DUAL STATUS (35b) Canadian on H1B moved to US same tax year - considered resident alien by IRS - what to file? -

I'm a 27 year old Canadian currently living in the United States on an H1B. Before leaving Canada I closed all major credit cards, bank accounts (except for one which still has an outstanding balance which will be paid off this year), and brought all personal belongings with me. The only thing I've left in Canada which is giving me a tough time is ~60K  in RRSP's. I've determined as per IRS publication 519 I am a resident alien for tax purposes as per the substantial presence test. I've been considering doing the filing myself, but I'm confused as to whether or not I should be declaring my RRSP's and if so, what are the implications? Especially this year since I've lost over 10%+ of their value.

I would like to use your services, but I would like some degree of confidence that by paying over 1K (moving year) that I will be really saving that much. I can understand someone who has complex tax situations with properties, receiving retirement funds, capital gains/losts, etc. My tax situation is pretty straight forward (I think) and aside from filing forms 1040, 8891 (maybe) in the US with some Canadian tax credits and in Canada file a T1 tax return (departing), I'm having a tough time seeing the value of your services. I'm hoping you can convince me otherwise.

Any other year, I would only except to file in the US, but this one I don't want to take a chance on.

Thanks for your help!

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david ingram replies;

I went to see my dentist Ed Clark the other day and $160 dollars later was told 'no cavities'.  I was very happy.  Last time I saw him because a cap had split off the enamel - this is the truth - I ended up with a $16,000+  dental bill because he discovered a very hidden abcess and then pointe out all my ground down teeth.

Although I like the appearance of my $16,000+ teeth and appreciate the fact that the abcess was fixed, etc. I was happier hearing 'nothing wrong but floss more' than I was with the litany of stuff wrong after not being there for a few years.

I have no idea if our service would be worth it to you.

It is an intersting question.  You have mentioned the form 8891 which is a new form.  Not filling it out can result in a penlty of 35% of the value of your RRSP PLUS 5% for each year you do not report it.  Being in the US on an H1B requires the filing of form 8891 to report (and exempt) the internal earnings of your RRSP.  However, if you are in California, the 8891 does NOT exempt the internal earnings on your RRSP and the California Franchise Board taxes them requiring an adjustment on form CA or CA(NR) with the 540 or 540NR.

You do not mention form TDF 90-22.1.  I was told by a representative from Treasury on June 20, 2007,  that their intention is to levy a minimum $10,000 fine for failure to file this form.  I had a 105 year old client pay a $10,000 fine for failure to file it and over 1,000 clients of a Vancouver financial consultant 'Jerome Schneider' were fined because he told them not to file the forms.  Jerome Schneider was sent to jail himself and fined $100,000 for telling them not to file the forms.  That was a plea bargain where he agreed to testify against all his clients and a couple of lawyers and accountants he had worked with.  Without the plea bargain, his penalties were astronomical because there were over 1,000 charges possible. 

If you want more info on Schneider, you can read the story at 
http://www.quatloos.com/schneider_witmeyer_guilty.htmJust remember that this first year, your US 1040 either needs to include your Canadian income (before you moved to the US)  and a '2350 and 2555' (to exempt the Canadian Income) or an 1116 (to claim a foreign tax credit)  OR be filed as a Dual Status preparer - see line 35b top of page 2 of the 1040 and mark the top of Page One of the return as a DUAL STATUS RETURN.  In this situation, you also have to file a 1040NR with DUAL STATUS STATEMENT on the top of Page one of the 1040NR.  This 1040NR would be reporting any US source money you received BEFORE moving to the USA.

one more thig for you or anyone else reading this.  If you have 'ANY' foreign accounts (Canadian, French, Spanish, Japanese, Australian or any other of the 265 or so countries in the world) you MUST fill in US schedule B and answer the two questions at the bottom.  Your RRSP is a foreign trust and form 8891 replaces form 3520 for an RRSP.

Good Luck

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David Ingram wrote:

On January 29, 2008, David Ingram wrote:

It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. 
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However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. For the last two weeks, I have just found out that my own email notes to myself have been spammed out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my 'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have actually looked at and deleted and I have actually answered 1234 email questions for clients and strangers without sending a bill.  I have also put aside 847 messages that I am maybe going to try and answer because they look interesting. -e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and  help
Therefore, if an email is not answered in 24 to 48 hours, it is likely lost in space.  You can try and resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.  david ingram expert  US Canada Canadian American  Mexican Income Tax  service and help.
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Phone consultations are $450 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. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
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.
 
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 recieved as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

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.
 
This from "ask an income trusts tax service and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention. Advice on bankruptcy  e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and help .

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