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QUESTION:
Hello,
I am a Canadian Citizen but lived and worked in the US for 1.5 years. The first 5 months, I was still paid via the Canadian "affiliate" company. I filed Canadian taxes as normal in 2002 (even though my residence was in US).
My question is this: How do I avoid paying more taxes than I already have in the US? What order should I do the forms in? I have the US taxation forms for both state and IRS and form to establish residency in Canada. Also, I am not employed at the moment. Could you recommend a tax accountant that charges on a sliding scale?
Thank a lot,
TXXXXXXXXXX
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david ingram replies:
You should have filed a US return and paid tax to the US for your first five months, while asking for a refund from Canada. Your employer left you in a horrible position and should be chastened for doing so.
The US income would not have been taxable in Canada because you were a departing Canadian. (I am assuming here that you actually moved to the US and were not commuting daily or weekly from a home you kept in Canada. Your next return would have been all of 2003 in the USA and no tax return to Canada unless they asked for it and if they did, you would file a nil return and claim exemption from Canadian Tax under Article IV of the US Canada Income Tax Convention (Treaty). It sounds like you were still there for one month of 2004. This month is taxed in the US and you then return to Canada as an arriving Canadian.
You would have paid much less tax under this scenario,
Goto www.centa.com and read the US/Canada Taxation section. It will help you. Even with the penalties resulting, it is likely to your benefit to correct 2002. You should ask your former employer to make up for any penalties because your employer is the entity that left you hanging on the line.
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You are looking at a $700 Cdn bill for us to straighten the returns out and that is on a sliding scale. It is worth more.
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