Sent: Monday, March 06, 2006 6:05 AM
Subject: Hello tax expert
I am a Canadian citizen who has been working in Maryland under using TN visa since Oct 24th 2005. I had a good job in Mississauga Ontario with Rogers communications and grossed 75k (T4) from Jan to Oct 2005. I have also received a W2 in the USA as my income for Oct, Nov and Dec 2005 was 60K gross (net 36K as I was given a one time lump sum relocation payment by my US employer of 48K USD in Dec 2005 which was taxed). In Mississauga I still have a house with a small mtg that has been partially rented and I lived in it for the last 5 years (60% personal and primary residence and 40% rental). The gross rental income for 2005 is 9K. I am wondering what my best practice would be for 2005 tax returns. I will likely renew my TN visa in Oct 2006 for another year with same US employer as a management consultant. Can you point me in the right direction for filing my 2005 income tax returns or know someone who can?
Thank you,
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david ingram replies:
There are two possibilities:
1. File a departing Canada tax return if your intention is to get an H1 and maybe a green card in the US. The departing return would include Canadian forms T1161, and maybe 1243 and 1244. It would include your Rogers T4 and the rent and expenses for the rental suite for Jan to October.
2. File a Canadian Section 216(4) rental non-resident return for the rents received after leaving Canada to report the November and December income and expenses.
3. File a dual status US 1040 return. This would only report the W2 income and the rent received for November and December. If you paid Canada any tax on the rent, it would be claimed as credit on form 1116. You can use the November and December pro-rated Canadian mortgage interest and property taxes on your US return and you would also file a form 3903 to claim some of your moving expenses.
I would be happy to look after this for you.
The price for Maryland, the 1040 and the two Canadian returns would be between $800 and $2000 Canadian. I expect if you have everything documented and there are no mutual funds to deal with , your price would be about $1,200 Canadian.
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A second method would be to treat yourself as a factual resident and exempt your US income under article IV of the US / Canada Income tax Convention (treaty).
This has the advantage of making your house in Canada tax free while you are away. The disadvantage is that because you only left in October, the CRA may try and tax you on the two months in the states. I do not think it is worth the risk for this year as I do not expect your Ontario house to go up much in the next two years if you were to return then.
You might want to buy an hour of my time and discuss this. The charge would be $400 Cdn if you phone from the us AND $428 FROM Canada WITH GST.
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