My_question_is: Applicable to both US and Canada
Subject: Establish Canadian non-resident status-CCTB & other related
Expert: taxman at centa.com
Date: Wednesday September 27, 2006
Time: 01:27 PM -0400
QUESTION:
Hi David,
I’ve been your reader since the tax season of this year. I’ve learned a lot
from your resourceful website. To help my husband to get rid of his factual
resident status while he’s earning money from US, I quitted my job in BC and
moved to US with my son last month (Aug.). Soon after the move, I notified
Revenue Canada to change my address. I also notified MSP for my permanent
leave from Canada. After having these done in early September I received
September CCTB. I am now wondering should I ask CRA to stop paying me the
CCTB and refund them the September benefit or taking any other actions in
order to establish non-resident status of Canada for all three of our family
members as early as possible. In fact, I am not so sure what’s the best and
fast way to let CRA admit that we are not Canadian tax residents anymore.
Could you give me some advices? Below are some information about my status
for your reference.
* We are Canadian citizen. My husband granted TN visa and moved to US last
year and now in TN extension period. My son and me moved to US with TD visa
last month. We intent to stay in US and eventually get Green Card.
* I sold my car and terminated our rental apartment when I left Canada. We
cancelled all credit cards, investment accounts in Canada.
* I am just keeping my saving and checking accounts including one joint
checking account with my husband in Canada. Keeping the joint account is
merely for my husband to remit 2005 tax to CRA and paying a few last utility
bills. But I would like to cancel all of them as soon as I’ve settle down
myself in US. This is supposed to be done in one or two months. My husband
already cancelled all his financial accounts in Canada.
* My husband has US driver license and haven’t surrendered his BC license,
but he can surrender it at anytime. I went to convert my BC license to US
one, but the local DMV rejected my application and told me to use BC license
for the time being until my TD visa expires. I don’t feel this is right. We
are trying to find solution. But under current circumstance I have to hold
my BC license and don’t know if CRA will count this as a “tie” in
determining my Canadian tax residential status.
That’s all our relations to Canada. I expect when we file 2006 return my
husband’s factual resident status is changed upon the action we are taking,
or he even has no need to file 2006 Canadian return (that’s probably a
daydream). Looking forward to hearing your advice. Thank you for your time.
----------------------------------------
david ingram replies:
If you are both living in the US with the intention of staying there, you
are not taxable in Canada on US income even if you have two houses and five
bank accounts. You may b e ruled to be a factual resident of Canada but
that is no problem. You just report all your US income on the Canadian
return and deduct it all on line 256 under article IV of the US / Canada tax
treaty.
However, in my opinion, you are in danger of being charged with driving
without a licence or having no insurance if you do have an accident if you
are living in a State and do not have a proper local driver's licence.
If the local DMV has said that you can continue to use it, have them put it
in writing with an attestation that your BC driver's licence is valid.
Article IV reads as follows:
Article IV - Fiscal Domicile -
For the purposes of this Convention, the term "resident of a Contracting
State" means any person who, under the law of that State, is liable to
taxation therein by reason of that person's domicile, residence,
citizenship, place of management, place of incorporation or any other
criterion of a similar nature, but in the case of an estate or trust, only
to the extent that income derived by the estate or trust is liable to tax in
that State, either in its hands or in the hands of its beneficiaries. For
the purposes of this paragraph, a person who is not a resident of Canada
under this paragraph and who is a United States citizen or alien admitted to
the United States for permanent residence (a "green card" holder) is a
resident of the United States only if the individual has a substantial
presence, permanent home or habitual abode in the United states and that
individual's personal and economic relations are closer to the United states
than any other third State. The term "resident" of a Contracting State is
understood to include:
(a) the Government of that State or a political subdivision or local
authority thereof or any agency or instrumentality of any such government,
subdivision or authority, and
(b) (i) A trust, organization or other arrangement that is operated
exclusively to administer or provide pension, retirement or employee
benefits, and
(ii) A not-for-profit organization that was constituted in that State,
and that is, by reason of its nature as such, generally exempt from income
taxation in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then his status shall be determined as
follows:
(a) he shall be deemed to be a resident of the Contracting State in which he
has a permanent home available to him. If he has a permanent home available
to him in both Contracting States, he shall be deemed to be a resident of
the Contracting State with which his personal and economic relations are
closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available to him in
either Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of
them, he shall be deemed to be a resident of the Contracting State of which
he is a national;
(d) if he is a national of both Contracting States or of neither of them,
the competent authorities of the Contracting States shall settle the
question by mutual agreement.
Where by reason of the provisions of paragraph 1 a person other than an
individual is a resident of both Contracting States, the competent
authorities of the Contracting States shall by mutual agreement endeavour to
settle the question and to determine the mode of application of the
Convention to such person. Notwithstanding the preceding sentence, a company
that was created in a Contracting State, that is a resident of both
Contracting States and that is continued at any time in the other
Contracting state in accordance with the corporate law in that other
Contracting State shall be deemed while it is so continued, to be a resident
of that other State.
-------------------------------------------
This former Q & A might help
------------------------------------------
My_question_is: US-specific
Subject: Treaty tie-breaker provisions
Expert: taxman at centa.com
Date: Friday March 24, 2006
Time: 04:46 PM -0800
QUESTION:
Hi David, I reckon I am a resident for tax purpose both in US and Canada. I
am a Canadian citizen. I am also renting a home in Canada for wife and son
for the whole year, and have rented a home in US as well. Can I file my US
return as Non resident alien? And what is the advantage of filing as Non
resident alien if compare to resident alien? Many thanks
=====================================================
david ingram replies:
The cheapest tax return you can file is as a factual resident of Canada
exempting your US income on line 256 under Article IV of the US / Canada
Income Tax Treaty. This would save you several thousand dollars of income
tax.
Then you would file a US Joint 1040 return with your wife.
This is fair, because "you" do NOT qualify for medical in Canada because you
are not sleeping in your province 183 nights or more.
That is how you should file your return if you intend to remain and work in
the US and eventually move your wife and child to the US when you get your
green card.
--------------------------------
On the other hand if you are in Canada for more than 183 days and only in
the US 2 or three days a week and intend to come back to Canada and are not
a US citizen or green card holder, you should file a US 1040NR and be a
resident of Canada.
You should likely buy an hour of my time.
Phone consultations are $400 for 15 minutes to 50 minutes (professional
hour).
This is not intended to be definitive but in general I am quoting $800 to
$2,000 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you
lived in one country only - no self employment or rentals or capital gains -
you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are
complicated because of the back and forth foreign tax credits. - The IRS
says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not
live in or a rental and a business and foreign tax credits no move in or
out
$2,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection
period) with a three or four slips and no capital gains, etc. for $100 or
$125.00
With a Rental for $300
A Business for $300 - Rental and business likely $400
And an American only (lives in the US with no Canadian income or filing
period) with about the same things in the same range with a little bit more
if there is a state return.
.TDF 90-22.1 forms are $25 for the first and $10.00 each after that when
part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after
that.
Just a guideline not etched in stone. --------------------------
------------------------
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
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North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
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Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA) time -
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