T2062 Confusion -

QUESTION:
 


Hi David: I am wondering if you might be able to answer my confusion. A lawyer friend told us that we need to file T2062 since we are selling our property and moving to US. We are unable to rent it out because of the rental restrictions. However it said that once we dispose our property even with the T2062 filled, CRA will take 25% off the profit. Are we never going to get this money back from CRA? We already have an offer for $270K and we bought it for $190K meaning the profit is $80K. It just sounds as if we are being punished by CRA for moving to US if we never see the $20K back. This property is our principal home resident. Many thanks and hope you can help with our confusion.

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david ingram replies:

Since it has not been rented out and assuming it is the only one you own and that you lived in the property as your only residence, any profit (the $80,000 you mention) up to the day you leave the country is tax free as your principal residence under Section 54(g) of the Canadian Income Tax Act.  If you sell it BEFORE you leave, there is NO reason to get involved with a T2062 AND T2062A.

If you or your husband has already left the country, the purchaser and his or her lawyer will want to be protected and want a clearance certificate. 

The Clearance certificate is issued by the CRA after you  have filed the forms T2062 and T2062A. Note that the T2062 and T2062A calculations do NOT allow the deduction of any selling expenses such as legal or commissions.

The clearance certificate gives the CRA's ruling about what the 25% withholding tax should be taken from.

If there is NO profit that the CRA determines, there is no tax.withholding.

I will give a low key example however.

If the house was worth $260,000 when you left and sold for $270,000 less a $10,000 Real Estate Commission, the CRA would want 25% of the $10,000 obvious profit and your lawyer would have to remit $2,500 to the CRA.

When you did your tax return on the sale, there would be no profit, because you would only have received $260,000 after the R E Commission and you would get your $2,500 back.

Again, if you lived in the house while residents of Canada, the $80,000 profit is not taxable because the value the CRA and whomever prepares the T2062 for you is based upon the value the day you left or leave the country.  We do a lot of T2062 forms and can handle these for you.  I have to tell you that the CRA is taking 3 or 4 months to issue the certificates at the moment because of the number of applications.  Three years ago, it usually took 3 weeks.

If you have an accepted sale while you are still obvious residents of Canada , NO T2062 or withholding should be involved.
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These older questions will give you some other ideas as well although none applies directly to your situation as described.

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QUESTION:

Hello ! I am a Canadian citizen moved to USA in Jan.1.07. I am selling my house after 10 months(empty after I left).I still have bank a/c's and my wife is a Canadian PR. Will I have problems to sell my house in Chatham, Ontario. Please reply - 309-333-xxxx.

Regards
xxxxx xxxxxxxx 

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david ingram replies:

I see you sent this twice - sorry it was not answered but I do get 30 to 100 a day and can not even begin to answer them all.

This has been answered for other people however in the time between the two questions.

Because you are not living in Canada, anyone buying the house is required to withhold 25% of the GROSS sale price unless you fill in and file forms T2062 and T2062A with the CRA within ten days of the actual sale.

This form would take into account that the house was your personal residence up to the day you left.

For 2007, you must file form T1161 as a departing resident. Failure to file Form T1161, can end up with a $2,500 fine as shown below.  Happy to look after these departing Canada returns for you.


These similar questions were answered on Feb 17 for instance.

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Hi David,

(1) I am a Canadian Citizen and employed in Canada from Jan 01, 2007 to June 30, 2007 and my tax was deducted at source. I have received T-4

(2) Since the employer closed down the facility, I received unemployment benefit until November 04, 2008. I have not received any  paper from EI income so far

(3) Since November 05, 2007, I am working in USA under TN-1 work permit and i have W2 from my employer

Can you please tell me how much it would cost for filing tax against above income?  Which documents I need to provide you?

Next year, I would have only income from USA and how much it would cost to file tax return.  Do I have to file tax return in Canada for the year 2008  against USA employment earning only?  It is temporary yearly base job contract. I intent to be a Canadian Citizen.

Regards,

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david ingram replies:

If you do not want to report your US income to Canada, you need to file a departing Canada return including form T1161.. If your house is rented out, you should have filed form NR6 BEFORE leaving the country.

Our fees are outlined in the Disclaimer below following some older questions.


QUESTION: Hi David, I am Canadian citizen, worked in Canada for the first 5 months of 2006. then moved to US and worked then for the rest of 2006. I have income from Canada employer, Canadian bank and US employer. I filed tax return on my US income to IRS already. I haven't done Canadian tax return yet. I had thought I only need to file Canadian tax return on my Canadian income. But it seems both CRA and IRS requested to report my world income to both. I am confused. What should I do to file the tax return to both? More specially, I received NR4 slip from CIBC bank. I could not find where to enter this form when I used Ufile.ca. How can I enter US W2 form into any Canadian tax form? How can I enter T4 slip into US tax return form? thanks a lot! _______________________________________________________________
david ingram replies:

An NR4 does not go on the Canadian return.  It goes on Schedules B and 1116 of the US return

The T4 does not go on the US return unless you are filing as a year round resident as in 2 below.

I am too busy to come up with a new answer but this older one will give you an idea.

QUESTION: Hi David, I really need your help in filling U.S tax and I am getting mixed messages which forms to file. I am a Canadian Citizen in U.S on TN visa for more than a year. I have RRSP in Canada over 10,000 put in fixed bond and saving account in a bank. What do I need to file here and what forms do I need to fill. Do I still have to file tax in Canada for Canadian earning? Please help. ____________________________________________________
david ingram replies;

You need to file a departing Canada tax return and file T1161 if you left more things than your RRSP behind.  The Canadian return will only include Canadian earnings although if you had a Home Buyers Plan, it is all due and taxable on the departing Canada return unless you have paid it back.

For the US, you have two choices:

1.   File a 1040NR dual status statement and a Dual Status 1040 Income Tax return with no standard deduction

or

2.   File a full 1040 which includes your Canadian income and gives you a full standard deduction and the right to file a joint return if married.  This is usually the best if you left Canada early in the year as you did.

If you can't figure it out, file an extension  form 4868 (find it at http://www.irs.gov/pub/irs-pdf/f4868.pdf )

and then send the information to us at the address in blue below to complete for you.
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QUESTION:

We moved to the US in December 2004. At the time that we did our 2004 taxes, we did not have any 2004
US income to worry about, so we used ufile.ca to do our Canadian taxes. We have a house in Canada that we
 kept with the intent of renting it out, and were unaware of the requirement to file a T1161 until we began
 working on our 2005 taxes with the assistance of an accountant. By the time he got involved, it was already
 late. In January 2007, CRA assessed a late filing penalty for both myself and my husband as joint owners of the
 property. The statement was sent to our old address, even though we updated our address at the time we sent
 in our 2005 tax returns. My question is this: Is there any way that we can get the late filing penalty forgiven?
 We have done everything else by the books, and we did file the T1161 when our accountant brought it to our
 attention. Thank you.
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david ingram replies:

The T1161 for a departing Canadian is due on April 30th of the year following the departure.  The penalty is a minimum of $100 or $25.00 per day to a maximum of $2,500.  This is the same penalty for the late filing of a T3 return with distributions.

I know of no method of officially canceling the $2,500 penalty you will each have received.  You could try writing to the FAIRNESS COMMITTEE and explain the situation and they might cancel it.  for $5,000, it is certainly worth the effort.

You can start looking up the rules for the FAIRNESS COMMITTEE here:

http://www.cra-arc.gc.ca/agency/fairness/prov_3-e.html

I do not expect them to agree but they might.

You might write to Prime Minister Stephen Harper as well.  The penalty is unfair because although easy to find if you know what you are looking for, NO ONE knows about it automatically. 

The tax preparation programs do not tell you to fill it in when you put a date in for departing Canada. 

The $2,500 penalty is imposed after 100 days. 


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On February 11, 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.  e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help
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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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 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. 

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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