QUESTION:
Hi,
I am working in Detroit, USA on H1B1 visa and I live in Windsor as Canadian
PR with my family. I have twin babies who are US born citizen. I daily
commute for work from Windsor to Detroit.
I am keeping 80% of my savings in US banks and remaining in Canadian banks
(for monthly expenses and other purposes in Canada). Would I have any
problem while filing the taxes as I would file the taxes first time in
Canada next year? What is advisable?
Thanks,
------------------------
david ingram replies:
Your first tax liability is to the United States on your wages and on the
earnings from the interest.
However, you might want to show yourself as a non-resident of the USA under
Article 4 of the US / Canada Income Tax Treaty.
If you did so, you would pay no tax to the US on any interest you received
but you would pay 15% tax to the US on any dividends you receive.
If you choose the 1040NR route, Make sure you provide your US investment
people with a filled in W8-Ben form immediately.
This will mean that the institution will only withhold 15% tax on dividends
and will not withhold tax on any interest. You can see the form here:
http://www.irs.gov/pub/irs-pdf/fw8ben.pdf
After getting the US figures, you will convert all the numbers to Canadian
dollars and report them on a Canadian T1 General.
The foreign tax you paid to the US including tax, Social Security and
Medicare will go on line 431 of the Canadian return and the Foreign income
will go on line 431 of schedule 1 of the federal form. The remainder of
both figures (after the federal allowance) will go on the equivalent lines
of the Ontario schedule 428.
Your tax return would be immensely less complicated if you did not have any
investments in the USA.
You should also opt out of any 401(K) plans you might have because Canada
does not recognize the deduction even though they want to tax you on
withdrawal. I will remove this caveat if you have a matching plan where
your company is contributing an equivalent amount.
However, even in this case, you should arrange with your employer to give
you the money instead and opt out of the plan and buy a Canadian RRSP.
Happy to look after the returns at the time.
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a
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