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Princeton University, Princeton, New Jersey, USA
Mr. Ingram,
I have attached the email that I submitted to the "Ask an Expert" section of your webpage. I'm sorry for pestering you but I'm involved in a situation that could have significant (financial) consequences if I am not advised properly.
I found your website while searching for information regarding US/Canada taxation issues. I'm not sure if you usually reply to emails such as mine, but thought I would run it past you to see!
If you cannot help me, could you perhaps refer me to someone who could? I don't have that much money but it's worth my while to figure this out to prevent myself from going into debt! I live in the Montreal area, although my mother lives in
Ontario - so anyone in the Ottawa-Montreal area would be extremely helpful.
here's the Ask An Expert submission:
I have a question regarding the issue of residency and taxation. I've read through some literature on these two subjects but still feel confused.
I'll list the important information in bullet form to make it easier to read:
-Canadian student, 20 years old, from Montreal
-third year undergrad at Princeton University
-am on university financial aid (grant) that makes the
school affordable
-as part of my financial aid package, have to have a campus job to help cover incidentals (school supplies, books, living expenses)
-freshman year summer and sophomore summer I lived and worked on Princeton campus
- summer job (since it was on campus it wasn't part of the 12 month maximum allocated to students under the J/1 student visa)
-have not lived worked at home in Montreal since school started
-have never filed a Canadian tax return. worked one summer in montreal after grade 12 but I made so little money I was told I didn't have to file. My employer didn't generate a T4 for me.
-**next summer I want to come home and work**
-My family has talked to some experts who say that if I live here and work here, the government will consider me to be a resident of Canada even though I've been living in the states for 2.5 years. So for tax-purposes I could be asked to pay taxes retroactively on my financial aid (which would mean that
I would no longer be able to afford to attend school), and on any income I received those two summers.
-I might have to pay taxes on my financial aid and American income *even though* I already paid US taxes on the SAME financial aid (exempt) and income (exempt up until a certain income which I did not surpass). This is even though the US-Canada tax treaty states that you cannot be taxed twice
in the same income...??
-the bottom line, they say, is that if I live in Canada (even if I work a non-paying job, or don't work at all), it might lead to the government asking me to pay taxes....
-does this mean that I can't live with my parents again? That I have to live on campus over the summer to avoid this taxation?
Thanks very much for your help! I hope I can resolve this confusion once and for all.
Have a nice day,
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david ingram replies:
I am answering this for you as an individual because you sent it to me directly and because other people are involved. I am charging you $100.00 US for the answer which is a starving student rate because I charge $350.00 per hour and have already spent my twenty minutes reading the question.
1. When you are in the US as a student on a J1 visa you have the option of continuing with your provincial medical coverage for five years even though you are not in Canada. You are allowed to drive on your Canadian Driver's licence and can own a car licenced in Canada. These three benefits mean that if you claim them, you would usually file a US 1040NR and still be liable for Canadian Income Tax on any earnings from the US or Canada for that five years.
2. If, on the other hand, you do not pay your Canadian Medical, get a New Jersey driver's licence and licence your car (if you have one) in New Jersey, you have now established a closer connection to the US and should file a US 1040 tax return and are not liable for Canadian Tax in my opinion.
3. If you do go back to Canada for the summer, whether you work or not, Canada has every right to try and tax you. If they succeed as in (1) above or this (3) item, you would calculate Canadian and Quebec tax and then claim a foreign tax credit on your Canadian returns for any tax, medicare or Social Security you paid to the US. You would also get to claim your US university tuition and claim a deduction amount for every month you attended full or part time university.
4. If you wish to escape Canadian tax, get a New Jersey Driver's licence and make sure you have US medical coverage. If you really want to escape Canadian tax, make sure you have all sorts of US identification and no (or at least very little) Canadian identification.
5. Goto www.centa.com, read the US/Canada taxation section and pay particular attention to the Judge Teskey decision in the Dennis Lee case. This is an excellent list of what makes someone taxable in Canada.
6. If you stay in the US and work there for the summer, and give up your Canadian health insurance and driver's licence, it is unlikely that Canada would even look at you.
You may send your cheque (check) to the address below. If you have another follow up question, it is unlikely that I will charge you for a little tiny one.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, the United Kingdom, Quebec, 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, American and Canadian and Mexican and Quebec, and any of the 43 states with state tax returns, etc.
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