Moving to Canada from US mid-year
QUESTION:
After 5 years away as non-residents to Canada, my family and I moved back to Vancouver from the US at the end of July.
My husband is employed full time here and I am self employed with a company that's incorporated in the US (with US clients).
My question is, since we will have been in Canada this year less than 183 days, will I have to file a Canadian tax return and declare my world income or can I just file in the US this year? (I assume that my husband will have to file here this year because he's employed here. )
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david ingram replies:
When you have moved back to Canada, yuo have a date of entry and the number of days is irrelevant.
The number of days is used when someone is in and out of the country, (usually on a regular basis), NOT when one moves to Canada to live. If you moved here with husband on Sept 1 and spent 90 out of the next 120 days working in the USA, you would be taxable in Canada because of your move here.
In other words, you are taxable on the income from the moment you entered Canada.
You are likely not taxable in the USA on that income unless you are still going across the border to the USA to actually perform the work.
Your email would indicate that you must have had a visa to do the work there but will likley have given that visa up unless you are:
a - A US citizen in which case, you are still taxable in the USA on your world income but if the work is performed in Canada, would pay tax to Canada first OR
b - You have a green card and filed form I-131 before you left the USA to keep your green card alive while in Canada (has to be renewed annually) OR
c - You have an E-2 Visa which would allow you to contiue working in the US for your own company. If it is your own company, a TN visa should not have been issued if that was what you were using OR
d - You have an H1 to continue working for the US company in which case, although you call it your own, It would more likley be that you have a 50% or more partner in the USA.
If you are physically performing some or all of the work in the USA, then the IRS and New York has first claim on that money (if you worked in New York, but there is no state tax if you worked in Bellingham, Washington, or Anchorage, Alaska) and Canada has second claim. You would pay tax to the Federal Government and the State (if in a state with income tax) first and then report the money again on line 104 of the Canadian T1. You would then report the money again on line 433 of the schedule 1 and claim the tax, FICA, Medicare and State tax on line 431 of the Schedule 1 (fill out T2209 first) and then put any excess on line 48 of schedule 428 (fill out T2036) if there was some left over to claim against your provincial tax.
If you are a US citizen or green card holder and are working in Canada only, you would pay the tax to Canada first and then claim the Fed Tax, Prov Tax and CPP you paid to Canada as a foreign tax credit on US form 1116.
Another possible scenario would be that you are a US citizen who does not really want to live and work in Canada even though your husband is here. You have sort of moved her but opened an office in Bellingham or Marysville across the border and are spending a lot of time there and are a factual resident of Canada have to report your world income but not taxable on income not earned in Canada. In this case, (I have a couple of dozen of these where the wife lives and works in teh US and the husband in Canada or vice versa), you report your incometo Canda but exempt all US income on line 256 under Article IV of the US/Canada Income Tax Treaty.
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I can tell you without reservation that you will likely need help with this and that is what we do. �
After 5 years away as non-residents to Canada, my family and I moved back to Vancouver from the US at the end of July.
My husband is employed full time here and I am self employed with a company that's incorporated in the US (with US clients).
My question is, since we will have been in Canada this year less than 183 days, will I have to file a Canadian tax return and declare my world income or can I just file in the US this year? (I assume that my husband will have to file here this year because he's employed here. )
---------------------------------------------------
david ingram replies:
When you have moved back to Canada, yuo have a date of entry and the number of days is irrelevant.
The number of days is used when someone is in and out of the country, (usually on a regular basis), NOT when one moves to Canada to live. If you moved here with husband on Sept 1 and spent 90 out of the next 120 days working in the USA, you would be taxable in Canada because of your move here.
In other words, you are taxable on the income from the moment you entered Canada.
You are likely not taxable in the USA on that income unless you are still going across the border to the USA to actually perform the work.
Your email would indicate that you must have had a visa to do the work there but will likley have given that visa up unless you are:
a - A US citizen in which case, you are still taxable in the USA on your world income but if the work is performed in Canada, would pay tax to Canada first OR
b - You have a green card and filed form I-131 before you left the USA to keep your green card alive while in Canada (has to be renewed annually) OR
c - You have an E-2 Visa which would allow you to contiue working in the US for your own company. If it is your own company, a TN visa should not have been issued if that was what you were using OR
d - You have an H1 to continue working for the US company in which case, although you call it your own, It would more likley be that you have a 50% or more partner in the USA.
If you are physically performing some or all of the work in the USA, then the IRS and New York has first claim on that money (if you worked in New York, but there is no state tax if you worked in Bellingham, Washington, or Anchorage, Alaska) and Canada has second claim. You would pay tax to the Federal Government and the State (if in a state with income tax) first and then report the money again on line 104 of the Canadian T1. You would then report the money again on line 433 of the schedule 1 and claim the tax, FICA, Medicare and State tax on line 431 of the Schedule 1 (fill out T2209 first) and then put any excess on line 48 of schedule 428 (fill out T2036) if there was some left over to claim against your provincial tax.
If you are a US citizen or green card holder and are working in Canada only, you would pay the tax to Canada first and then claim the Fed Tax, Prov Tax and CPP you paid to Canada as a foreign tax credit on US form 1116.
Another possible scenario would be that you are a US citizen who does not really want to live and work in Canada even though your husband is here. You have sort of moved her but opened an office in Bellingham or Marysville across the border and are spending a lot of time there and are a factual resident of Canada have to report your world income but not taxable on income not earned in Canada. In this case, (I have a couple of dozen of these where the wife lives and works in teh US and the husband in Canada or vice versa), you report your incometo Canda but exempt all US income on line 256 under Article IV of the US/Canada Income Tax Treaty.
----------------------------------------------------------
I can tell you without reservation that you will likely need help with this and that is what we do. �
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