QUESTION: I am a Canadian citizen working in the U.S. on a TN-Visa. My
employer has initiated the process of transfering me to a H-1B. Because I
want to calim non-resident status in Canada for tax purposes, I have cut all
my ties. I have cancelled Canadian credit cards, health card, draiver's
license. My only tie to Canada is a home and the associated mortgage (my
parents presently stay in the house I won.) My parents are Canadian
citizens and have been in canada for over 23 years and are not dependent on
me. My wife and son reside with me in the U.S. Will the house in Canada
likely to cause any trouble with respect to claiming non-resident status for
tax purposes?
============================
david ingram replies;
The house does not make you a resident of Canada. You have another house
(even if rented available to you in the United States. However,
When you left the country, you should have filed a T1161 with the CRA. This
T1161 lists your "left behind" assets and their value as you left the
country. Normally it would list any stocks, bonds, patents, business
ownership and real estate holdings. Real estate, stocks, business
ownerships have a deemed departure value and any increased value is
considered to have been realized as you left and "INCOME TAX CAN BE DUE AT
THAT MOMENT".
You declare the values on from T1161 (a $2,500 fine for not filing if
necessary ($25/day with 100 day maximum).
The 1243 figures out the gain and the 1244 defers the tax and provides you
an opportunity to provide security to defer paying the tax.
This former Q & A may help you.
QUESTION:
I am a Canadian Citizen moving to the US on a K1 Visa and getting married
very shortly. My employer (in Canada) would like me to continue working for
them in the US. Who do I pay taxes to, is it just the US or is it both the
US and Canada. They also want to pay me in Canadian Currency (which I am
against) but I feel that it should be in USD - Is there any legal issue with
this?
-------------------------------
david ingram replies:
You will pay tax to the United States which will be a problem because you
will not be putting money into the US social Security System unless you show
yourself as self-employed. If you become a self-employed contractor, you
will have to pay the IRS about 16% for Social Security as well as your
Federal and state (if in one of the 43 taxing states) taxes.
Your employer in Canada should pay you in Canadian dollars because he is a
Canadian employer. You will have to take the risk on currency conversion.
However, your employer should pay you his or her or its share of CPP and EI
so that you have that money to pay your US Social Security.
When you leave Canard you should file form T1161 if you have any assets
(even ones you are taking with you) and the T1161 may trigger a T1243 and
T1244.
See the following Q & A's for other looks. I, of course would be happy to
look after your return when you make your move. You and your new husband
will go crazy trying to find anyone who can handle that type of return and
we specialize in moves in and out of both countries. The usual fees are
between $750 and $1,500 Canadian.
David
My name is XXXXXXXX, I held a TN visa to work in the US from October of 1996
till May of 2001.
I was separated from my wife in Canada, had a
girlfriend in the Washington state, but supported my household including my
children. I was forced to leave the US. Could I argue that I was a resident
of the US during that period.
XXXXXXXXXX
-----------------------------------
david ingram replies:
You sound like a non-resident of Canada for that time.
When you left in 1997, did you file your return as a departing Canadian and
file Form T1161 to report the ownership or half ownership of the house you
left behind?
When you came back, did you move back in with your wife and children?
If you did, did you account for any capital gains tax on your half of the
house for the three years you were gone? (a non-resident's house is
subject to capital gains tax which is triggered if you move back into it).
If your wife filed as separated, you would win hands down. If she had filed
as a married person, you have / had a fight.
If you were openly living with your girlfriend or thought of as a couple and
brought her back to Canada with you when you came to visit the kids, you
would have a better argument even if your wife filed as married.
An interesting but not unusual situation.
===================
The following q & a shows what you should have done.
Sorry, David,
I missed your reply! I thought this was just the same thing we had sent
you. Thank you very much for the information and for the list of contacts
as well. If you feel comfortable with your knowledge in this area, we will
likely go with you. Could you give us a rough idea how much it would cost
for you to do it: The combined Canada, S.C. and N.C. return?
Also, as we are on a TN. and (ultimately) I will be on a student visa with
RRSP's in Canada do you think its worth pursuing non-resident status?
Thanks again,
XXXXX.
==========================
david ingram replies:
You would be looking at $1,000 to $2,400 Cdn for the three returns. I
realize
it is a big spread but departing Canada returns require a T1161 and possibly
a T1243 and T1244.
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1161/t1161-03e.pdf
This is the form to calculate the tax on the T1161
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1243/t1243-03b.pdf
This is the form that defers tax on the deemed disposition
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1244/t1244-03b.pdf
Pro-rated exemptions, etc.
Take a look at the forms.
Your Canadian Accounts require TD F-90 forms and your RRSP's require special
reporting as well. We would start by filing an extension for the US return -
form 4868.
http://www.irs.gov/pub/irs-fill/f9022-1.pdf
By non-resident status, I think you are referring to the USA. That would
be the last thing you would want because non-residents can NOT file a joint
return. The US joint return will save you thousands.
The first year is a toss-up. Most people would file you as a dual status
which also means no joint return. The only way to do it is both ways. To
file the joint return in the USA the first year, we have to add in all your
Canadian Income as well and claim a foreign tax credit. This almost always
results in significant US tax savings.
-----Original Message-----
From: David Ingram at home - bus at taxman at centa.com
[mailto:davidingram at shaw.ca]
Sent: March 31, 2004 11:19 AM
To: XXXXXXXXXXXXXXXXX
Subject: South Carolina after moving from Ontario - ask an income tax expert
experts specialist specialists
----- Original Message -----
From:
To: 'David Ingram at home - bus at taxman at centa.com'
Sent: Tuesday, March 30, 2004 6:34 PM
Subject: RE: Question misdirected
Thanks David,
Here it is again:
Hi,
I just found your site yesterday and I'm excited at the resources you
provide. Generally we are do it yourselfer tax folks, but I think we may
need your services which we can discuss later as it is pretty complex.
Perhaps you could clarify something for us.
We live in Ontario and we are in the process of selling our house. We have
bought a house in South Carolina which will close in June. My wife is going
to go in on a TN visa as a Physiotherapist and I will go in as her spouse.
Later (in August) I will register with a student visa, so that I do not have
to renew it annually like my wife will. Now my wife will actually be working
in North Carolina as a physiotherapist and we will live (and I will go to
school) in South Carolina.
What are the tax implications of:
A) buying a house in the USA (S.C.) and then selling it after 3-4 years to
return to Canada.
B) working in one state (N.C.) and living in another?
Thanks in advance for considering our situation,
XXXXXXXXXXXXXXXXX
==============================================
david ingram replies;
If you buy a South Carolina, North Carolina. Arkansas or Georgia House and
live in it, any gains will be tax free up to $500,000 ($250,000 each) if you
have lived in it for 24 months out of the last 60 that you owned it.
If you lived in Hull, Quebec and worked in downtown Ottawa, you would file a
Quebec and a Canadian Federal return.
If you live in North Carolina and commute to South Carolina, you will be
filing a South and North Carolina return. You will not pay double state
taxes but you will end up paying the higher rate after exemptions, credits,
deductions, etc.
In your first year in the USA, you have the option of filing a joint tax
return by reporting your Canadian Income as well. This will save you tax.
Most preparers will suggest that you have to file a dual status return the
first year and can make it a joint return.
Whatever you do, have this year's returns prepared by someone who does both
(with experience - not at your learning expense).
We, of course, are all happy to help you by snail mail, email, fax or
courier, OR
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Starting this Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of
Cartier Partners and I will be hosting an INFOMERCIAL but 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
This from ask an income tax immigration planning and bankruptcy expert
consultant guru or preparer from www.centa.com or www.jurock.com or
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US/Canada/Mexico Tax Immigration & working Visa Specialists
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