My_question_is: Applicable to both US and Canada
Subject: Moving to California
Expert: taxman at centa.com
Date: Friday December 29, 2006
Time: 04:28 PM -0500
QUESTION:
Hi there,
I did a search for international tax specialists in the Vancouver area, and
your website came up. I wanted to ask for some advice for my particular
situation:
- Married, both are Canadian citizens,
- Currently employed by a Canadian company (regular full-time) for 2 years
and leaving the company February 15, 2007
- Beginning employment by an American company in California (regular
full-time) March 5, 2007 under a TN Visa
- Wife will stay in Canada until August 2007 to finish degree
- Wishing to avoid double taxation
- Has no property or other assets; only bank accounts, credit cards, and
loans (student and vehicle) that will be paid off by December 2007
Basically, I want to avoid double taxation. I plan on permanently staying
in California and bringing my wife down in August -- does the delay my
non-residency status since my spouse is staying until August? Do I have to
close all my bank accounts -- or can I keep one because I need to pay for my
wife's expenses while she is in Canada.
Thank you,
-----------------------------------
david ingram replies:
The CRA would want to make you a factual resident of Canada until your wife
joins you.
If that is the case, deduct the US income on line 256 of the Canadian return
under Article IV of the US / Canada Income Tax treaty.
In my opinion, you fall under the terms of the Wolfe Bergelt case.
Goto www.centa.com and read the US/Canada Taxation section in the second box
down on the right hand side. You will find several tax cases to look at
with Wolf Bergelt being the one you want to see. Details of Article IV of
the treaty are also there.
For 2007, you should likely report your Canadian earnings on the US return
and claim a foreign tax credit for the tax paid to Canada on US form 1116.
this way you get to claim the standard deduction and the benefit of a joint
tax return rate. Otherwise, you are stuck with a dual status return which
only allows you to claim specific itemized deductions and taxes you at the
highest rate as "married filing single". Without mortgage interest and
property tax deductions, itemized deductions in the US are not as good as
deductions in Canada.
We, of course would be happy to look after the returns at that time.
----------------------------------------
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