What year did person become resident of Canada? david ingram expert US CANADA cross border non-resident income tax help and prep

  Hi David,
 
I have a question about a landed immigrant/permanent resident and taxes.  Situation: a person "lands" in Canada, then immediately goes back to the U.S. and lives there with his Canadian-citizen spouse for five years.  At the end of five years they move to Canada to reside there permanently.  Question: on the tax form it asks to give the date the person became a resident of Canada.  What does he put, the date he landed (though he never filed a Canadian tax return after that because he lived & worked in the U.S.) or the date he actually started living in Canada?
 
Thanks,
 
xxxxx

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david ingram replies:

A PR (permanent resident) card issued by the Canadian government  gives a person the right to live in Canada and work at whatever they may choose to work at.  If they are working in Canada while living in the US, they would not be taxable in Canada
until they had earned over $10,000 under Article XV of the US Canada Income Tax Treaty.
 

If they go south to the US and live with a Canadian Citizen spouse, they can renew their PR card for as long as they are living with their Canadian Citizen Spouse outside of Canada.

When living with a spouse in the US, tax would be owing to the US under Article IV of the tax treaty on their world income, subject of course to the fact that Canada would get to tax any Canadian source earnings first.

The person should put their date of entry as the day they moved to Canada with their Canadian Citizen Spouse.  Presumably, that would be the same date that their Canadian Spouse puts on his or her return as 'their' date of entry to Canada.

Of course, it is always possible that they moved to Canada on different dates but usually, it would be the same date.

Of course, they both have a US return to file as well.  They have a choice of filing a joint return or they might want to file as married filing separately.  In that case the spouse may want to file dual status returns.

these may help

QUESTION:

Hello --

I stumbled across your site and it seems very helpful.

Here is my situation.

I am Canadian but went to the U.S. for university beginning in September 2001.  I graduated from the school in May 2005.  Beginning in June 2005 I stayed in the U.S. working.  I left the U.S. at the end of July 2007 permanently to move back to Canada.

I began working in Canada in August 2007 and worked through the end of the year.

How should I file my taxes?  Am I a resident of the U.S.?  Am I a resident of Canada?

Look forward to your answer!

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david ingram replies:

For 2007 you will file a departing the US 1040 DUAL STATUS RETURN (line 35b) and a 1040NR DUAL STATUS STATEMENT.  the 1040 only reports the US income but you do not claim or get the standard deduction.  You can claim itemized deductions if you have them.

For 2007, you will file an arriving in Canada T1 General. This only reports your Canadian Income but pro-rates your exemptions.

These older questions will stretch your imagination a bit.


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david ingram replies:

This older question will help you:

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david ingram replies:

If you are working in Canada, you should not be getting a W-2.  The reason is that as a resident of Canada, you should not be paying into US Social Security or Medicare or paying basic income tax to the USA.

Your first tax liability for services rendered in Canada under Article IV of the US Canada Income Tax Treaty is to Canada.

You should be filing a Canadian T1 return and paying Canada and provincial income tax first.  Then you would file your US return and either:

1.    Use form 2555 to exempt up to $82,400 of income from US tax and then file US form 1116 to claim a foreign tax credit on the excess OR

2.    Use form 1116 to claim the foreign tax credit on your US return for tax paid to Canada.  If you have children, you would usually do the latter because it would usually qualify you for the $1,000 per child USA refundable tax credit.

3.    In the case of interest (10%) and dividends (15%), you must get any excess tax back from the US by reclassifying the income on form 1116.

4.    In the case of interest, you can claim the difference between 10 and 15% as a deduction on Canadian schedule 4.

5.    You should NOT be paying into a US 401(K) or US Social Security. Canada will not allow the 401(K) as a deduction.

Your employer should start paying you on a 1099 Basis and pay you your salary plus their share of Social Security plus their share of Medicare plus their share of any 401 or other pension plan they contribute to.

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