Thank you very much for this helpful answer. How much would be
your rate to take care of the canadian tax return for my husband
and I for the year 2005?
My medicare card with Quebec is almost expired and they are now
sending me the form to renew it. Should I write them and tell
them I am no longer living in Quebec since last year or should I
just not send them the form for renewal? My husband's medicare
card did not reach it's expiration date, should he contact them
directly to tell them he was away since a year ago and will there
be any consequences since we did not advise them earlier? I am
also repaying a student loan in quebec and have received a TP4 to
deduct part of the interests I am paying on this loan. Did I need
to repay the totality of this loan in 2005 or can I still keep on
paying it monthly? Finally apart from the RRSPs which we are
planning to repay the whole amount borrowed based on your
suggestion (we are repaying in 2006 instead of 2005, is that a
problem?) and apart from the condo we are renting, we have a few
bank accounts in canada mostly held to manage the condo rental.
Can these accounts remain open?
Looking forward to hearing from you in the near future,
Have a good day!
=============================================
David Ingram replies:
The RSP has to be repaid before March 1st, 2006. Any later and
it is ALL taxable in 2005.
Yu can continue to pay the Student Loan.
The Quebec Medical is no longer valid and has not been valid
since 90 days after you left. There is no sense paying it any
more.
In fact, if you write and tell them when you left, they will
refund the premiums you paid in excess.
Your accounts can remain open but you must tell the banks that
you are a non-resident.
I generally quote between $800 and $2000 for leaving Canada
arriving in the US tax returns.
You mention the Canadian return only.
I strongly doubt that you will find someone who can do the US
portion this year. I know that is a strong comment but there are
so few people in Florida that can do it, that I just say not
likely.
You may get a return that is accepted by the IRS but it is not
usually right.
The US return has to include forms 8891, 1116, T DF 90-22.1 and
schedule E to report the rental income in Canada. The 1116 is to
report any foreign tax credit. Whoever does one should do the
other,
In addition, it is quite often better to include the Canadian
income on the US return and claim the foreign lax credit or
exemption and get a lower tax rate because you can file a joint
return. At one time I had 14 offices in Florida (back in the
70's to be sure) and I never saw a local prepare an arriving
Canadian return correctly.
david ingram
taxman at centa.com wrote:
QUESTION: Thank you for creating such an informative and
insightful website!
My husband and I are both Canadian citizens and have been
working in the US
for more than a year on a TN visa. We worked more than a 183
days a year in
Florida, we own a condo which we call home and file our income
taxes in the
US. In Quebec, we also own a condo which we are renting out
through an
agency (third party) and we still hold our Quebec driver's
license and
medical insurance card, although we have not used any of these
governement
services while we were out of the country.Finally, we are also
repaying our
RRSP for the First time home buyer's program and hold a bank
account in
Canada to pay our mortgage for the condo we are renting and are
repaying my
quebec student loan. Question: Can we be considered 'Deemed
Non-Residents'
rather than 'Factual Residents' of Quebec/Canada for tax
purposes? Is there
some way for us to pay our work income tax only to the US?
---------------------------------------------------------------
------------
david ingram replies:
The good news is that your wages are only taxable in Florida
under Article
IV of the US / Canada Income tax treaty as described.
However, you should immediately give up your Quebec medical (it
was
officially dead after 90 days anyway even if you still have a
card and even
if you are still paying the premium.
THE BAD NEWS is that when you leave the country as you have
done, the RRSP
Home Buyer's Plan is either taxable on your leaving Canada
returns or you
have to repay the money. I usually advise you to pay the tax if
the over
all income is less than $35,000.
On the final Canadian return you must file forms T1161. .
Since the condo in Canada is rented, you must file another
Canadian return
each to report the rental income and expenses only. This is
called a
section 216(4) return and is due by June 30 of the following
year, i.e. June
30 2006 for the 2005 year.
We would be glad to look after the Quebec, Federal and US
returns for you in
this difficult transition year (and any others of course).
-----------
This previous question may help you as well.
QUESTION:
When we left Canada in early 2001, our accountant didn't ask us
to fill up
Form
T1161 as it wasn't in circulation then. I did some research on
the forms
used in 2001 and it wasn't there. It appeared in 2002/2003.
We did dispose of our property and some investments.
Will this be an issue if we come back?
Thanks for your input.
===============================
david ingram replies:
Departure tax rules have existed in Canada since July 17, 1971.
Before the
formal T1161, you just listed the items in a free form manner.
However, your
research is incorrect.
http://www.cra-arc.gc.ca/E/pbg/tf/t1161/t1161-04e.pdf
The form T1161 was originally issued in draft form in about Oct
1996 along
with new regulations which added other items for reporting. For
instance,
up to Oct 1996, no departure tax had to be calculated on the
value of shares
of a private CCPC (Canadian controlled Private Corporation).
There is a certain analogy to the US form 8861 for reporting
RRSP accounts -
we knew the form was coming for over a year - then we had a
draft form for 6
months - and then the full fledged form - however, the rules
for reporting
were originally made in 1989 and the requirements to report
Canadian RRSPs
to the US Government was handled with free flow designed
reporting rules
according to US REV-PROC 1989-45 which was modified by REV-PROC
2002-23 in
April and then codified with form 8891 in 2004
http://www.irs.gov/pub/irs-pdf/f8891.pdf). At all times there
were big
penalties for failing to report a Canadian RRSP. The current
penalty is 35%
of the amount contributed to the Canadian RRSP plus 5% a year
for every year
that the RRSP is not reported. This would apply to you as well
if you have
left a Canadian RRSP behind. Then of course, you need to report
your
Canadian RRSP accounts and any other Canadian financial
accounts on form T
DF-90.21 (see bottom of Schedule B of your 1040) and the
failure to report
the financial accounts (to the department of the Treasury in
Detroit)
carries a penalty of up to $500,000 PLUS 5 years in jail. At
this point in
time, I have never seen anyone penalized with the 5% a year for
an RRSP
account but I have seen several $10,000 penalties for failing
to report the
accounts to Treasury including one 105 year old lady with a
$10,000 fine for
failing to report a $38,000 bank account at the Royal Bank of
Canada in
Edgemont Village in North Vancouver, and a 68 year old Arizona
lady with a
$60,000 fine for failing to report over $500,000 in Canadian
RRSP's. Note
that the $60,000 fine was not the 5% a year, it was for failing
to report
the existence of Canadian financial accounts.
http://www.irs.gov/pub/irs-pdf/f9022-1.pdf
Back to Canada - By similar rules, departure tax clearly
existed before the
T1161 was issued and was to be reported in writing without a
specific form.
If you have disposed of assets affected by form T1161, you
should do some
amending and be prepared to pay the proper tax to Canada. When
you do so,
the US government will issue you a federal foreign tax credit
and a refund
for up to ten years.
I cannot guarantee that it will be an issue on your return. At
the moment,
the CRA is not doing a good job of catching people on these
items. I doubt
if the CRA is catching 2%. However, the intention is to get
them all so i
think you should correct the situation to stay clean.
Unfortunately, the CRA can go easily go back eight years if
they feel that
you have wilfully evaded the situation and obviously, since you
now know
about it, your failure to fix it would be wilful evasion.
Your accountant was clearly incorrect in not calculating a
departure tax or
at least taking it into consideration on your departure.
Remember that
there is no departure tax to be paid on small amounts. The only
time it is
necessary to provide security is when the federal tax exceeds
the guidelines
to be found on form T1243
(http://www.cra-arc.gc.ca/E/pbg/tf/t1243/t1243-04e.pdf) and
T1244
(http://www.cra-arc.gc.ca/E/pbg/tf/t1244/t1244-04e.pdf
$12,107.50 for
Quebec and $14,500 Fed tax for former residents of all other
provinces)
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
permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE
talk show
called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on
the internet
at
www.600AM.com
Call (604) 280-0600 to have your question answered. BC
listeners can also
call 1-866-778-0600.
Callers to the show and questioners on this board can also
attend the
Thursday Night seminars on finance and making your Canadian
Mortgage
Interest deductible.
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
US / Canada Real Estate Specialists
Home office at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 9 AM to 9 PM 7 days a week (please do not
fax or phone
outside of those hours as this is a home office)
email to taxman at centa.com
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed
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