Canadian married to an American - has not moved yet - how to file?

QUESTION: Dear Mr. Ingram,

I am so grateful I came across your website while searching for answers regarding cross border tax issues. Please help me with my inquiries.

I am a Canadian and is married to a U.S. citizen since 2006. He is in the U.S., and I still reside and work in Canada. I will not move there until the approval of my immigration papers.

I would greatly appreciate your expert advise regarding my inquiries below.

1. I will be filing my 2006 tax return this month (Toronto,Ontario), & would want to know if I still need to declare my husband's income in my tax return the fact that he is not a Canadian resident.

2. For his 2006 tax return would he also need to declare my Canadian income for 2006, even I have not moved there yet? Any advantages of doing so?

3. Should I get the approval of my immigration visa by May 2007, how and where to apply for the non-resident status in Canada for tax purposes.

4. For my tax return for 2007, will I need to file 2 income tax returns? A separate tax return for my Canadian income, then file a joint tax return with my husband in the U.S.?

5. Should I move and become a resident in the U.S. in May 2007. Will I just need to file my income from January to April 2007 for my Canadian tax return,
then from May 2007 to December 2007 for my U.S. tax return?

Or do I need to file income from Jan 2007 to Dec 2007 for my joint tax return in the U.S.? In this case would I be taxed twice?

5. How about the Canadian 'exit return. Would that be for my 2007 tax return?

6. I immigrated in Canada in Feb 2001. Would any of my CPP contributions be carried over once I move to the U.S., considering that I have only been in Canada for less than 10 years? Is there are U.S./Canada treaty regarding pension plan contributions?

I look forward for your help. Thank you very much in advance.



david ingram replies:

This was outside the two a day of two non-client questions I am answering but I spotted it as it was being sent away and here goes:

1. Your husband's income should be shown on your Canadian return. It is not taxed but does count agaisnt you for things like GST credits and renter's and sales tax credits.

2. He should be filing a joint US return with you. It will save him some $3,000 to $5,000 in tax depending upon his own income. He will either exempt your income on fomr 2555 or claim a foreign tax credit on form 1116.

3. There is nothing to apply for.

4. you will have to file a departing Canada return and maybe forms 1161, 1243 AND 1244 (ONLY IF YOU ARE LEAVING A HOUSE OR STOCK MARKET PORTFOLIO OR SUMMER CABIN or other asset behind - see form T1161). You will also need to file a US return which will likley be a joint one with your husband.

5. Yes see 4 above -

6. Yes, there is a UK-Canada and a US-Canada Social Security Totalization agreement which will mean that if you work for at least 4 years in the US and contribute to US Social Security, that ime (not the money) contributres to the 10 year requirement for CPP.

You are welcome

david ingram