QUESTION:
Hello,
I am H1 worker in USA and moving to Canada soon to become Canadian PR in
June. So beginning from this year, I will be Canadian tax-resident, and in
US I become non-resident. And I understand I will be paying taxes either
side this year.
My question is, next year, if I still have bank account, 401k account and
brokage account in the States, do I still have to pay either side because of
interest and capital gains? What about my Canadian income? And, further
more, I have investment in a third country, I know I need pay Canada tax for
the gain, do I still have to pay US tax for the third country gains too?
Thanks,
=================================================================
david ingram replies:
For 2007, you will not be a resident of the US for tax purposes. You will
have to pay 15% tax on any dividends you receive from the brokerage account
and then report them in Canada again, pay tax to Canada and claim the 15%
paid to the US as a foreign tax credit on line 431 of the Canadian return.
However, as a non-resident - non-citizen of the US, any capital gains or
interest on your US brokerage account will be taxable in Canada only.
The following Q & A may help in another way as well.
------------------
QUESTION: My husband and I (both Canadian Citizens) moved back to Canada on
July 1, 2005 after temporarily living in the US since August 2002 (working
with a TN work permit). According to the US, we are still considered a
resident for the 2005 tax year due to the Substantial Presence Test.
However, we are also considered residents of Canada since we have lived in
Canada more than 183 days, purchased a house in Canada in August 2005 and
started Canadian Healthcare on July 1, 2005. I understand there are
tie-breaking rules that come into effect in this case to determine
residency. Can you please clarify how to file under these circumstances?
---------------------------------------------------------------------------
david ingram replies:
There are four different methods of filing your return - all legal and worth
exploring to pay the least tax.
1. You could file your 1040 as a dual status taxpayer. In this case, you
would also file a blank 1040NR marked with dual status statement.
2. You could file a 1040NR with an 8840 to justify your closer connection to
Canada.
3. You could file an ordinary 1040 reporting your world income for the year
and claiming a foreign tax credit for the tax paid to Canada.
4. You could file a 2350 extension to file your return in January 2007 when
you will have been in Canada long enough to file a 2555 exemption as a
bonefide resident of Canada for a calendar year. The 2555 states you have
to be a US citizen or a resident alien to file the 2555 but this is NOT
referring to a Green Card resident alien. It refers to the fact that you
are a resident alien for tax purposes as in the substantial presence test.
Good Luck!!
Phone consultations are $400 for 15 minutes to 50 minutes (professional
hour).
This is not intended to be definitive but in general I am quoting $800 to
$2,000 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
$2,000 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 a three or four slips and no capital gains, etc. for $125.00
up.
With a Rental for $300
A Business for $300 - Rental and business likely $400
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 $400 and up.
TDF 90-22.1 forms are $25 for the first and $10.00 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.
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA) time -
(please do not fax or phone outside of those hours as this is a home office)
email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com/> www.david-ingram.com
<http://www.david-ingram.com/>
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 <http://www.centa.com> . If you forward this message, this
disclaimer must be included."
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