Exact residency date under TN Visa?

[skoper]

Hi, I'm still slightly confused about this. I am moving to the US in a couple weeks to work under the TN Visa. I intend on severing all significant residential ties with Canada. However, I do not pass the "green card test" since I am under the TN. I also do not pass the Substantial Presence Test. So I am considered a non-resident alien for the 2009 tax year in the US? Do I then get taxed at generally unfavourable rates compares to residents? If so, isnt there a way to voluntarily elect to be a resident, notwithstanding the green card or Sub pres test?

[agnelson]

Since you will not have met the SPT, which is the test that most first-year residents, you will have the choice of the following 3 options:

File as non-resident, using 1040NR.
File as dual-resident, (part-1040NR, part-1040)electing to be treated as such because you will meet SPT next year (the process is described in IRS Pub 519).
or, by treaty, you can file a full year 1040, reporting all world income for the year. On that 1040, you can avail yourself of all the deductions exemptions, etc normally available to any US taxapayer, including beinag able to use Form 1116 for foreign tax credits, and/or 2555 to exclude your Cdn wages.

Generally, one is advised to try all three methods, and pick the one which yeilds least US tax. The choice has no impact on your Cdn tax return.

Just a note on residency, if your Cdn residency was 'iffy' I would not choose the pure 1040NR route, as choosing either of the other two would bolster your case for being deemed non-resident if the issue came up. But as long as you have no house and spouse in Canada by year-end, you will be considered as having departed in 2009, and assumed US residency on the same date.

-- Thu Oct 08, 2009 5:51 am --

You should be following this up at serbinski since you post there too, but just to complete the topic,

If you did meet SPT or GC test in the first year (say you moved in April), then the pure 1040NR choice would not be available to you.

If you only work for a month or 2 in US, it is quite possible that 1040NR, especially if you are single, would be the best choice, since you still get personal exemption and some deductions.

But for a married couple, unless one had some weird deemed diposition or a huge Cdn-only tax deduction, filing full-year 1040 is almost always the way to go, even if arriving late in the year.