What year did person become resident of Canada? david ingram expert cross border non-resident income tax help and preparation by

xxxxx xxxxxxx wrote:
  Hi David,
 
I have a question about a landed immigrant/permanent resident and taxes.  Situation: a person "lands" in Canada, then immediately goes back to the U.S. and lives there with his Canadian-citizen spouse for five years.  At the end of five years they move to Canada to reside there permanently.  Question: on the tax form it asks to give the date the person became a resident of Canada.  What does he put, the date he landed (though he never filed a Canadian tax return after that because he lived & worked in the U.S.) or the date he actually started living in Canada?
 
Thanks,
 
xxxxx

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david ingram replies:

A PR (permanent resident) card issued by the Canadian government  gives a person the right to live in Canada and work at whatever they may choose to work at.  If they are working in Canada while living in the US, they would not be taxable in Canada
until they had earned over $10,000 under Article XV of the US Canada Income Tax Treaty.
 

If they go south to the US and live with a Canadian Citizen spouse, they can renew their PR card for as long as they are living with their Canadian Citizen Spouse outside of Canada.

When living with a spouse in the US, tax would be owing to the US under Article IV of the tax treaty on their world income, subject of course to the fact that Canada would get to tax any Canadian source earnings first.

The person should put their date of entry as the day they moved to Canada with their Canadian Citizen Spouse.  Presumably, that would be the same date that their Canadian Spouse puts on his or her return as 'their' date of entry to Canada.

Of course, it is always possible that they moved to Canada on different dates but usually, it would be the same date.

Of course, they both have a US return to file as well.  They have a choice of filing a joint return or they might want to file as married filing separately.  In that case the spouse may want to file dual status returns.

these may help


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!

====================================================
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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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. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
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. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

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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