Canadian working in Hawaii - Article IV of US / Caanda Income Tax Convention (Treaty) -

I’ll send it again, can’t hurt, and might benefit others. Wanted your take with some further elaboration. I’ve decided against the IRA, contributed to my RRSP’s and will file 8891 form to defer the US tax hit on the RRSPs.:

Dear David,

I was doing some quick research online due to my current immigration/work status, to determine how to best start planning for contributing to my retirement (I am 29 yrs old). I came upon your expertise many times and figured I’d email you directly.

I am a Canadian citizen, an xxxxxxxxxx in Hawaii, a xxxxxxxx in Ontario, and I currently work in Honolulu on a temporary, but renewable, TN visa at axxxxxxxxxxxxxx (entering my third year working full-time in the US).  I believe based on Canada’s facts and circumstances test, I would be deemed a Canadian resident for tax purposes due to my ongoing ties to Ontario, and plan to file Hawaii, US federal, and Canadian tax returns this year (I filed the same way the past two years, and the tax hit, despite the foreign tax credit is still substantial enough for me to write this email).

I was wondering if you would kindly answer 2 quick questions for me –

1)I understand I shouldn’t contribute to my Hawaii employer’s 401(k) plan due to the unfortunate Canadian income tax treatment 401(k)’s receive. However, should I contribute to an IRA (Individual retirement account) while I continue to work in the US? As well, I’m hoping all this social security I am contributing to in the US, may one day benefit me if I someday become a US resident.  I am trying to start my nestegg for my retirement and don’t really know if my employment will lead me to eventual permanent residency in the US or not; and

2)If you are on a TN visa and working in the USA (regardless of whether you plan to eventually apply for adjustment of status to an immigrant visa category), is it prudent to break off all ties with Canada if your sole goal is to free yourself of filing as a Canadian resident (I believe there seems to be an inconsistency inherent in doing that, as a TN visa is a temporary visa and you are supposed to return after the year is up back to Canada).  I’m wondering if the Canadian tax authorities may have an issue with you not filing a CCRA return as a Canadian resident while on a TN, when for immigration purposes, you are supposed to show an intent to return home after what should be a temporary stay in the US. The whole idea here would be to avoid the foreign tax credit structure, and simply file in one country (the US) – that would be more advantageous.

Any information would be greatly appreciated.

With the highest regards,

Honolulu, HI 968xx


david ingram replies:

Well, it would be very unusual for a TN visa holder in the US for 3 years to have to file a Canadian return unless he or she had a spouse and seven kids in Canada and went home every weekend.

I doubt if there is any reason for you to file let alone pay any tax to Canada which means that the purchase of an RRSP is a waste and should be reversed by filing form T3012.

In fact, if you have filed Canadian returns for 2004 and 2005, they should likely be reversed as well under article IV of the US / Canada Income Tax Treaty.  article IV overrules most of the Canadianisms people have such as some furniture stored in Canada or a favourite car stored at dad's place.  GOTO and read the US/Canada Tax Section in the second box down on the right hand side.  Pay close attention to Article IV - then read the Judge Teskey decision in the Dennis Lee Case and realize that Dennis Lee was not in the US or another tax treaty country,.

The above is an observation. In reply to your two questions:

1.    You are in the position where you CAN contribute to a 401(K).  I am assuming here that you are not taxable in Canada as per my observations above.  In addition, an IRA would give you a US tax deduction.

2.    As I said, it is rare for a TN visa holder to file a Canadian Tax return unless they have a dependent family in Canada and commute back and forth on a really regular basis.  Your going to Canada to help out at your old firm for a week or two does NOT by itself, make you taxable in Canada on your world income.. Your ownership of cars and furniture does not make you taxable in Canada by itself when the Treaty is used.

david ingram wrote:
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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 for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included."
Be ALERT,  the world needs more "lerts"
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. 
This from "ask an income trusts tax and immigration expert" from or or David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, 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, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention

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