QUESTION:
I was transferred to the Vancouver branch of my US-based company in April
2004 from California. I have income in California and from April-December
2004 income in Canada. I'm a US permanent resident, but a national of
another country which does NOT have a tax treaty in the US. I was in Canada
less than 330 days in 2004. I'm still living and working in Canada. I've
been struggling with my taxes since March of this year, not knowing what to
deduct and what to claim as credit. I thought I needed Form 2555 in
addition to the 1040, but after reading all the information available, I now
think that I don't qualify.
I think I need to file form 1116. I filed my taxes here in Canada 3 months
ago, but have not heard back yet. I'm suppossed to get about $3500 in
refund. My Canadian income in 2004 was over $100K CAN, and my US income was
less than $45K US. I had a rental property in California in 2004, and to
complicate things further, I bought a property in Vancouver in October 2004.
Can you help point me in the right direction in terms of forms needed?
P.S. I have a 401K and an retirement account in Canada.
Thanks!
===============================================
david ingram replies:
1. Did you file Form I-131 BEFORE you left the US? This is the form that
preserves your resident (green) card for re-entry into the US as a permanent
resident. If you did not, you are in serious danger of having lost it
already.
If you have lost it, then your tax return is different than if you are still
a permanent resident. Buying a house here without an I-131 extension sort
of (but not necessarily) guarantees the loss of the green card.
2. For Canada's return,
* you did not qualify to buy an RRSP for the 2004 tax return. You qualify
for "this" year's RRSP based upon "last" year's earnings in Canada. You
"will" qualify for an RRSP on your 2005 return but do not buy any until you
get your assessment from Canada. Please also note that the Pension
adjustment amount (I am assuming that you have a company pension plan)
greatly restricts the amount you can put into your RRSP
* You had to report your California rental on form T776 of your Canadian
Return
* You had to pro-rate your PERSONAL exemption amounts for 2004 and it is
unlikely that the Canadian return is correct.
3. For the US return,
* Form 1040
* Schedule E for the rental
* form 1116 to claim the foreign ta credit for Canadian Taxes paid OR Form
2555 to claim exemption for up to $80,000 US pro-rated for the number of
days in Canada
* The US form should have had a 2350 filed to allow you to claim bona fide
residence in Canada - With the form 2350 filed, your 2004 US return would
not have been due until Jan 15, 2006
* Forms T DF.90-22 to report your Foreign (Canadian and your home country)
accounts if the combined balances in all accounts is more than $10,000 US.
They would have been over $10,000 for sure the day you bought the house in
Canada.
You should likely retain us to do the returns for you. The fee would be
between $750 and $1,750, tax deductible, and save you a lot of headaches.
Answers to this and other similar questions can be obtained free on Air
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