duel citizenship

[teresaagos]

I have duel citizenship in Canada and the US. I live in Canada but work in the US. I have a US mailing address that I use as well. When asked my residency is it based on the state i pay taxes in or where i actually live?

[Steven]

The place where you principally reside, which in this case would probably be the jurisdiction in which you hold your driver's licence. You pay taxes based on that.

If it's Canada you file a T1 in Canada and a 1040 as a non-resident. If it's the US you file a 1040 in the US and a non-resident T1. However from the sounds of it the CRA would certainly deem you resident if you "live" in Canada, so if you have a US driver's licence probably better to change it to a Canadian one and file your taxes as a non-resident of the US.

Claim a foreign tax credit for any income tax you pay in the US, the general guide for the T1 explains this.

[teresaagos]

I have filed taxes in both countries but neither as a non-resident and end up paying some taxes in both countries. Should i go back and ammend my taxes then?

[Steven]

Well, you will pay taxes in both countries, because you're not exempt from payroll/social security withholding in the US on your US-source income, and presumably you've got income in Canada too, e.g. you get a T5 from the bank to report your bank interest.

But basically if you live in Canada, you file your taxes like any other Canadian does, the only real difference is that you have to claim a foreign tax credit for any income tax you paid in the US (you report your total worldwide income on your T1, use the exchange rate on the days you were paid, work it out from www.bankofcanada.ca). As Canadian tax rates are usually higher than US rates you will probably owe some income tax to the CRA.

In the US you file a 1040 with your Canadian address on it, because you're a US citizen unfortunately you also have to file for a foreign tax credit for any income tax you paid in Canada on Canadian-source income, e.g. the income tax you pay on your bank interest. You also report all your income on your 1040, but presumably there will be little tax to pay because your US withholding will cover it (in fact you may be due a refund).

This assumes your principal residence is in fact Canada.

It's hard to comment further because it's not clear on what your specific situation is, but if you have a look on the IRS website under "non-residents" it will give you some idea of what the situation is, plus read the instructions for the general guide for the T1.

The main thing to bear in mind that people come unstuck on in your situation is that you cannot be resident in both countries for tax purposes simultaneously - it's one or the other, and there's always some caveat in how they determine "residency" that if you have "closer ties" to another country that is your tax home regardless of whatever test it is they use.

The US also goes out of their way to make it more complicated because US citizens are taxed on the basis of their citizenship, rather than just where they live, so you have the appearance of filing US taxes like people resident in the US (because you file a regular 1040 instead of a 1040NR), but in fact you are not in the same situation and slightly different rules apply.

If you need to adjust your return you need to fill in a 1040X in the US or a T1 adjustment in Canada, but I'd talk to the CRA/IRS first to find out exactly what you need to put down on the forms.

It is a somewhat complicated situation, you may want to talk to a good cross-border (i.e. Canadian) accountant about it if you're really confused.

One thing you will discover after you've paid out more income tax to the CRA is that moving to the US will work out cheaper, because effectively at the moment (if you're a resident of Canada) you are paying the combination of Canadian income taxes plus US social security tax, which is higher than CPP contributions.

Really in this situation it boils down to healthcare - if you're healthy and don't need it, living in the US is going to be cheaper. Or your US employer has a really good healthcare plan then also living in the US is going to be cheaper. If their plan is rubbish and you've got some sort of problem then paying the extra tax in Canada and living in Canada to use the Canadian system may be worth it. Depends on your tax bracket to some extent.

[rosiecruse]

I am a Canadian and relocating to the States permanentely and I want to have a duel citizenship how do I do that.? Thanks

[Steven]

Do you qualify for US citizenship? This isn't really a tax question.

[rosiecruse]

Do you know how to obtain a dual citizenship. nothing to do with taxes.
Thanks a bunch

[Steven]

Bit of a vague question, do you have a parent who is a US citizen, or are you talking about just general immigration into the US? Because the answer to the second point is obviously very broad, I'd suggest having a poke around the USCIS website first.

There is no way of simply applying for US citizenship off the bat, you'd have to immigrate in some relevant category, change status to permanent resident (in most cases), be a permanent resident for 3-5 years and then apply for citizenship.

Even if you have a parent who is a US citizen, they have to register you before you reach the age of majority, otherwise they have to sponsor you on I-130.