QUESTION:
HI David et al,
Thank you for creating such an informative site!
I have a few questions:
My Canadian parent company is applying for an L1 for me to work as an employee in Managerial/Specialized capacity for our US subsidiary in Honolulu. I will be paid in USD by US company and subject to American employment law and tax, etc. I understand I am to file income tax in both countries, and do not understand exactly how the foreign tax credit works and if this should affect my negotiations at all for compensation. Also, I don't understand how my Canadian residency might be affected since I am single woman with no dependants (father and brother live here but not sure if this classiefies as "family"). This said, is it wise to continue investing in RRSPs', etc while I'm away... Sorry this is a long question, perhaps I need an appointment? Any resources you can share to point me in right direction would be great. I can afford a lawyer but not a senior partner, and this is the first move I've ever done like this.
Thank you!
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DAVID
INGRAM REPLIES:HI David et al,
Thank you for creating such an informative site!
I have a few questions:
My Canadian parent company is applying for an L1 for me to work as an employee in Managerial/Specialized capacity for our US subsidiary in Honolulu. I will be paid in USD by US company and subject to American employment law and tax, etc. I understand I am to file income tax in both countries, and do not understand exactly how the foreign tax credit works and if this should affect my negotiations at all for compensation. Also, I don't understand how my Canadian residency might be affected since I am single woman with no dependants (father and brother live here but not sure if this classiefies as "family"). This said, is it wise to continue investing in RRSPs', etc while I'm away... Sorry this is a long question, perhaps I need an appointment? Any resources you can share to point me in right direction would be great. I can afford a lawyer but not a senior partner, and this is the first move I've ever done like this.
Thank you!
--------------------------------------------------------------------------
If you are transferring to Hawaii on a full time basis, you will become a tax resident of the USA and will not need to file a Canadian return as long as you are there.
This assumes that you do not leave your home here empty and your car licenced and come back every couple of weeks. article IV of the Tax Treaty is very clear. If you do not have a home availagble to you in Canada, yiou are taxed in the US on your workld income. If you have mutual funds or bank accounts in Canada, tell the financial institution your new US address and they will deduct 10% tax on any interest paid and 15% tax on any dividends paid to you well a resident of the United States
You will have to file a departing Canada return for the year you left. That return might require a T1161, 1243 and 1244 if you are leaving any assets behind.
There is a seven or eight year limit for an L1 visa. If you decide you want to stay there "forever", you will need to be sponsored by the comapny for a resident alien or "green" card.
If you decide that you want to stay there be sure you do not fall into the trap that the company pays CPP (Canada Pension Plan) for you instead of US FICA (social Security and Medicare).
The reason is that You have to pay into US Social security for 30 years to receive a fair prorated share of your retirement pension.
There is a provision that says that the comapny can pay CPP instead of FICA for five years if the transfer is not expected to last five years.
Therefore, if your transfer is only for a 3 year period, the copmpany may want to invole that clause. In my opinion, that is to your detriment if you intend to stay there.
Paying CPP instead of FICA saves the company a bundle but costs you a lot in retirement.
Do NOT invest in a Canadian RRSP while a resident of the USA.
I am available for individual; consultations. The fee is $400 by phone or in person for an up to one hour consultation. If you are physically in Canada at the time, GST of $24.00 is also charged.
In the meantime, goto www.centa.com and read the US/CANADA Income Tax section in the second box down onthe right hand side. This is mainly aimed at American citizens living in Canada but you will get more ideas from it.
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Therefore, if an email is not answered in 24 to 36 hours, it
is lost in space. You can try and resend it but if important, you will
have to phone to make an appointment. Gillian Bryan generally accepts
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Disclaimer: This question has been answered without detailed
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comment. Nothing in this message is or should be construed as advice
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expert US Canada Canadian
American Mexican Income Tax
help.
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15
minutes to 50 minutes (professional hour). Please note that GST is added if
product remains in Canada or is to be returned to Canada or a phone consultation
is in Canada. expert US Canada Canadian American Mexican Income
Tax help.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 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
$1,600 would be for two people with income from two countries
$2,800 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 two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
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.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
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.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand,
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