Dear Sir/Madam,

I am a Canadian citizen livign and working in the US and am interested in using your tax preparation and tax advice services. I would like to get a quote from you on how much a tax consultation and tax preparation would cost for next year. Here are the highlights of my status:

1. Married, but wife is not working
2. Living in California
3. Moved to the US 2 year ago. Taxes for past 2 years were prepared by a firm specializing in US/Canada tax.

I am also interested in getting advice on purchasing a house in Toronto Canada and the tax/finanicial implications of doing so. I would appreciate it if you could provide me with the quote for the tax preparation and for getting advice on the real estate (separately).

Thank you in advance.

_____________________________________________________________________________________________
david ingram replies

I usually quote between $800 and $2,800 for US / Canada Tax Preparation.

I charge $400.00 Cdn per hour plus 6% GST if the client is in Canada and the work is staying in Canada and/or returning to Canada.

The following is a price guideline which is posted on the web site which i send out when requested.

Note that phone consultations tend to be $400 and would likely, usually cover your real estate question.  If you have paid for a consultation and phone back with a 5 minute follow up a couple of times, I do not usually charge for that 5 minute follow up.

QUESTION:

I started building a house for myself in Canada and then married an American and moved to the USA. The next year I finished the house and have rented it out for 9 years. If were to move into it for a year but would travel abroad much of that time, would I be able to avoid the capital gains tax when I sell a year later
  ________________________________
david ingram replies:

The house has been subject to Canadian rental tax returns under section 216(4) each year.  I hope you have reported it on form T776 and your T1 return in Canada and then converted the figures to US dollars and reported them again on scheule E of your 1040.

You do NOT escape Canadian or American Capital gains tax by moving into it.  The second you move in, you have done a deemed disposal in Canada and are subject to Capital gains tax in Canada and owe that tax on your next tax return.  If you make an election under section 45(3) you can delay 'paying' the tax until the actual sale but you still trigger it the day you move in.

These older questions might help.
My question is: Canadian-specific

QUESTION: Hi David,

I am a Canadian citizen. However, from March 2000 to Nov 2004, my family and I became non residents while I worked overseas. During the period that we were overseas we rented our home in a long term lease agreement. When we returned to reside in Canada we purchased another home to live in and we have continued to rent our original house. Could you please explain how capital gains will be handled? Do we need to file anything forms with CRA prior to selling the rental house? Also, how would capital gains be handled if we sell our current personal residence and move back into the rental house?

Best regards,


________________________________________________________________
david ingram replies:

The first house has incurred capital gains tax from the moment you left the country.  Although it is possible to rent a house out for 4 years and claim it capital gains tax free by filing an election under section 45(2), this does NOT apply to non-residents.  We have had a couple of cases lately where the capital gains tax on the house is more than the tax saved by becoming a non-resident for three or four years because the houses went up so much in value.

I am assuming here that the second house you are living in has increased in value more than the rental since you returned and it should be your principal residence for that time because it would have been possible to declare the rental capital gains tax free after your return by filing the election.

Deemed Disposition!

Moving in to a rental house 'triggers' the capital gains right now although it does not have to be paid right now. The capital gains is calculated on schedule 3 and the amount put on line 127 of the T1 General Canadian Tax return.  You then make an election to defer paying the tax until actual sale under section 45(3) and deduct the line 127 amount on line 256.

This older question will likely help you understand it.


QUESTION:

We have moved out of country for job reasons and now look to return to
Canada.  Before leaving we tried to sell  our home and were unable.  For the
last 10 years we have been renting it.  We plan to move back into and then
sell it.  What must we do in order to avoid paying capital gains tax.

Dan

PS  We did not know that we could have declared it our principal residence
as we moved for job reasons and thus, did not do that!
====================================================================
david ingram replies:

When you moved out of Canada, you should have done a departing Canada return
and filled in either a T1161 or the former form (number escapes me at the
moment) to declare assets left behind.

At any rate, if you became a non-resident of Canada from your job move,
there is no exemption from capital gains tax on the increased value of the
house unless you were a deemed or factual resident of Canada while you were
gone.  A deemed or factual resident status can apply to people who are
working on CIDA projects, are members of the armed forces, are members of a
Canadian Diplomatic mission, working for the United Nations and a couple of
other esoteric items covered by Regulation 3400.

Your Belgian email address makes most of these possibilities unlikely.

In addition, you would have had to report your earned income to Canada every
year and I presume that you did not do that but did file a Section 216(4)
rental return to report the rent received.

A further complication is that if you returned to Canada and bought another
house which you moved into, there would not be an immediate tax bill but if
you move into the rental house, it is deemed to have been sold and you (and
your spouse if joint) owe tax on the increased value.

Fortunately, under section 45(3) of the Canadian Income tax act, you can
notify the CRA (Revenue Canada when you left 10 years ago) that:  I hereby
elect under section 45(3) of the Income Tax Act to defer the payment of tax
on the residence at XXX your street, until the actual sale.  Attach a
proforma Schedule 3 to calculate the profit and then pay it when you
actually sell the house.

In other words, if your intention was to move in for a short time to try and
make it tax free, you are just doubling your moving expenses and increasing
your accounting and legal fees.

If the idea is to move into a new house on your return, you are better off
to sell the one you have first and buy the new one
before you come back so that you have the most capital freed up to buy the
next house and move directly.

-  Incidentally - If you decided to keep the old one as a rental and borrow
money against it to use to purchase the new one, the interest on the
borrowed money is NOT deductible against the rental income even though the
mortgage is registered against the rental house because the money was USED
to buy the personal residence you are about to occupy.

QUESTION:

I am a Canadian citizen who moved to the US several years
ago, accompanying a spouse who was doing post-
doctoral work at an American university.  Our visa status
was J2 and J1 respectively.  We had severed ties with
Canada and were no longer filing Canadian tax returns.   
She has recently accepted a job in the US resulting in a
change of visa status to H1b for her and H4 for me.  What
would my tax obligations be if I were to return to working
in Canada while awaiting my green card application to be
processed?  I'd appreciate any advice or assistance in
finding pertinent information.
_______________________________________ david ingram replies:
Your tax liability would be to Canada first and the US second since I would presume that your mind and heart were in the US.

You would file a Canadian T1 and then report the money on your US 1040 joint return again and either exempt it on form 2555 or claim a foreign tax credit on form 1116.

However, if you leave the US without special permission while your green card application is pending, you can NOT return to the US unless your resident alien (green) card has been issued.

To solve the problem, you must fill out form I-131 in advance to leave and re-enter the US.  the same situation applies to your spouse. �

QUESTION: Hi David,

I am Canadian citizen, worked in Canada for the first 5 months of 2006. then moved to US and worked then for the rest of 2006. I have income from Canada employer, canadian bank and US employer. I filed tax return on my US income to IRS already. I haven't done canadian tax return yet. I had thought I only need to file canadian tax return on my canadian income. But it seems both CRA and IRS requested to report my world income to both. I am confused. What should I do to file the tax return to both? 

More specially, I received NR4 slip from CIBC bank. I could not find where to enter this form when I used Ufile.ca. 
How can I enter US W2 form into any Canadian tax form?
How can I enter T4 slip into US tax return form? 

thanks a lot!

_______________________________________________________________
david ingram replies:

An NR4 does not go on the Canadian return.  It goes on Schedules B and 1116 of the US return

The T4 does not go on the US return unless you are filing as a year round resident as in 2 below.

I am too busy to come up with a new answer but this older one will give you an idea.

QUESTION: Hi David,

I really need your help in filling U.S tax and I am getting mixed messages which forms to file. 
I am a Canadian Citizen in U.S on TN visa for more than a year. 
I have RRSP in canada over 10,000 put in fixed bond and saving account in a bank. 
What do I need to file here and what forms do I need to fill. 
Do I still have to file tax in Canada for canadian earning? Please help.

____________________________________________________
david ingram replies;

You need to file a departing Canada tax return and file T1161 if you left more things than your RRSP behind.  The Canadian return will only include Canadian earnings although if you had a Home Buyers Plan, it is all due and taxable on the departing Canada return unless you have paid it back.

For the US, you have two choices:

1.   File a 1040NR dual status statement and a Dual Status 1040 Income Tax return with no standard deduction

or

2.   File a full 1040 which includes your Canadian income and gives you a full standard deduction and the right to file a joint return if married.  This is usually the best if you left Canada early in the year as you did.

If you can't figure it out, file an extension  form 4868 (find it at http://www.irs.gov/pub/irs-pdf/f4868.pdf )

and then send the information to us at the address in blue below to complete for you. �

QUESTION:

I worked in the U.S. for some time and I am still in the middle of my career. I am now back in Canada and I hold a 401K with approx. 30,000 USD. I would like to transfer this to a Cdn. RSP. What is the best way to do this? For e.g. I am a long way off from age 59.5yrs. (which is their no-penalty age of redemption) and I have also heard it makes sense to redeem/transfer one's 401K in smaller chunks as the withdrawal tax associated with it is a progressive rates, not a flat 15% tax as we have in Canada. If this is the case, how small do the chunks need to be? Specifically, what forms do I use and where do I get them?
I really appreciate any insight you can give me as I am confident I am not the first person to ask you these questions.
___________________________________

david ingram replies:

Because of the 10% early redemption penalty, it makes little sense to me to try and roll your 401(K) into a  Canadian RRSp.

Roll it into an IRA and leave it in the USA.

I am oput of time in this last two weeks of the 2007 filing season.  this old question and answer may help.

[email protected]: Please see bottom of message if you wish to unsubscribe.
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Dear Sir,
Question

I have been working in California for the 5 years on H1 visa  and have 401 plan(about 40K)
What should I do with this plan , when I will move to Canada ( I'm a PR.)
Move it to IRA or other option .
Thank you very much

_____________________________________________________________________________________

david ingram replies:

------------------------------------------



QUESTION: Hello,

In the US since 2001 and there is a 50-50 chance I will move back to Canada
in 2007 or beginning of 2008. What should I do with the following:

1.401K : I have a 50K+. Should I let it grow? Rollover in a IRA? should I
withdraw when I know for sure that I will move back? (I heard you can
rollover an IRA or 401K into a RRSP) what are the tax implications?

2. In the event I move to Canada, can I use my 401k or IRA toward the
purchase of my first home and not be taxed on my withdrawal.(I currently
rent in the US and never bought a property in Canada) Will the US recognize
a property bought in Canada as eligible for the first time home buyer
program?

3. We wanted to contribute to a Coverdell education saving account this year
for our first child. Will Canada tax me upon distribution?

4. Is there a best time to move back to Canada, (late 2007 or beginning of
2008)

Thank you for your time
----------------------------------------------------
david ingram replies:

Your 401(K) can be rolled to an IRA.  Your IRA can then be rolled into an
RRSP but the US will not recognize it as a rollover and want to penalize you
10% for early withdrawal if you have not yet reached the exalted age of 59
1/2 at the time of withdrawal.

By buying a house, you can exempt up to $10,000 of the withdrawal from the
10% penalty.

Rolling it into the RRSP involves reporting the IRA as income on your
Canadian return and then claiming the deduction for the rollover. Because
the tax paid to the is a foreign tax credit in Canada, you get to claim the
tax paid to the USA against other income in Canada.

Therefore, it is necessary to have significant other income in Canada for
you to get the equivalent of a tax free rollover.  In other words, do NOT
move to Canada at the end of a year.  You should move at the start of a
year, i.e. Jan 15 to May 15 or so that you can get a lower tax rate on your
IRA withdrawal in the USA and maximum benefit for the foreign tax credit in
Canada.

Done properly, and with the RRSP money in the account long enough in Canada,
you can then withdraw up to $20,000 Canadian (tax deferred) to use as a down
payment on your Canadian house.

------
the following previous email talks about it as well.


QUESTION:

worked in CA for 4 yrs. returned to BC in Apr.'04.  Need to transfer my
retirement fund but having difficulties with bank and credit union.  US
specifies that I must roll it over to IRA accounts (Individual retirement
account.  I do not want to be subject to the 20% withholding fee for IRS.
What would be the best way to get the funds to me here in Canada.
=======================================
david ingram replies:

1.  move it to an IRA and leave it there in one of the world's strongest
economies.  Most financial advisors are trying to get "more" of their
clients' money into US funds.

2.    If you just have to have it in Canada, you have to cash it in in the
US and pay your tax to the US.  take what is left, add the amount (even if
borrowed) of the tax you paid to the US and buy your Canadian RRSP.  That
will give you a tax deduction which should be larger than the tax you paid
to the US.

When you get the refund, pay back the loan.  You will have transferred the
money quite handily.

The amount you took out is also taxable on your Canadian return.  Pay that
tax with the tax you paid to the US as a foreign tax credit.

You will likely need help.

Don Walkow of Seabank Capital Management in Surrey, BC is one Canadian who
can help you with the process while you are still in the United States.  His
licensing allows him to deal with 401(K) plans, IRA's, RRSP's and straight
securities in any state in the US - He is one of two people I know of who
can do this. - His North American telephone number is 1-800-541-9952 and you
can find out more at www.seabankcapital.com.

Darrell Thompson of Blackmont Securities is the other person and is located
in Toronto.  His phone number is 866-775-7704

If you are in Canada and in BC in particular, Fred Snyder, host of "Its Your
Money" every Sunday Morning from 9:00 to 10:30 AM Vancouver Time can also
look after you but can NOT talk to you if you are in the US. (999 out of
1,000 other Representatives in Canada can NOT talk to you either).  You can
listen to this Canadian Program (I am a guest on the fourth Sunday of every
month) live at www.600am.com.

Hello,

Thank you in advance for your help

My situation is:

I am in USA under TN-Visa. I worked 255 days in USA in 2006 and I already filled
the 1040 and 1040NR as dual-status, based on the number of days in USA.

My question is:

Should I declare what I earned in USA to Canada revenue?
How can I avoid double taxation?
Do you do Canadian taxes?
Can I know the fees?

Regards
__________________________________________
david ingram replies;

Too busy in this last two weeks.

This might help

QUESTION: Hi David,

I am Canadian citizen, worked in Canada for the first 5 months of 2006. then moved to US and worked then for the rest of 2006. I have income from Canada employer, canadian bank and US employer. I filed tax return on my US income to IRS already. I haven't done canadian tax return yet. I had thought I only need to file canadian tax return on my canadian income. But it seems both CRA and IRS requested to report my world income to both. I am confused. What should I do to file the tax return to both? 

More specially, I received NR4 slip from CIBC bank. I could not find where to enter this form when I used Ufile.ca. 
How can I enter US W2 form into any Canadian tax form?
How can I enter T4 slip into US tax return form? 

thanks a lot!

_______________________________________________________________
david ingram replies:

An NR4 does not go on the Canadian return.  It goes on Schedules B and 1116 of the US return

The T4 does not go on the US return unless you are filing as a year round resident as in 2 below.

I am too busy to come up with a new answer but this older one will give you an idea.

QUESTION: Hi David,

I really need your help in filling U.S tax and I am getting mixed messages which forms to file. 
I am a Canadian Citizen in U.S on TN visa for more than a year. 
I have RRSP in canada over 10,000 put in fixed bond and saving account in a bank. 
What do I need to file here and what forms do I need to fill. 
Do I still have to file tax in Canada for canadian earning? Please help.

____________________________________________________
david ingram replies;

You need to file a departing Canada tax return and file T1161 if you left more things than your RRSP behind.  The Canadian return will only include Canadian earnings although if you had a Home Buyers Plan, it is all due and taxable on the departing Canada return unless you have paid it back.

For the US, you have two choices:

1.   File a 1040NR dual status statement and a Dual Status 1040 Income Tax return with no standard deduction

or

2.   File a full 1040 which includes your Canadian income and gives you a full standard deduction and the right to file a joint return if married.  This is usually the best if you left Canada early in the year as you did.

If you can't figure it out, file an extension  form 4868 (find it at http://www.irs.gov/pub/irs-pdf/f4868.pdf )

and then send the information to us at the address in blue below to complete for you. �

QUESTION:

Used to work as a Statutory Employee via the Internet for an Employer in Salt Lake City (80 miles away), Utah USA.

In August 2006 we moved to BC, Canada (landed immigrant), and I continue to work for the same company via Internet and telephone.

Statutory Employee in the U.S means an employee who works from home and at own hours but is supervised by the employer. This fact is indicated on the Employee W2 and the employee files Schedule C 'Profit & Loss from Business' i.e. declaring the W2 income as business Income.

Since, I have moved to Canada they deduct staright 30% payment to non-resident tax from my pay-check. And issue a W2.

What I Want:

I wish to contribute into the CPP.

I do not want to fall under registration for GST/PST

I wish to claim home-use expenses, as I work from home into their Servers.

I wish to claim Foreign Tax credit both for the Federal and the BC tax returns (from the 30% withholding).

Question:

Under what filing status should I file my 2006 Tax Return? Salaried or Self-employed?

_______________________________________________________________________________
david ingram replies:

If you are self-employed, neither your Canadian nor US returns are due until June 15th so don't get in a rush.

Your first tax liability after you moved to Canada is to Canada.

If they are paying you while you work in Canada, they should NOT be deducting any US tax let alone 30%.

If you are self employed in Canada you have to pay into the CPP and can NOT pay into US social Security.

You are not entitled to any foreign tax credit from the 30% withholding because you do not owe the US any tax for that period.

If they are just deducting tax and no FICA and Medicare, you are self-employed.  If they are still dedcuting Medicare and FICA, they are in error because you are not working in the US.

I think from this brief bit that you are self employed.  That means that if you are billing over $30,000 a year you HAVE TO be registered for GST.

QUESTION:

My wife is an American citizen and Canadian Permanent Resident and I am a Canadian citizen and we both reside and work in Canada.  My wife has to report annually to the IRS but do I, as her spouse and (I guess) as a non-resident alien) require a Tax ID (requested using form W-7) to be reported on her income tax return?  If so, are there any other obligations I am required to fulfill by having an ITIN, like having to report to the IRS myself?
  ____________________________
david ingram replies

This was rejected but while doodling at 1:00 AM and looking at rejected emails, I decided to answer it.

There is no need for you to get an ITIN unless your wife needs you for an exemption which usually only occurs when you sell your house for a big profit.

However, If you do get an ITIN, it does not create any reporting requirement with the IRS unless you do something that needed to be reported whether you have an ITIN or not.  Winnings in Las Vegas or Atlantic City might be one example.

The main reason you likely want an ITIN is to keep peace in the family.  Your wife would be much happier if you had one and she could put it on the tax return and feel just a little more legitimate if you know what I mean.

Says he, the one with six or seven ex-wives.

Do as I say, not as I do.

QUESTION:

We are considering buying a residence that is on 10 Acres and is owned by people who have been growing flowers and selling them to Canadian Tire.  The property is zoned minimum 10 acres.  The flowers are not the primary source of income.  The property has farm status.  The property has a residence which is used full time by the owners of the property.  Will full GST have to be paid on the purchase of this property?

____________________________________________________________________________
david ingram replies:

I don't know from the information given.

The following older answer may help.



My question is: Canadian-specific

QUESTION: I am buying an acreage in BC. I am told that I have to pay GST on the purchase price. Is this because it has farm status? Can I get the GST back?
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david ingram replies;   Farms are tough and depends upon whether it is a working farm and being sold as a working farm or for the personal use of someone.   The decision on whether or not to charge GST is the decision of the vendor, not the purchaser.  If the vendor decides not to charge and the CRA decides that GST should have been charged, the vendor is liable for the tax because it is assumed that the price included the GST.  Therefore, a farmer who was a GST registrant is ALWAYS going to want to charge GST.   There is no general exemption for the sale of farm land *    A Farm Land Transfer to Family Members Exemption (Farming Exemption)


However, there IS a limited exemption on the sale of farm land if:

the property was used by the individual himself and was farmed at any time;

immediately before transferring the property the property has been farmed; and

the new use of land must be personal to the individual or to the relative of the individual

A similar exemption also extends to the sale by a corporation, partnership or trust with the same criteria as above.

This prevents G.S.T. becoming payable on a deemed change of use of farm land to personal use or the conveyance of farm land to a family member.  

We just went through this with a working farm sold to someone who intended to farm it. GST was payable. 

In this case,  to defer the GST, you must register as a farm yourself and then, after paying the tax,  you will get an input credit and a refund when you file your first return.  Recognizing that this can be an immense cash flow problem, the government has come up with form ????  or you can defer the tax by filling in a form ??? .  David Stoller, a lawyer in the same building as us at (604) 922-4702, can likely give you the name of the form and since he has just finished such a transaction for the seller is likely as good a lawyer as any to help with yours.   His office is at:   801-100 Park Royal South West Vancouver, BC V7T 1A2