Confused about TN Visa vs. non resident for tax purposes

I am a social worker hoping to move to Florida on a TN Visa, but I am confused. In order to get a TN Visa you have to show ties to your country (ie, home, bank accounts, ect.) However, in order not to be double taxed, you have to prove yourself a non-resident (no home, no bank accounts ect.) The whole reason I want to move to Fla. is they do not have an income tax. Has anyone encountered this before? How do you meet both criteria?

thanks
Ronnie

Hmmm. I think you need to look at the TN and your tax status independently. When I got my TN, I never had to show a home and bank account. Just hope that you don't get a very thorough agent!

Tax consequences:
If you keep a home in Canada, you can convert it to rental status? I believe that if you spend more than two years away from Canada, you stand a better chance of being deemed a non-resident of Canada. If you only plan to say in Florida for a year, you might want to be taxed as a Canadian and claim foreign tax credits on your US tax return? Better check this out.

Darrell

Hi Ronnie;

I'm currently working in the States on a TN visa. I hired a fantastic lawyer to help me with my paperwork (His name is Paul Ramacieri from Simpson & Wigle law firm in Hamilton, ON - I'm unable to post the link on this forum but if you do a google search, I believe the firm should come up no problem.). He's very knowledgeable and very professional. I had no problems in Buffalo when I applied for my TN Visa.

My understanding with the TN Visa is that it grants you "non-immigrant" status to work in the U.S. That is, your residency status remains Canadian because your work in the U.S. is deemed to be "temporary" in nature. As I'm sure you know, there is currently no limit to the number of times a TN Visa may be renewed. However, once it appears you intend to reside permanently in the U.S. (and that you are not, in fact, working in the U.S. on a very temporary timeline) it is likely that your request for a renewal after a number of already granted renewals will be denied. You may want to explore the H1 Visa, which is a more permanent working visa than the temporary 1 year TN.

In terms of your tax status, as a Canadian citizen, I believe that you must report and pay taxes on all of your worldwide income to the Canadian Government. In the case of the TN Visa, you would file taxes in the U.S. for monies earned during your work period and also file taxes with the Canadian government. Any tax paid to the U.S. on your U.S. earned income would be 'credited' to your Canadian tax liability account because of the U.S.-Canada tax treaty (that is, you would report all income (including U.S. earned) to the Canadian Government on your Canadian tax return and would receive a 'credit' for the tax you've already paid on the U.S. monies earned, thus, eliminating 'double taxation').

In terms of avoiding income tax by residing in Florida, I'm under the impression that you would first have to give up your Canadian citizenship and become American so that you would be bound by American tax laws. Please note, however, that I am certainly not a lawyer and that you must get legal advise on these matters rather than take my word for it!

For legal advise, I recommed contacting Mr. Ramacieri - he's an excellent resource and certainly knows his stuff. I'm sure he would be able to direct you to knowledgeable CPAs as well.

I hope some of this helps!

wilso02

To clarify:

You don't have to been a US Citizen to have US tax laws apply. As a resident alien (I'm still Canadian) residing in the States on an L-1 (interoffice transfer), you can do a clean break from Canada and have US tax laws apply to you.

I'm no expert, but you need to find out if the TN and tax laws are separate from each other. Regardless if you have a TN visa, if you live in Florida for four years you may have a case to have US tax laws apply to you.

I am in the middle of taxes right now.
I am not done yet, and it is hell, and there definitely appears to be one or two slight variations on how to go about it,
BUT
wilso02 appears to have given you the best information based on my recent conversations with the IRS

A TN-status (the IRS will refer to it as a visa, its not, but don't quibble) is a non-immigrant status. Once you pass 183 days in the US on it you will generally be a "resident alien" for tax purposes. But you will probably also be a Canadian resident and tax payer. First you will file in the US on your worldwide income, then you will file in Canada on same, with credits against your liability and pay the difference. You will not suffer double taxation if you do things right, but you will not get off paying much less tax then if you stayed in Canada (Income Tax that is!, you'll still save on sales tax!, keep in mind all those estimates about tax-free day from the Frasier Inst. take all taxes into account).

Hello

I am a canadian physician, and when i had to file my TN Visa taxes last year, i filed them at the site VisaTaxes, they specialize in tax filing for visa holders in the united states.

I had to file the non resident tax form 1040NR and also for my wife, had to apply for ITIN , tax id number.

Hope the information helps!

Some replies here are actually advertisments in disguise.

The whole reason I want to move to Fla. is they do not have an income tax. Has anyone encountered this before? How do you meet both criteria?

thanks
Ronnie

To answer the original question, strictly speaking you can't. You cannot move your tax home to the US because to do so requires to you cut all residential ties to Canada, and if you do that you no longer have proof of non-immigrant intent for TN-1.

Having said that a lot of people in TN-1 do move their tax homes to the US because USCIS often doesn't really check that closely what your residential ties are to Canada, and the CRA doesn't often follow up to make sure all your residential ties have been severed.

However you're obviously taking risks doing it that way, the way you're supposed to do it is to carry on filing taxes in Canada, file as a non-resident in the US and claim a foreign tax credit for the income/social security taxes you paid in the US, so effectively you pay the Canadian rate.

But going by the comments on here, hardly anyone does who stays in the US for more than a year or two in TN-1.

The other problem I ran into (doing it the correct legal way) is that if you carry on filing as a non-resident for years on end, the IRS eventually stops believing that you are a non-resident and starts asking for proof, but if you are in TN-1 you should maintain that proof anyway so it shouldn't be a big deal.

Hi Steve:

However you're obviously taking risks doing it that way, the way you're supposed to do it is to carry on filing taxes in Canada, file as a non-resident in the US and claim a foreign tax credit for the income/social security taxes you paid in the US, so effectively you pay the Canadian rate.

I thought that after 183 days in the US year you will pass the "substantial presence test" and you can't file as a non-resident. You have to file as a resident alien.

I am quite new to this. We came to US in Sept 08 on TN/TD visa. I figured that since we are here less than 183 days in 2008 we have to file US tax return as non-residents i.e. 1040NR (or 1040NR-EZ) disclosing only W2 income from the US for the last 4 months of the year. We can't file jointly, but unfortunately "married - filed separately".

In Canada, for 2008, we can file "regular" tax return disclosing our foreign income from the US and also deduct the tax paid in the us.

For 2009 we will meet the substantial presence test, we can file the next year's tax return in the US as resident aliens and use the advantage of filing jointly as married.

I heard something about "exit Canadian return" which should show that we had left Canada and now work in the US. I we file the Canadian exit return for 2008, we shouldn't need to file Canadian return for 2009, except maybe for income on RRSP. But then it comes the TN-1 clause that one has to show the ties to Canada, it's rather confusing.

Peter

I thought that after 183 days in the US year you will pass the "substantial presence test" and you can't file as a non-resident. You have to file as a resident alien.

You have the choice, because under the tax treaty you can claim non-resident status by filing Form 8833 with your 1040NR. But you have to maintain residential ties to Canada as provided for under Article IV of the treaty.

I am quite new to this. We came to US in Sept 08 on TN/TD visa. I figured that since we are here less than 183 days in 2008 we have to file US tax return as non-residents i.e. 1040NR (or 1040NR-EZ) disclosing only W2 income from the US for the last 4 months of the year. We can't file jointly, but unfortunately "married - filed separately".

You can file either as a non-resident by filing 1040NR with 8840 (covering the last portion of the year) or alternatively you can file dual-status which means you file 1040NR for the part of the year you were in Canada and a 1040 for the remainder of the year, with all the deductions, personal exemptions and so on pro-rated to those months.

FIling as a non-resident is simpler because you've still got to file a T1 anyway (so two tax returns instead of three) but it's more expensive because you have to pay the difference between the US and Canadian rates to Canada after you've claimed the foreign tax credit in Canada.

Also moving your tax home back to Canada when you leave the US can be a bit of a pig.

In Canada, for 2008, we can file "regular" tax return disclosing our foreign income from the US and also deduct the tax paid in the us.

Yes, on the Canadian end and a 1040NR and 8840 in the US. Or alternatively you can pro-rate it to the time you left and moved to the US and then file dual-status in the US.

For 2009 we will meet the substantial presence test, we can file the next year's tax return in the US as resident aliens and use the advantage of filing jointly as married.

For 2009 you once again have a choice. If you filed dual-status in 2008, then for 2009 you would file a 1040 like the average American. If you filed US non-resident for 2008, then you could tell the CRA you left on December 31st and file a 1040 for 2009, or you could file a T1 for 2009 and file a 1040NR and an 8833 for your US-source income for 2009.

Which method to use depends on how long you plan on staying in the US and how much you earn.

I heard something about "exit Canadian return" which should show that we had left Canada and now work in the US. I we file the Canadian exit return for 2008, we shouldn't need to file Canadian return for 2009, except maybe for income on RRSP. But then it comes the TN-1 clause that one has to show the ties to Canada, it's rather confusing.

Even the IRS aren't 100% sure how TN-1 should file so I wouldn't worry about it too much. There is confusion over the treaty provisions.

If you move your tax home to the US you may also be subject to Canadian departure tax: http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... n-eng.html

RRSPs aren't really a problem since the tax treaty changes last year. They're still treated as a tax shelter in the US, you just have to file Form 8891 with your 1040.

I strongly suggest you read the first 15 pages or so of IRS publication 519.