Dual citizen moving to the US

mastamindz
New Member



Joined: 08 Sep 2008
Posts: 2
Location: Edmonton

Posted: Mon Sep 08, 2008 5:54 am

 

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I am a Canadian resident who is interested in moving and working in the united states. I am able to receive dual citizenship because I am a treaty indian, but my wife is not. I'm hoping someone can point me in the proper direction regarding my questions below.

1. We plan on purchasing a home in Southern California, where we plan on spending anywhere from 6 - 8 months out of the year, and a few months in our home in Canada (but not every year). I will be running my business from both countries as a sole proprietor (web developer, online marketing). Do I file taxes for work that I completed in Canada, and work that was completed in the US? Both? What if I worked in the US on a contract that is based in Canada.

2. My wife and child obtaining citizenship in the US. My son is also treaty indian, again my wife is not. What is required for my wife to legally work and reside in the US and Canada.

3. Health care. I have no idea where to start.


I hope someone can help me out with the above, and anything else I may be forgetting. Thanks!

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SarniaGrl
CanuckAbroad Regular



Joined: 18 Mar 2008
Posts: 45
Location: Tennessee

Posted: Mon Sep 08, 2008 7:10 am

 

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Here is a link to another thread here that has good info for you. On it there is a link to a Jay Treaty PDF & checklist you can read through.


http://www.canuckabroad.com/forums/sponsoring-a-canadian-fiance-vt3519.html

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1637
Location: Calgary

Posted: Mon Sep 08, 2008 11:14 am

 

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Well the healthcare question is relatively easy, if you spend that amount of time in California you don't qualify for Canadian healthcare anymore, and as you're self-employed you'd basically be paying out of your own pocket for it.

Your tax situation is going to be hideously complex I'm afraid because the new tax treaty requires proportional payment of taxes based on where the work is performed and you clearly would have a "permanent establishment" in both countries.

US citizens have to file a 1040 return every year, regardless of where they live - if you already are one and you've never filed, you need to sort your situation out with the IRS before you do anything else, they usually require you to file for the last seven years unless they think you've intentionally evaded paying taxes (note there may be something in the indian treaty though that changes this, for example if you are treated as a US national rather than a US citizen - if you're a US national you don't have to file until you're in the US).

Anyway, once you're in the US you have a choice - file as resident in the US and non-resident in Canada, or vice versa. You pay less tax filing as resident in the US but on the other hand you might still qualify for healthcare in Canada if you file as resident there.

The paperwork you file varies based on your situation:

If you're a US citizen claiming residency in Canada, you file a 1040 in the US and state you are non-resident and file a T1 (as normal) in Canada and claim a foreign tax credit for income tax paid in the US.

If you're a US national claiming residency in Canada, you file a 1040NR in the US and file a T1 (as normal) in Canada and claim a foreign tax credit for income tax paid in the US.

If you're a US citizen claiming residency in the US, you file a 1040 in the US (like any other American) and file a non-resident T1 in Canada and claim a foreign tax credit in the US on Form 2555 for any income tax paid in Canada. (Note the maximum foreign tax credit you can claim in the US is based on an income of $85,700 for 2007 - over that amount there are some cost of living expenses you can additionally claim but they're minimal for Canadian residents).

You have to register as self-employed in both countries and do proportional payroll withholding based on where you were when the work was performed, which is going to get really messy, I don't envy you that task (in one country you would have to withhold as a non-resident, non-resident withholding rates are different, code 0 in Canada). You will also be paying CPP and social security - one minor advantage is that because your pay is split into two different halves it will reduce your contribution limits so your taxes might work out a bit lower than they would if you were in one country or the other all year.

You can still claim the full amount of social security you're entitled to when you retire under the totalization agreement.

As for your wife this is going to be a treaty question, you'd need to look into what the treaty actually says, she may be able to qualify for naturalization or LPR status if you put her down as a dependent, maybe not.
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Steve.

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erhead
New Member



Joined: 20 Sep 2008
Posts: 2
Location: Massachusetts/Ontario

Posted: Sat Sep 20, 2008 11:42 am

 

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I'm a Canadian citizen by birth who has recently claimed US citizenship (July 2008) through a US born parent. I currently have an Ontario driver's license and my established primary residence is in Ontario. I am renting an apartment in MA (as of Sept. 1, 2008) and want to start the process of making this home a US primary residence. This includes getting a MA driver's license and Masshealth insurance.

First, I was under the impression from talking to an accountant friend that I would be able to claim both my US and Canadian homes as primary residences in each country. And for tax purposes, I would have to pay the difference of whatever countries taxes are higher to that country which I paid less taxes. Is this not correct? This past year I worked for 2 companies in Canada and am currently looking for a job in the states. What should I be doing to prepare for this tax year? Because I only recently claimed citizenship, do I have to file for the past 7 years with the IRS? If I had to pay the difference in taxes for the past 7 years I would be financially ruined!

Second, this is somewhat off topic I know, but if I frequently travel back and forth from both primary residences can I have health insurance in both places? What are the time constraints if it is at all possible. Lastly, is there anyway for the MA RMV to check and see that I already have a Canadian driver's license? Is it within my rights to not tell them? I don't want to give it up as I have vehicles registered in Ontario.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1637
Location: Calgary

Posted: Sun Sep 21, 2008 3:51 pm

 

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You can only have one permanent residence, any accountant who told you otherwise really needs to go back to university. The tax treaty pretty much says that, as do all the Canadian and US publications on it.

I'm afraid you claimed citizenship at about the worst time possible for tax form purposes because it's right in the middle of the year.

In Canada you have to file a T1 for the part of the year you were working and living in Canada, and if you were working in Canada after you became a US citizen you may also have to file a non-resident T1 for the portion of the year you resided in the US. On the US end you have to file a 1040NR for the first part of the year and a 1040 for the part of the year after you became a US citizen.

The date that is actually important is the date on which you established residential ties, if that was before you became a US citizen. The IRS and CRA will pro-rate your personal exemptions based on the portion of the year you resided in each country.

Whether you need to go back and file for previous years depends on how you got your US citizenship, if you already had it and simply didn't use it then you do have to go back and file for previous years. If you physically didn't have citizenship, you only need to file from the date you had it.

This is not the end of the world, you claim a foreign tax credit for any tax paid outside the US, although I'm not sure what they do with social security payments in this situation, you'd have to ask them.



You can't have two primary residences, so you cannot have two DLs, this is illegal under the laws of Ontario and MA (because for example you could accumulate points that the other jurisdiction didn't know about). Bear in mind if for some reason they decided that you did have two principal residences, you would face dual taxation - it is an extremely bad idea indeed to have two primary residences. A DL counts as something the IRS and CRA think makes your resident.

Not sure what the law is on people licensed in other jurisdictions having cars registered in Ontario, you'd have to check with the Ontario DMV. It may be legally possible but I doubt it comes up often because of the difficulty of getting insurance. Having a car registered in another jurisdiction doesn't necessarily count as a "residential tie" for tax purposes.
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Steve.

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erhead
New Member



Joined: 20 Sep 2008
Posts: 2
Location: Massachusetts/Ontario

Posted: Wed Sep 24, 2008 6:03 am

 

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Thanks, Steven. I'm going to get some professional help from an accountant that deals with international tax laws. Being a dual citizen is making me feel like I have no country instead of having two.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1637
Location: Calgary

Posted: Thu Sep 25, 2008 9:36 am

 

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My strong advice is to use an accountant in Canada, not MA. Canadians have a better idea about US tax laws than the other way around.
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Steve.

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