Moved back tio Canada from USA - Expert Income Tax help on cross Border tax and immigration and divorce and RRSP and IRA and oth


XXXX XXXXXXXX wrote:

Dear David,

Just came across your site and thought I would run something by you...

I am a Canadian citizen. I was in the U.S. from August 2003 until August 2009. I earned income all that time (H1B). I have filed a U.S. tax return for my income from January to end of August 2009. I returned to Canada (North Vancouver!) and now have a T4 for income earned from August to December. I began to prepare my own return, as it seemed easy and straight-forward. I came across something that seems to indicate that I have to report my 2009 U.S. income on my Canadian return. Is that correct? What looked like a $120 (or so) refund from Ottawa now looks like I might owe $2440 or so! Can this be? Please advise. How shall I proceed?

Thanks,
XXXX

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QUESTION:

Hello --

I stumbled across your site and it seems very helpful.

Here is my situation.

I am Canadian but went to the U.S. for university beginning in September 2001.  I graduated from the school in May 2005.  Beginning in June 2005 I stayed in the U.S. working.  I left the U.S. at the end of July 2007 permanently to move back to Canada.

I began working in Canada in August 2007 and worked through the end of the year.

How should I file my taxes?  Am I a resident of the U.S.?  Am I a resident of Canada?

Look forward to your answer!

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david ingram replies:

For 2007 you will file a departing the US 1040 DUAL STATUS RETURN (line 35b) and a 1040NR DUAL STATUS STATEMENT.  the 1040 only reports the US income but you do not claim or get the standard deduction.  You can claim itemized deductions if you have them.

For 2007, you will file an arriving in Canada T1 General. This only reports your Canadian Income but pro-rates your exemptions.

These older questions will stretch your imagination a bit.


My_question_is: Applicable to both US and Canada
Subject:        Where do I pay tax?
Expert:         taxman@centa.com
Date:           Wednesday March 21, 2007
Time:           10:20 AM -0500

QUESTION:

I just moved back to Ontario, Canada after 7 years of loving in Virginia.  I will continue to work the same U.S. company that I worked for while living in VA. Basically, I will be working from home.  My question is, what do I need to do in order to comply with Can. Us Tax Treaty?  Are there forms to fill out and send to the IRS?  Also, my employer is not sure what they need to withhold...or if they should withhold anything and basically pay me  cash and I will pay taxes here in Canada.  What about FICA and all FUTA and unemployment? 
Thank you. I appreciate all the help I can get.
__________________________________________________
david ingram replies:

This older question will help you:

QUESTION:

Hi,

I'm an American citizen residing in Canada (permanent resident) and working for an American company remotely from home in Canada. I get a W2 at year-end. I assume I have to file both US and Canadian tax returns.

My questions are :
1) Do I file a US tax return and claim a foreign tax credit on my Canadians tax return. Or is it vice versa?
2) Do I still file state/local tax return in the US (I lived in Maryland prior to landing in Canada), even though I now reside in Canada?
3) For the extra tax I end up paying to the 2nd country (in excess to what I pay to the first country), can I claim any type of credit or deductions on that tax in next tax year?

Thank you very much!

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david ingram replies:

If you are working in Canada, you should not be getting a W-2.  The reason is that as a resident of Canada, you should not be paying into US Social Security or Medicare or paying basic income tax to the USA.

Your first tax liability for services rendered in Canada under Article IV of the US Canada Income Tax Treaty is to Canada.

You should be filing a Canadian T1 return and paying Canada and provincial income tax first.  Then you would file your US return and either:

1.    Use form 2555 to exempt up to $82,400 of income from US tax and then file US form 1116 to claim a foreign tax credit on the excess OR

2.    Use form 1116 to claim the foreign tax credit on your US return for tax paid to Canada.  If you have children, you would usually do the latter because it would usually qualify you for the $1,000 per child USA refundable tax credit.

3.    In the case of interest (10%) and dividends (15%), you must get any excess tax back from the US by reclassifying the income on form 1116.

4.    In the case of interest, you can claim the difference between 10 and 15% as a deduction on Canadian schedule 4.

5.    You should NOT be paying into a US 401(K) or US Social Security. Canada will not allow the 401(K) as a deduction.

Your employer should start paying you on a 1099 Basis and pay you your salary plus their share of Social Security plus their share of Medicare plus their share of any 401 or other pension plan they contribute to.


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If your question was not answered fully or you wish to go further, I am available for individual consultations by phone or email or in person for $450 per professional hour. 

Please also note that we prepare Canadian, US, Australian, UK and New Zealand returns on a mail in, email, fax, snail mail or couriered basis. At any time, our clients are in 40 countries or more.  They have every occupation from nuclear Submarine captains to FedEx pilots to Major Bank officers to Politicians, Diplomats and border patrol officers.  My favourite, however, is a penguin catcher in Antarctica among others there..

If you 'really' only have a single question requiring a 'couple' of minutes, you can try phoning me for free as part of the following.

- For a quick free question

Most Wednesday evenings, from 6 to 9 PM Vancouver (Pacific - LA, Seattle) time, I interview others and answer short US Canada, Great Britain, Spain, Indonesia,  Mexico, etc.  tax and immigration questions.  GOTO www.david-ingram.com - the North American phone number is (866) 980-0499 - the local number in the lower mainland is (604) 980-0321.

 http://alexandramorton.typepad.com/

OR

You might try calling Fred Snyder's own radio program for an answer. 

Fred Snyder's  "IT'S YOUR MONEY" radio show. on CISL,  650 AM on the dial in Vancouver from 9 to 11:00 AM every Sunday  (604) 280-0650 or (877) 280-0650 - You can listen live from anywhere in the world at www.am650radio.com from anywhere in the world. click on the button in the top left hand corner.
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You might try calling Fred Snyder's weekly radio programs for an answer. 
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