CRA might have a point but only might. Your physical presence in the US clearly makes you a taxable resident of the US. Your job means that your financial affairs are in The US.  It would help if you had filed a factual return each year since you left.

5.   ??

6.   That is his job.  Hopefully, the arbitrary assessments they have sent you are new enough you can file formal notices of objection - i.e. within 90 days of their issuance.

Get the returns done ASAP.  Glad to to do them for you if necessary.
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Dear David,
 
My wife is going to work in the US. We have been married for 7 years and have a 20 year old daughter (I adopted my wife's biological child) who will be studying in the US for that period.
 
I am going to remain in Canada and we plan to visit each other during our holidays.
 
Is there any way my wife can pay taxes only to the US during this period? we would like to make an appointment with you to hear the details ASAP as we need to make a go or not go decision based on the answer.
 
Regards
 

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david ingram replies:

If you were separated, there would be no problem. 

However, as a married couple, the CRA will want to tax your wife on the basis that her family ties are in Canada BUT is she has her daughter with her AND if  'you' visit her in the US four times to one rather than her "coming home' every couple of weeks, she should be considered factual resident of Canada whose US income is exempt from Canadian tax under Article IV of the US / Canada Income Tax treaty.

Article IV of the Treaty reads as follows:

Article IV

Residence

1.  For the purposes of this Convention, the term "resident" of a Contracting State means any person that, under the laws of that State, is liable to tax therein by reason of that person's domicile, residence, citizenship, place of management, place of incorporation or any other criterion of a similar nature, but in the case of an estate or trust, only to the extent that income derived by the estate or trust is liable to tax in that State, either in its hands or in the hands of its beneficiaries. For the purposes of this paragraph, an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual's personal and economic relations are closer to the United States than to any third State. The term "resident" of a Contracting State is understood to include:

    (a) the Government of that State or a political subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority, and

    (b)

      (i) a trust, organization or other arrangement that is operated exclusively to administer or provide pension, retirement or employee benefits; and

      (ii) a not-for-profit organization

    that was constituted in that State and that is, by reason of its nature as such, generally exempt from income taxation in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

    (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both States or in neither State, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);

    (b) if the Contracting State in which he has his centre of vital interests cannot be determined, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

    (c) if he has an habitual abode in both States or in neither State, he shall be deemed to be a resident of the Contracting State of which he is a citizen; and

    (d) if he is a citizen of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3.  Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting States, then if it was created under the laws in force in a Contracting State, it shall be deemed to be a resident of that State. Notwithstanding the preceding sentence, a company that was created in a Contracting State, that is a resident of both Contracting States and that is continued at any time in the other Contracting State in accordance with the corporate law in that other State shall be deemed while it is so continued to be a resident of that other State.

4.  Where by reason of the provisions of paragraph 1 an estate, trust or other person (other than an individual or a company) is a resident of both Contracting States, the competent authorities of the States shall by mutual agreement endeavor to settle the question and to determine the mode of application of the Convention to such person.

5.  Notwithstanding the provisions of the preceding paragraphs, an individual shall be deemed to be a resident of a Contracting State if:

    (a) the individual is an employee of that State or of a political subdivision, local authority or instrumentality thereof rendering services in the discharge of functions or a governmental nature in the other Contracting State or in a third State; and

    (b) the individual is subjected in the first-mentioned State to similar obligations in respect of taxes on income as are residents of the first-mentioned State.

The spouse and dependent children residing with such an individual and meeting the requirements of subparagraph (b) above shall also be deemed to be residents of the first-mentioned State.

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Under these circumstances, she can even file in the US as a head of household (with a non-resident non US citizen spouse with no US income) which will give her a very good US tax rate.

Phone Gillian Bryan at 604-980-0321 between 10:30 and 4 PM to make an appointment to see me if you wish.  Pricing, etc., follows:

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On January 29, 2008, David Ingram wrote:


It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. 
e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help
 
However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. For the last two weeks, I have just found out that my own email notes to myself have been spammed out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my 'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have actually looked at and deleted and I have actually answered 1234 email questions for clients and strangers without sending a bill.  I have also put aside 847 messages that I am maybe going to try and answer because they look interesting. -e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and  help
Therefore, if an email is not answered in 24 to 48 hours, it is likely lost in space.  You can try and resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.  david ingram expert  US Canada Canadian American  Mexican Income Tax  service and help.
david ingram's US / Canada Services
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My Home office is at:
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Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
 
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Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.
$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up.
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

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. 
This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 

 

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Authored by: Anonymous on Tuesday, March 02 2010 @ 08:45 AM PST factual resident eligibility for child tax benefit

Hi there,

 

I am a Canadian citizen and have been classified as a factual resident of Canada because I work for the Canadian Government as a a school teacher but own a house with my husband in the USA.  I have been paying full taxes in Canada since I married my husband in 2001.  I work part time in Canada and during that time I reside with my parents in Canada to make the commute easier.  I have an active Canadian bank account.  My husband and I have decided to move back to Canada full time and when I phoned to apply for child tax benefits I was told that based on my taxes, I should have been eligible for these benefits all along.  I had more than one representative from that office tell me the same thing.  Is this true?

 

 

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