Paid customer-TDF90-22.1 and Canadians buying 401K - Factual Resident - Deemed Resident - T4131 T4056 - dan Walkow - cross borde

Hello David,

I understand you are very busy. I will  appreciate it very much if you can reply my email. I need know If I need to file TDF90-22.1 by the end of this month.


Hello David,

I am xxxxxxx xxxxxx, one of your customers. I started working in the USA in September  2007. Thanks for filling my 2007 year Canada tax return. Also thank you for your estimate  of my USA tax in 2007. For your interest and reference, would you like a copy of my 2007 year USA tax file that was done by my company¢s designated tax company?

I can email you my tax filing with password protected if you want. Please let me know.


My US accountant said that since I am filed as a Non-resident in 2007, I do not need to report my foreign accounts (Canada accounts) for year 2007, and then not need to file TDF90-22.1 by the June 30, 2008. Is this correct? I do not want to get a big fine.


I have a few questions about Canadians buying 401K and saving money in USA, I will appreciate it very much if you can help me.


My annual income is about 126,000. No any tax deductible benefits as I have not bought a house in xxxxxxx and want to move back to Canada or move to Seattle for work next year. Even though I move to work at Seattle, I am still going to retire back to Canada after 7-10 years


I have questions about Canadians buying 401K and saving money in USA:


1)     I can buy 401K up to 20,500 in 2008, this is the only tax-deductible benefit I have. Should I fill my limit this year? I do not need to touch this money until I retire. However, If I get back to Canada, how about this money? Can I still leave it in USA until I retire and take it out monthly? Will it cause any troubles or money loss?  


2)     I have bought some stocks and mutual founds in the USA and have a savings account. If I come back to Canada, does withdrawal of this money to Canada have any problems or loss money? Can I still keep these investments in USA and continue to trade stocks or mutual founds?



3)      Do you have any suggestions about how to manage my finances to avoid money loss when I back to Canada?  Keep the money in USA or transfer money to Canada under my husband¢s name now?


4)     Since I am a factual resident in Canada, I am supposed to fill the Canada tax return every year. I should report my USA earnings and then deduct this earning under the Treaty.  What kind of tax form I should fill for 2008? I will be in Canada 4 week in 2008. Does it will affect my factual resident status?


I know these questions are boring. Hope you will not mind after a summer weekend.

Thank you very much and look forward to your response!

Best wishes for you and your family


david ingram replies:

It is a simple answer.  I would likely have filed you as a dual status 1040 in which case, you would have had to file forms TDF 90 AND form 8891 if you have an RRSP in Canada.  I file a dual status return when someone intends to stay in the US for several years and a 1040NR if you are just there for a year on a TN.

I also file the 1040 Dual Status because it sets it up in my computer system properly for the next year.  My system (and no other i know of) does not transfer info from a 1040NR to a 1040 (mine did until 1993).  therefore, although a little more work the first year, it saves it the second year and makes the transition easier in my opinion.


To answer your current question, I agree that if you filed a 1040NR, there is no need to file the extra forms by June 30th.


To your other questions:

1. As a resident of the USA, You may buy a 401(K) as a tax deductible investment. You may leave it in the USA until your retirement.  Of you had done it six years ago, and were now back in Canada, you would be crying because the exchange rate drop would mean that yo had lost 45% of your spending power in Canadian dollars.

2.   You can leave the account in the USA but your US stock broker may not want to deal with you with a Canadian Address.  You can arrange to move your account to someone like Dan Walkow who has set himself up to deal with Canadians in the US with Canadian accounts and Americans in Canada with US Accounts.  You can find more about Dan at

3. I do not understand the question unless you are talking about losing money because of the exchange.  If you are intending to spend all your money in Canada, it would likely be prudent to keep it in Canada.  Again from 1003 to 2003, you were likely better off with your money in the US.  Since then, you have clearly likely been better off with your money coming to Canada on a regular basis.  I do not have a crystal ball for the future but am in the camp that firmly believes that Canada's currency will be worth more seven years from now. If I had to make the decision, I would be concentrating on paying down a Canadian Mortgage first BEFORE I made a single investment.  Then i would likely leave 20% in Euros, 20% in Asia, and 20% in the USA and 40% in Canada.

4.   We filed your Canadian return as a departing resident complete with form T1161.  This may be in error if you are continuing as a factual resident although Andrew Nelson is adamant that a T1161 must be filed as a Factual Resident as well.  However, we did not put the US income on the Canadian return.  We will have to investigate further in September after the new Technical Amendments have come out for the new treaty.

Andrew nelson says that the new process is that you are a deemed NON-RESIDENT and therefore have to file the T1161 as we did. 

Read Andrews email to me a few days ago - in red -

David, here has been a 'slight' change in how CRA treats so-called "Factual Residents" who meet the treaty definition of resident of another state.

There are now considered "Deemed non-residents" and as such can no longer use the 256 method of excluding income. CRA sees thru this as an avoidance of deemed disposition rules.

They MUST now follow the rules for "deemed non-residents" which requires them to file a departure date and meet all other requirements of a departure return.

>From T4056, the emigrants guide:

"If you left Canada in 2007 and keep residential ties in
Canada, you are usually considered a factual resident.
However, if you are also considered to be a resident of
another country for the purposes of a tax treaty, you
may be considered a deemed non-resident. The ordinary
effects of ceasing to be a resident of Canada will apply as
if you were an emigrant."

This was changed about 3 years ago, and does away with the 256 maneuver. As you are aware, saying you are a factual resident avoids deemed disposition and that is the VERY REASON that the deemed non-resident status was developed.

256 is now only used to exclude certain income that is specifically covered by a treaty, no longer all income from a country of which you are considered a resident by treaty.

You can find this guide at:

However, I have continued to use the FACTUAL Resident Line 256 scenario without question at least 60 times in the last three years with no questions and have even filed retroactive returns where we have used the method to get retroactive refunds.

Paragraph D, Page 9 of the 2007 CRA General income tax guide you can find at any post office (in Canada) states (underlined italics added by me)::

D. If you lived outside Canada on December 31, 2007, but maintained significant residential ties (see previous section) with Canada, you may be considered a factual resident of Canada. Use the package for the province or territory where you kept your residential ties. You also have to complete Form T1248, Information about your residency status, and attach it to your return. Mail your tax return to the International Tax Services Office, 2204 Walkley Road, Ottawa ON K1A 1A8. If, under a tax treaty, you are considered to be a resident of another country, this may not apply. For more information, contact us.
AND / However there is another guide which deals with FACTUAL AND DEEMED Residents. Guide T-4131 deals with those Factual and Deemed residents.

It contains the following at:

Factual residents and income tax

As a factual resident, we tax your income as if you never left Canada. You will continue to:

  • report all income you receive from sources inside and outside Canada for the year, and claim all deductions that apply to you;
  • claim all federal and provincial or territorial non-refundable tax credits that apply to you;
  • pay federal tax and provincial or territorial tax where you keep residential ties in Canada;
  • claim any federal, provincial, or territorial refundable tax credits that apply to you; and
  • be eligible to apply for the goods and services tax/harmonized sales tax (GST/HST) credit.

This applies for the year you leave and for each year you are a factual resident while living outside Canada.

You will see there is some controversy and you should be careful.  The fact that a NEW TREATY was signed in Sept 2007 only adds to the confusion.  For instance, If you are a taxable resident of Canada, I have been telling people for years NOT to participate in a 401K.  the new treaty seems to say that this is okay and Canada will honour the deduction of the 401K for your Canadian return. 

However, no one I know is POSITIVE  that it says that.  In the last two days I have talked to three others whose opinion I respect and we are all waiting for Technical notes to be published on the new treaty around the end of August.

Hope this helps.


david ingram's US / Canada Services
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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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