Dear David,
My wife is going to work in the US. We have been married for 7
years and have a 20 year old daughter (I adopted my wife's biological
child) who will be studying in the US for that period.
I am going to remain in Canada and we plan to visit each other
during our holidays.
Is there any way my wife can pay taxes only to the US during this
period? we would like to make an appointment with you to hear the
details ASAP as we need to make a go or not go decision based on the
answer.
Regards
--------------------------------------------
david ingram replies:
If you were separated, there would be no problem.
However, as a married couple, the CRA will want to tax your wife on the
basis that her family ties are in Canada BUT is she has her daughter
with her AND if 'you' visit her in the US four times to one rather
than her "coming home' every couple of weeks, she should be considered
factual resident of Canada whose US income is exempt from Canadian tax
under Article IV of the US / Canada Income Tax treaty.
Article IV of the Treaty reads as follows:
Article IV
Residence
1. For the purposes of this Convention, the term
"resident" of a Contracting State means any person that, under the laws
of that State, is liable to tax therein by reason of that person's
domicile, residence, citizenship, place of management, place of
incorporation or any other criterion of a similar nature, but in the
case of an estate or trust, only to the extent that income derived by
the estate or trust is liable to tax in that State, either in its hands
or in the hands of its beneficiaries. For the purposes of this
paragraph, an individual who is not a resident of Canada under this
paragraph and who is a United States citizen or an alien admitted to
the United States for permanent residence (a "green card" holder) is a
resident of the United States only if the individual has a substantial
presence, permanent home or habitual abode in the United States, and
that individual's personal and economic relations are closer to the
United States than to any third State. The term "resident" of a
Contracting State is understood to include:
(a) the Government of that State or a political
subdivision or local authority thereof or any agency or instrumentality
of any such government, subdivision or authority, and
(b)
(i) a trust, organization or other arrangement
that is operated exclusively to administer or provide pension,
retirement or employee benefits; and
(ii) a not-for-profit organization
that was constituted in that State and that is, by
reason of its nature as such, generally exempt from income taxation in
that State.
2. Where by reason of the provisions of paragraph 1
an individual is a resident of both Contracting States, then his status
shall be determined as follows:
(a) he shall be deemed to be a resident of the
Contracting State in which he has a permanent home available to him; if
he has a permanent home available to him in both States or in neither
State, he shall be deemed to be a resident of the Contracting State
with which his personal and economic relations are closer (centre of
vital interests);
(b) if the Contracting State in which he has his
centre of vital interests cannot be determined, he shall be deemed to
be a resident of the Contracting State in which he has an habitual
abode;
(c) if he has an habitual abode in both States or
in neither State, he shall be deemed to be a resident of the
Contracting State of which he is a citizen; and
(d) if he is a citizen of both States or of
neither of them, the competent authorities of the Contracting States
shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1
a company is a resident of both Contracting States, then if it was
created under the laws in force in a Contracting State, it shall be
deemed to be a resident of that State. Notwithstanding the preceding
sentence, a company that was created in a Contracting State, that is a
resident of both Contracting States and that is continued at any time
in the other Contracting State in accordance with the corporate law in
that other State shall be deemed while it is so continued to be a
resident of that other State.
4. Where by reason of the provisions of paragraph 1
an estate, trust or other person (other than an individual or a
company) is a resident of both Contracting States, the competent
authorities of the States shall by mutual agreement endeavor to settle
the question and to determine the mode of application of the Convention
to such person.
5. Notwithstanding the provisions of the preceding
paragraphs, an individual shall be deemed to be a resident of a
Contracting State if:
(a) the individual is an employee of that State or
of a political subdivision, local authority or instrumentality thereof
rendering services in the discharge of functions or a governmental
nature in the other Contracting State or in a third State; and
(b) the individual is subjected in the
first-mentioned State to similar obligations in respect of taxes on
income as are residents of the first-mentioned State.
The spouse and dependent children residing with such
an individual and meeting the requirements of subparagraph (b) above
shall also be deemed to be residents of the first-mentioned State.
----------------------------------
Under these circumstances, she can even file in the US as a head of
household (with a non-resident non US citizen spouse with no US income)
which will give her a very good US tax rate.
Phone Gillian Bryan at 604-980-0321 between 10:30 and 4 PM to make an
appointment to see me if you wish. Pricing, etc., follows:
--------------
----
In 2005 I was living in Ontario, Canada and joined
a U.S. company. I continued to live in Canada through July of this
year. I seem to have significant tax “issues”. Partly because I know
the IRS does not withhold as much tax as Revenue Canada requires (I
knew I would owe) and secondly, because I am not an expert tax preparer
and I should have gone to the experts. Revenue Canada has now
completely disallowed my tax payments to the IRS as a foreign tax
credit and are claiming I owe them a fairly significant chunk of money.
I think I need to go back and have a professional
do my 2005 U.S. returns, which I never did. I also will need some
help/support with Revenue Canada to make sure that I get my foreign tax
credit for the monies paid. I will also have a professional prepare my
2007 return when the time comes because in this year, I have actually
become a resident alien. I am working and living in Pennsylvania now
under and H1-B.
Can you help?
I will need
an estimate of costs – I do not have a large budget but thought I would
start by asking
My returns are not difficult at all. I have
simple income/deductions from a T4 and W2 in 2005 and just a W2 in
2006. I have some charitable donations and that’s about it. Pretty
simple returns (I think). My wife does not work, and I have two kids,
aged 11 and 7.
Please advise if you can help.
Thanks in advance,
-------------------------------------------------------------------------------
david ingram replies:
1. What you are asking for is what we do. I can not tell if you
were physically working in the USA in 2005, 2006 and up to July 2007
and commuting or if you were telecommuting and working in Canada. It
is also different if you had a spouse and children in Canada or if you
were in the US for most of the time and just kept your old house in
Canada while waiting for the issuance of the H1B, etc. In other
words, if you were in the USA most of the time and came back to Canada
sporadically,you may still have had ties to Canada but are not
necessarily 'living' in Canada for tax purposes under Article IV of the
US/Canada Income Tax Convention. You may be a FACTUAL Resident exempt
from Canadian Tax under Article IV of the Treaty.
And, if you were not sleeping in Ontario 153 nights a year, you did not
qualify for OHIP. If you did not qualify for OHIP in 2006 for
instance, it is not reasonable that you should be taxable in Ontario
but having a wife and two children in Ontario guarantees that the CRA
will try and tax you. However, if your intention was to move and your
wife and children were only remaining in Canada until the house sold or
until your wife finished a course at Ryerson or something specific, you
may not be taxable in Canada.
2. In general, I quote $900 to $3,000 for a US / Canada income tax
return and there is more clarity below. Fixing something generally
costs more than preparation in the first place if both countries are
involved. If your US return is correct, you are likely looking at
$500 or $600 as a minimum and $1,000 to $1,200 as a high to repair the
Canadian return.
You should go to
www.centa.com
and read the US/CANADA
Income TAX section in the second box down on the right hand side.
Pay attention to the Wolf Bergelt Case where he was not taxed in Canada
when he moved to the US even though his wife and four children were
still living back in Ottawa. You will find this in just about the
exact middle of the section. And, on the other hand, David McLean was
taxed when he came back after 7 years in Saudi Arabia. It is important
to recognize the differences between living in a treaty and a
non-treaty country.
-------------------------------------------------------
--Hello There,
I was wondering if I could get some guidance.
I had left Canada in 2000 to work in the US on an LI (spec
knowledge)Visa. I had lived there and work there and still do since
then. However in 2002, My wife pursued her grad studies in BC,Canada
and we exchanged visits.
Here are some facts:
1. I spent more than 10 months in the US (for residence determination).
2. I have had permanent residences in 2 separate states in the US all
these years.
3. I have filed and paid US taxes and have been deemed a US resident
for tax purposes.
4. I have maintained a bank account in Canada to pay for my wifes
Tuition.
5. Every year since 2001 at Canadian Tax time (when my wife files her
Canadian Tax return), I call revenue Canada and give them these facts
and asked them if I have to file a Canadian Tax return and they respond
with a No I do not have to do anything. However they ask me to call the
International tax office and confirm. I do just that and they respond
that I do not have to do anything as i am not a resident. (I wish I had
taped them).
In any event I have recently received a letter from CCRA stating that I
owe taxes from 2002-2006. I have informed them that i am a resident of
the US for tax purposes. However because of my significant ties (My
Wife, and bank account) I have been determined to be a factual resident.
Here are my questions.
1. What form do I need to fill out?.
2. Do they expect me to declare all my US income, after converting it
to Canadian dollars (when I did not have the luxury of using all that
converted amount which was very high in the former years), as I had
spent most of it in USD living in the US.
3. How can I be a resident of two separate countries for tax purpose
that have a tax treaty?.
4. CCRA refuses to listen to my questions (besides trying to find out
what form to fill out) and simply states that inspite of being a US
tax resident, due to my significant ties, i am a factual resident of
Canada and have to file and pay the horrendous amount of taxes
assessed. I checked all the forms and they are correct
5.
6. I have a CCRA collections officer chasing me, while i am trying to
get answers to my situation.
What are my options besides filing, which I intend to do as I do not
want to face criminal charges.
Any help or advice would be appreciated.
Thanks and Cheers
--------------------------------------
david ingram replies:
I agree that you are a factual resident of Canada BUT, and it is a BIG
BUT, you are A FACTUAL RESIDENT SUBJECT TO THE BENEFITS OF A TAX TREATY
as described in the government's own T1 General guide.
For the 2005 year it is the top left hand paragraph "D" on page 10.
1. File the Canadian returns and report all of your income and
exempt it all on line 256 under Article IV of the US / Canada Income
Tax Convention (Treaty).
.
2. yes
3. You can't be under the treaty - However, intent is important. If
your wife is just studying and intending to move to the US when
finished and you have a green card application in process, you are
absolutely (in my opinion) only taxable in the US. It also helps if
she spends as much or more time visiting you in the US as you spend
coming up to Canada to visit her. I tell people in your position to
stay out of Canada and have your family visit you in the US.
4. I disagree if you are intending to stay in the USA. -- If,
on the other hand, there was never any intention to stay in the USA
and
you are intending to come back to Canada in a year and your wife never
visited you in the USA and you made no effort to get a green card, the
CRA might have a point but only might. Your physical presence in the US
clearly makes you a taxable resident of the US. Your job means that
your financial affairs are in The US. It would help if you had filed a
factual return each year since you left.
5. ??
6. That is his job. Hopefully, the arbitrary assessments they have
sent you are new enough you can file formal notices of objection - i.e.
within 90 days of their issuance.
Get the returns done ASAP. Glad to to do them for you if necessary.
--QUESTION:
Hi, I am currently working and living in USA. All my income comes from
US employer. However, my spouse is living in Canada and she comes to
USA to visit me bi-weekly. I am told by some tax specialist that I can
be considered as deemed non-resident according to US-Canada tax treaty,
thus I don't need to claim Canada tax. Is it true? Thanks.
------------------------------------------------------
david ingram replies:
You are a factual resident and doing it right by having your wife visit
you in the US rather than you fly home all the time. Read on for more
information.
My_question_is: Applicable to both US and Canada
Subject: where do I file taxes
Expert:
taxman@centa.com
Date: Wednesday January 30, 2008
Time: 01:33 AM -0000
QUESTION:
I have been living in the San Francisco since august 2005. I work for
an american company. I fly home pretty much every weekend to Vancouver
where my wife and kids live. I am on a H1B visa. Do I need to file in
both the U.S. and canada every year or after this amount of time can I
just file in the U.S.
--------------------------------------------------------------------
david ingram replies:
I am surprised that you are on an H1B. I would have thought that the
hotel would have transferred you on an L1 visa which is easier and
faster for a manager with a multinational corporation.
If your intention is to stay in the US and you are waiting for your
wife and children to join you, then you are a factual resident of
Canada who has to file a Canadian return but would exempt everything on
Line 256 under Article IV of the US / Canada Income Convention
(Treaty). It helps in this case if your family flies down to join you
in the US as often as you fly home.
If you are not intending to stay in the US and are just there for a
short time and your family has no intention of moving, you are likely
taxable in Canada because you are really commuting to a job in the USA.
You would likely do well to spend a few dollars and spend an hour with
me. The difference is thousands because you get to file a joint return
in California.
---------------------------------------------------------