USA Noneresident & Canada Nonresident Tax - PICKING A US / CANADA TAX PREPARER - Canadian-US-Global Income tax help - ingram
I am looking for advice (direction) from an Income tax expert regarding the following case:
Background: During 2005, I left Canada to reside and work in USA. My family followed me in October 2006. After October 2006 I severed all ties with Canada as per Judge Teskey’s nonresident ties list. I worked in USA until December 2008. During July 2009, I found a Saudi/American employer (venture) for a job in Saudi Arabia (long term contract 2 years or more). My stay permit in USA was H4 until I left USA in July 2009. My wife is still working in USA on H1 visa and applied for a Green Card (I did not apply for Green Card).
1. Should I pay taxes in 2009 to USA as a resident alien (even I am working overseas) since I have been present in USA more than 183 day (2009/2008/2007 combined and divided)? I do not have USA work permit at this point. (I have H4 visa)
2. Should I pay USA taxes during 2010 knowing that I will be in USA less than 330 days? (form 673 Foreign Earned Income ). Do I need to pay USA taxes at all in 2010?
3. Could CRA (Canada Revenue Agency) having a claim that I do not pay taxes in USA and based upon their view (you should pay taxes somewhere) and being Saudi Arabia I will be in an uphill battle with them in spite of being nonresident?
Please provide some direction and who might be the appropriate person for USA income tax return.
david ingram replies:
First of all, I do not understand why you did not apply for a green card with your wife unless you are really intending to separate and do not want to be 'beholden' or something and never intend to work in the USA again. If you intend to live with your wife and or ever work in the USA again, you should apply for your green card as part of her application.
Second - If you are still living with your wife, even if you do not intend to be in the US less than 35 days a year, you are not taxable in Canada if you have severed all ties and your wife (whom you are still living with - if apart - is in the USA.
Third - If you are not intending to live with your wife and do not have a green card application, and an official residence somewhere, Canada can take a run at you.
Fourth - the US form 673 depends upon form 2555 for the section 911 exemption. If you look at the third line at the top of the 2555 form , you will see that it clearly says "For Use by U.S. Citizens and Resident Aliens Only".
see form at http://www.irs.gov/pub/irs-pdf/f2555.pdf
The proper name for a green card is a "Resident Alien" card.
Now to be technically correct, there are two resident alien definitions. One is the Resident Alien definition for Immigration and the other is the Resident alien definition for income tax which involves physical presence, closer connection to the US or another country, etc. see from 8840 at http://www.irs.gov/pub/irs-pdf/f8840.pdf to see if you think you are going to qualify for a closer connection to another country other than the US.
I do not know anyone any better to prepare your US returns than this office. I do know others that do the same thing with equal skills.. However, I am adamant that you should likely buy an hour of my time before you get yourself caught up in a tax box with the US and Canada. My number for a phone consultation is (604) 980-0321. Peter or I can make the appointment.
The following are others whom I recommend for US / Canada tax preparation if you have a reason to deal elsewhere and there are lots of those.
1. You may have a fellow employee, your ex wife, or brother who already deals here and you want to be sure that there is no criss-cross of information.
2. You may be thinking of separating from your present wife and she has said she is going to send her work here, or
3. You do not like phoning anyone in Vancouver.
The following in this question about choosing and accountant are all well qualified to deal with you
What should I look for in finding an accountant who can do my Canada/US taxes? I'm a Canadian working in the US under a TN visa.
david ingram replies:
1. Pick your accountant as soon as possible. Pick one that advertise that they are dual country accountants. I am giving a list after this.
2. Do not expect a 'free" exploratory visit. We do not have enough time and anyone any good in the business was turning people down in April and June.
If you want to talk to me first, I call that a tax consultation. I charge a minimum of $450.00 for your exploratory visit or consultation. If you then decide to hire me to do the returns, do not ask if I credit the consultation toward the preparation fee. The answer is NO. If you are doing a consultation, do it in November when there is time to sort things out before Dec 31st.
You can get a free bit of consultation by just hiring us to do the return and asking questions while it is being prepared.
3. Here are some questions to ask.
On the US side:
a. What is a Dual Status Return? can a dual status return be A JOINT RETURN? If they have to look it up, do NOT deal with them.
b. What is a dual status statement?
c. If you have rented your house out in Canada, what is the difference in depreciation methods.
d. What is form 8891 -
e. What is form TDF 90-22.1 - What is the penalty
f. When do you have to file Schedule B? Hint, if you have 'any' foreign financial account in any country, you have to file schedule B even if there were no earnings on that account and answer questions 7 and 8 on the bottom.
g. If you have a corporation on either side of the border, ask about forms 5471 and 5472.
On the Canadian Side
1. What is a departing Canada return?
2. What is a factual resident?
3. What is a deemed resident?
4. What is form T1135? (what is the fine for not filing on time) If they have to look it up? You do not want to deal with them.
5. What is form T1161? What is the penalty for not filing on time? If they have to look it up? You do not want to deal with them.
6. What is form T1243?, ditto
7. What is form T1244?, ditto
8. How is your house taxed when you move back in if you return to Canada?
9. Does section 45(2) apply (No, it does not it can NOT be used if you are a non-resident). How does Section 45(3) apply (It does not if you claim CCA while out of the country)
10. How long is your Provincial medical coverage good for?
11. What happens to your Home Buyers Plan when you depart Canada. (it is all taxable on that final return if not paid back within 60 days of leaving the country.).
This should help. Just remember. If a corporation is involved, you need someone who understands the question and can answer each one without 'research' or 'looking it up'.
If no corporations are involved, they do not need to know about forms 5471 and 5472.
If you are on a TN or H visa, this should be your bill.
If you are on an L visa, your company should pick up the tab.
The following are capable of looking after your returns if you do not want to send them here.
For the record, I have never met or even talked to Kevin Nightingale, Mark Serbinski,Steve Peters or Len Vandenberg that I know of or remember. I have met and talked to Brad Howland in his home office in Victoria. . Sonja Clarke, Steve Katz and Gary Gauvin all worked with me in my offices in the past.
The following was the answer to someone who was in need of an accountant to look after a cross border corporation.
You should only use a December 31 year end for the Canadian company because the US 5471 forms will be much cheaper if you are set up as a Dec 31st year end. By the way, failure to file the 5471 forms is a minimum penalty of $10,000 for the first 90 days and $10,000 every 30 days thereafter to a maximum of $50,000 a year per shareholder of the Canadian company.
In addition the Canadian Company will also likely end up with more than $10,000 in its account at some time and that necessitates the filing of form TDF 90-22.1 which has a minimum fine of $10,000 to a maximum fine of $500,000 plus up to 5 years in jail for failure to file.
When you are trying to find an accountant on either side of the border, start off by asking them what the rules are for when a 5471 and a TDF 90-22.1 have to be filed. If they can not answer immediately, then you do not want to be their guinea pig. Now, it will be likely that the person who answers the phone does not know so do not ask them so that they can write it down, say no one is available and then have someone else phone you back after getting a chance to look up the answers.
Save the questions for the actual tax person.
I would forget about the corporation unless you know it is going to make you a fortune. It 'reallllly' complicates your life! there is no way that being the president of a non-resident CANADIAN corporation is worth the hassles unless it is making you $100,000 a year or more in my opinion.
But you still have the corporation.
Some hints to get them done. Who could look after you?
Gary Gauvin is absolutely qualified to deal with you. He is an old business partner of mine from Ottawa. He now practices outside of Dallas Texas as a one or 1 1/2 person office. If you deal with Gary, you will deal with Gary. He is a US enrolled agent. You can find his website easily. Type - income Tax Expert - into
google. Gary will come up as number one or two. Why, because he is. If I am looking for a first or second opinion, I call Gary. Disadvantage -
Gary is a one person office. Advantage - You will always get to talk to Gary.
Gary likes corporations. I and my three associates do not like them. I like dealing with individuals who deal cross-border withOUT corporations.
OR KPMG in Vancouver. The last time I checked they had 22 people in their US/Canada department. call (604) 691-3025. Advantage - Lots of Backup. Disadvantage - It will be hard to get the same person to deal with you three times in a row.
OR Steve Peters with KPMG in Halifax at (902) 492-6011
OR Kevin Nightingale in Toronto at (416) 733-9595
OR Mark Serbinski in Toronto at (416) 733-0300
OR Len Vandenberg with BDO Dunwoody in Kelowna, BC. at (250) 763-7600
OR Steve Katz in Vancouver at (604) 732-1515
OR Sonja Clark in West Vancouver at (604) 913-3376
OR Brad Howland in Victoria at (250) 598-6258
Whoever you choose, you would likely do well to consult with me for one or two hours a year. If I have a suggestion, it will be worth it. If I can't come up with anything, you will know that what you are doing is likely the best track. I will compare it to my dentist. When I went in the fall of 2005, I ended up with $16,000 to $18,000 of dental bills, a bunch of pain, and a lot of nice new caps, etc.
When I went for an inspection on Jan 29, 2008, he could not find anything wrong except that I was not flossing. Which one did i appreciate more?
Well both - the first time was expensive but dealt with years of neglect. The second said I am on the right track. (and of course, it would not be right to leave it three. - a month later I was in total pain with some sort of abscess and Dr Ed Clarke fixed it 'just like that' but it took three visits. One to do a quick fix. Two to do a root canal through a cap and three to seal it in forever.
Good luck with your tax return AND your teeth and that is my last hint.
You would not go to the dentist without your teeth. Do not leave stuff behind when you visit your tax consultant.
Take your copies AND the assessments. Better to have a suitcase full of stuff you might need and do not then to leave stuff behind. Not taking it all the first time can end you up costing you twice as much for our fees. All we have to sell is our time.
My name is XXXXXXXXX. I was born in America to a Canadian father and an English mother. I grew up with the American passport and recently claimed my British and Canadian passports. I have never lived or worked in Canada or the UK. After university, I moved to Japan, then China and now I'm in Saudi Arabia. I have no intention of returning to the USA, Canada or the UK to live or work. I have never paid taxes to the UK or Canada. Last year, my father (naturalized American) passed away. This year, our last relative (my great-uncle and Canadian citizen) passed away.
His house has been sold and the profits will be split three way. 1/3 will go to his friend and Canadian citizen living in Canada and that person is the executrix. 1/3 will go to me and 1/3 will go to my sister living and working in America. I have gone through the steps to secure my Canadian citizenship and passport but my sister has not. As far as I understand, if she doesn't do this before she turns 26, she will lose the right to citizenship even though our father made both of us citizens before we were 2 years old.
The executrix will be meeting soon with my great-uncle's lawyer and accountant soon. They need to know my details and my sister's details for the money transfer. I have never paid tax in the US, although I have filed, because I have always worked outside the US and earned foreign earned income under the $90,000 limit which is under the foreign-earned income exclusion law. I'm not 100% sure how my taxes will look in the upcoming year in the US because right now we're in the process of getting the family home, which my father bequeathed to me and my sister, into our names. This is proving exceedingly difficult, however, because I want to buy my sister's half of the house and eventual turn it into a rental property. Because I have never paid taxes in the US, nobody will give me a mortgage even though I can almost pay for the house in full with my father's inheritance. Some sort of strange loophole will probably occur wherein me, my sister and my mother sign something so that all this can happen and the house can be solely in my name. At that point, I'm not sure what my taxes will look like, and if this will affect my next question.
Should I tell the accountant and lawyer in Canada dealing with my great-uncle's estate that I'm a Canadian citizen?
I imagine that they're assuming that me and my sister are just normal American citizens, one a resident and another a non-resident. I'm pensive about telling them this because if they know they might be legally obliged to give me the money one route or another. As far as I have researched, there's no inheritance tax in Canada (the amount will be around $45,000CAD). As I live abroad, all that money could go into my account in Hong Kong or America where I have accounts. I don't know if America will ever question then where that money came from. I'll just want to put that money into paying off the house once I can get some design of mortgage. If I tell them I'm a Canadian, they'll figure out that my sister is too, who has not secured her paperwork. Could we elect under which flag we'd like to have this processed?
Thank you very much for any insight you might provide. I'm very appreciative.
all the best
david ingram replies:
YOU ARE A VERY LUCKY PERSON.
When you turn 65 or you get disabled or ill (one out of seven chance) and need major medical help which at the moment you can not get in the USA and will not qualify for at retirement because you have not worked for 7 years in the US, you will be able to waltz into Canada or the UK and get your public health.
You will note that i said 7 years when the general thought is that you need 10 years to get Social Security Medicare. The answer is that you need 10 years to qualify at the lowest price. at nine years you pay a little more, at 8 years you pay even more and at 7 years it will cost you $300+ a month instead of $100+ per month at current rates.
In the meantime, you are correct. If your earned income is in the $90,000.00 range and you have no interest or other investment income, you will pay no US tax.
However, you mention your Saudi Arabian or Swiss or Hong Kong Account. Please be advised that when you prepare a US return, you MUST - HAVE TO fill in schedule B and answer questions 7 and 8 at the bottom even if you NO interest or dividends. The minimum fine imposable is $10,000 if you do not fill in Schedule B if you have any foreign bank, trust company, life insurance, debit card, credit union, savings and loans, stock brokerage, or other financial accounts.
If the total of all of your accounts is less than $10,000, you do not need to fill in the TDF 90-22.1 forms mentioned at question 7, but if your total is over $10,000, (even for a minute) every account you have must be reported.
AND, if you are the signing officer for a company bank account or a cub scout or girl guide or religious organization account, they must be reported as well.
If you have not being doing so, you must bring this up to date because with the inheritances, you are now going to be in the radar.
When you get the money from Canada for instance, if it is deposited to a Canadian bank, you are automatically over the $10,000. If you deposit it to a Hong Kong or Swiss Bank, you are automatically over the $10,000 limit.
If you put the money directly into a US account, it by itself will not cause you to go over the $10,000.
However, I bet that at this moment, you already have more than $10,000 in foreign accounts and I bet that you have not been filling out your TDF 90-22.1 forms.
It does not matter if you are a Canadian or American under the circumstances you describe. there is no estate tax in Canada and although there is in the US, it does not effect you unless you were inheriting over $100,000 US. If you were getting over $100,000 US, you would need to fill in form 3520 which is the same form that is asked fro in question 8 on schedule B of the 1040.
If you do buy the house from your sister, a mortgage should not be that difficult if you are going to have a house with 50 or 60% equity.
David Price at the Bank of America can likely help you at 206-349-6580. he can not help if you are buying the house to rent out but if it is to be a family house for your mother to continue to live in, he can help. If you do decide to rent out two or three years form now, that would be okay.
He is also a Canadian
Realize something else.Canada does NOT tax on citizenship. we tax on residence or lack of it. If you are not a Canadian resident, it does not mater if you are a Canadian, Ethiopian, Brazilian, or American in terms of what happens with the inheritance.
It does matter about tax on any interest your inheritance might have earned between the date of death and sale and when you receive the money. If you were a resident of the US (resident, not necessarily a citizen) there would be no withholding tax to Canada on the interest. as a resident of Saudi Arabia or Hong Kong. the Bahamas or Grand Caymans, the withholding rate is 25% (of the interest - not the principal).
hope this helps a bit and I remind you that if you need help with your expat USA tax returns, that is what we do by letter, fax, email or courier as well as in person if someone happens to be in Vancouver.
david ingram wrote:
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 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
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David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 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
$1,600 would be for two people with income from two countries
$2,800 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 $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
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 $800 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.
Just a guideline not etched in stone.
CEN-TA Cross Border Services - Tax, Visas, Immigration