Moving to Hawaii on L1 Visa, effect on income tax and Canadian residency if term extends past 3 years -

QUESTION:

HI David et al,

Thank you for creating such an informative site!

I have a few questions:

My Canadian parent company is applying for an L1 for me to work as an employee in Managerial/Specialized capacity for our US subsidiary in Honolulu. I will be paid in USD by US company and subject to American employment law and tax, etc.  I understand I am to file income tax in both countries, and do not understand exactly how the foreign tax credit works and if this should affect my negotiations at all for compensation.  Also, I don't understand how my Canadian residency might be affected since I am single woman with no dependants (father and brother live here but not sure if this classiefies as "family").  This said, is it wise to continue investing in RRSPs', etc while I'm away... Sorry this is a long question, perhaps I need an appointment? Any resources you can share to point me in right direction would be great.  I can afford a lawyer but not a senior partner, and this is the first move I've ever done like this.

Thank you!

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DAVID INGRAM REPLIES:

If you are transferring to Hawaii on a full time basis, you will become a tax resident of the USA and will not need to file a Canadian return as long as you are there.

This assumes that you do not leave your home here empty and your car licenced and come back every couple of weeks. article IV of the Tax Treaty is very clear.  If you do not have a home availagble to you in Canada, yiou are taxed in the US on your workld income.  If you have mutual funds or bank accounts in Canada, tell the financial institution your new US address and they will deduct 10% tax on any interest paid and 15% tax on any dividends paid to you well a resident of the United States

You will have to file a departing Canada return for the  year you left. That return might require a T1161, 1243 and 1244 if you are leaving any assets behind.

There is a seven or eight year limit for an L1 visa.  If you decide you want to stay there "forever", you will need to be sponsored by the comapny for a resident alien or "green" card.

If you decide that you want to stay there be sure you do not fall into the trap that the company pays CPP (Canada Pension Plan) for you instead of US FICA (social Security and Medicare).

The reason is that You have to pay into US Social security for 30 years to receive a fair prorated share of your retirement pension. 

There is a provision that says that the comapny can  pay CPP instead of FICA for five years if the transfer is not expected to last five years.

Therefore, if your transfer is only for a 3 year period, the copmpany may want to invole that clause.  In my opinion, that is to your detriment if you intend to stay there.

Paying CPP instead of FICA saves the company a bundle but costs you a lot in retirement.

Do NOT invest in a Canadian RRSP while a resident of the USA.

I am available for individual; consultations.  The fee is $400 by phone or in person for an up to one hour consultation.  If you are physically in Canada at the time, GST of $24.00 is also charged.

In the meantime, goto www.centa.com and read the US/CANADA Income Tax section in the second box down onthe right hand side.  This is mainly aimed at American citizens living in Canada but you will get more ideas from it.

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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included." expert  US Canada Canadian American  Mexican Income Tax help.
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Phone consultations are $400 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. expert  US Canada Canadian American  Mexican Income Tax help.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
 
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,000 would be the same with one rental
 
$1,200 would be the same with one business no rental
 
$1,200 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.
 
$1,500 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

$1,600 would be for two people with income from two countries

$2,800 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 $150.00 up.
 
With a Rental for $350
 
A Business for $350 - Rental and business likely $450
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 $800 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.
 
Just a guideline not etched in stone. 
 
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