Moved to US with US citizen wife
QUESTION: Hi David,
My wife was born in the US but only spent 3 days there. She has been living in Canada for 45 years until last year. I am a Canadian citizen working in the US on a L1 Visa.
We have been living in xxxxxxxx for the last 18 months. We own a home in xxxx and have been renting it out since we came to the US 18months ago.
My company has asked me to stay, and we are trying to navigate through all the tax implications of doing so. Do we have to pay capital gains tax on our home in Canada if we sell it? Will my wife be liable for taxes to the US forever because she is a dual citizen?
If you have any guidance for us, or can recommend the type of professional we should be talking to we'd appreciate it.
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david ingram replies:
You will have been asking questions everywhere and have found out how hard it is to find anyone who can deal with them.
You are, however, a typical client of this office.
1. You should each have filed a section 216(4) tax return on Canadian forms 1159 and 776 to report your retnal income in 2006. That return was due June 30th so is no late and subject to penalty.
2. figures on the T776 ( http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-06e.pdf (fillable) )
and T1159 ( http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-06e.pdf ) should then be converted to US dollars and included on US schedule E, 4562 and 1116.
3. If you sell the Toronto house, you will both need to fill out
forms T2062 ( http://www.cra-arc.gc.ca/E/pbg/tf/t2062/t2062-07e.pdf ) and
T2062A ( http://www.cra-arc.gc.ca/E/pbg/tf/t2062a/t2062a-07e.pdf )
within 10days of the sale to avoid a $25.00 a day fine (each).
Filling out the T2062 and T2062A forms enables you to have 25% withholding tax on the increase in value fromwhen you left Canada until the date of sale rather than a withholding of 25% of the gross sale price.
Your wife has always been liable to file US income tax returns and both of you must now file froms TDF 90-22.1
http://www.irs.gov/pub/irs-pdf/f90221.pdf - read bottom of form to see fines - a minimum of $10,000 now
and 8891 to avoid penalties of up to $500,000 plus five years in jail for failure to file the TDF 90-22.1 and 35% of the amount in an RRSP plus 5% a year for evcery year you fail to file or conform to the older rules for form 8891.
http://www.irs.gov/pub/irs-pdf/f8891.pdf
Your wife should file six years back to avoid significant penalties.
She will always be liable to file US returns.
You should take immediate steps to take out a green card with your wife sponsoring you. That will give you far more job security and the ability to change jobs at will if you want to.
We, of course, provide trhe kind of services you require.
My wife was born in the US but only spent 3 days there. She has been living in Canada for 45 years until last year. I am a Canadian citizen working in the US on a L1 Visa.
We have been living in xxxxxxxx for the last 18 months. We own a home in xxxx and have been renting it out since we came to the US 18months ago.
My company has asked me to stay, and we are trying to navigate through all the tax implications of doing so. Do we have to pay capital gains tax on our home in Canada if we sell it? Will my wife be liable for taxes to the US forever because she is a dual citizen?
If you have any guidance for us, or can recommend the type of professional we should be talking to we'd appreciate it.
-----------------------------------------------
david ingram replies:
You will have been asking questions everywhere and have found out how hard it is to find anyone who can deal with them.
You are, however, a typical client of this office.
1. You should each have filed a section 216(4) tax return on Canadian forms 1159 and 776 to report your retnal income in 2006. That return was due June 30th so is no late and subject to penalty.
2. figures on the T776 ( http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-06e.pdf (fillable) )
and T1159 ( http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-06e.pdf ) should then be converted to US dollars and included on US schedule E, 4562 and 1116.
3. If you sell the Toronto house, you will both need to fill out
forms T2062 ( http://www.cra-arc.gc.ca/E/pbg/tf/t2062/t2062-07e.pdf ) and
T2062A ( http://www.cra-arc.gc.ca/E/pbg/tf/t2062a/t2062a-07e.pdf )
within 10days of the sale to avoid a $25.00 a day fine (each).
Filling out the T2062 and T2062A forms enables you to have 25% withholding tax on the increase in value fromwhen you left Canada until the date of sale rather than a withholding of 25% of the gross sale price.
Your wife has always been liable to file US income tax returns and both of you must now file froms TDF 90-22.1
http://www.irs.gov/pub/irs-pdf/f90221.pdf - read bottom of form to see fines - a minimum of $10,000 now
and 8891 to avoid penalties of up to $500,000 plus five years in jail for failure to file the TDF 90-22.1 and 35% of the amount in an RRSP plus 5% a year for evcery year you fail to file or conform to the older rules for form 8891.
http://www.irs.gov/pub/irs-pdf/f8891.pdf
Your wife should file six years back to avoid significant penalties.
She will always be liable to file US returns.
You should take immediate steps to take out a green card with your wife sponsoring you. That will give you far more job security and the ability to change jobs at will if you want to.
We, of course, provide trhe kind of services you require.
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