H1B / H4 / GC questions + Tax home questions

[nictven]

Hi, first thanks for all kind souls of answering questions here now I have two more questions regarding tax and H1B.

Tax:

I moved my tax home to the states in 2008 (filed as dual status) because my wife was planning to goto the states in 2009. However, our pllan changed, my wife is not moving to the states yet.

From US tax point of view, could I move back my tax home to Canada for the tax year 2009 (e.g. report as NRA for 2009)?


H1B:

I am on H1B while my wife is not H4 yet. As my wife is currently studying and working in Canada at the moment. We are considering to apply green card in near future.

Should I get her as H4 now? Any advantages or disadvantage of doing it now? She is visiting me every other weekend, if she is on H4, and/or in the process of applying green card (while still studying and working in Canada), would it cause trouble crossing borders?

(both of us are canadians)

Thanks.

Nict

[agnelson]

H4 first:
There is nothing to apply for in getting H4. next time she crosses border to visit you, simply have her marrige cert and a copy of your H1 I-94 and that is it. She keeps the H4 in her passport and flashes it each time she comes in.

H4 has the advantage of lasting as long as your H1, rather than temp entry on tourist B2, and does not require she maintain Cdn residence.

Also, H1 and H4 allow for transition to Green card without problem.

One point however, there will be a short period when you both submit I-485 that she will need to stay in US to file The I-485, but her H4 status will mean that she does not have to wait 2-3 months while the paperwork is being processed for AP and EAD (a TD spouse or a B2 visitor would have to wait the whole period in US).

-- Sat Oct 10, 2009 9:27 am --

Tax issue:

2 questions: How are you filing in Canada, and on what basis did you file dual-status last year?

As you probably realize, as a married Cdn, filing dual-status was probaly the worst way from a tax-rate point of view, especially if you continued to file as a Cdn resident in canada.

Since you meet SPT, have spent more than 183 days in US this year, and filed as a dual-status last year, I don't see how you will be able to file 1040NR this year, nor why you would want to.

So, what you should be doing, and should have done last year, is file 1040 MFJ, reporting for both of you, world income, and using all the deducutions, credits and exemptions available to you.

Since it appears you never go to canada, I support that you are a Cdn non-resident (by treaty) from Sept last year if that is what you chose.

If you claimed that you wer still Cdn resident last year in canada, then you should havefiled 1040NR, and use the XXV non-discrimination clause to pay the taxrate of a US citizen.

You probably could not have continued this for 2009, by the shher number of days you spend in US. Your centre of vital interests is now in US, so you won't be able to clim closer connection to Canada. If you had been the one visitng Canada each week, instaed of the other wat round, then you could have made this argument, but this apparently is not the case.

So, it looks like you filed dual last year when you did not have to, and now, despite wanting to file NRA this year, you took too many steps that prevent you from doing this.

Wish you had come to forums.serbinski.com last fall , you would have gotten better advice. Seems you were focussed on your W-4 withholding rather than your final overall tax rate.

[nictven]

Thanks for the answers. For the I-485 submission wait, usually how long usually is the wait?

Tax:
For tax year 2008, since I still had significant days and ties to Canada, I filed as normal. And, we were planning moving to the States some time early in 2009, and preparing to cut ties.

However, our situation changed, and my ties are still significant to Canada, so I cannot file as non-resident for 2009 even though I only visited every other weekends.

[agnelson]

Since she would have H4, and would not need an AP to travel. just the time to actually file the I-485, and ensure it was received: two weeks tops.

To answer you question, as I said earlier, Since you are spending over 300 days in US in 2009, since you undertook to file dual-status for 2008 (by making the first-year choice) I would not see how you would now file an exemption to be treated as non-resident.

So, file full year 1040 MFJ and exempt her wages with 2555, and use 1116 on any othr Cdn income. I think you'll find this MUCH better than 1040MFS or last year dual-status return, and should suffice to reduce you US tax below your Cdn tax.

Back to residency. When you say signifificant ties, other than your spouse and home, you do live in US. CRA does accept departure to US even under these circumstances if one makes every effort to meet all US tax residency requirements, AND does not make frequest visits to Canada. You mostly did this by filing dual last year, and by staying in US an overwhelming amount of time this year. The only thing that you did that prevents you from declaring Cdn non-residency is your frequent return visits. If you had strictly had your wife visit you, you would have been non-resident since you left without question, by treaty, and CRA would have suported this. The fact that you did not declare having left then, pretty much now condemns you to waiting until your wife joins you, or you actually get GC.

Conversly, has you gone home EVERY weekend, you then could have made the case for US non-residency from the beginning, and would have been able to file a non-discrim Article XXV 1040NR last year and this year.

But by playing both sides of the fence, you are pretty much required to report all income everywhere.

There is an old trick (theoretically no longer available because of new rules on the "deemed non-resident" status) that you could try if you find that reporting your US income on your CDn return raised your Cdn tax (even after US tax credit): at one time, someone in your position, could merely report all income on CDn return and US return, and then exclude on line 256 of T1 all US income, since you really are resident there.

CRA used to accept this all the time, and may still be worth a try.

[Steven]

So, file full year 1040 MFJ and exempt her wages with 2555, and use 1116 on any othr Cdn income. I think you'll find this MUCH better than 1040MFS or last year dual-status return, and should suffice to reduce you US tax below your Cdn tax.

I agree. It's messy but it's the best option.

The problem is that your spouse is a residential tie but you are no longer resident, so to avoid having to undo what you have already done you need to say she's resident in the US as well and file a 1116 for her withholding taxes, not sure 2555 comes into it if you've filing a foreign tax credit because you're claiming she lives in the US. Getting her H-4 for now will help with this situation because it makes it look more convincing that she lives in the US for the purposes of convincing the CRA.

From the sounds of it she doesn't have much income because she's a student so the Canadian side of it from her personal standpoint should be relatively straightforward if she's not getting a T4 from anyone.

[agnelson]

The poster need not claim that his spouse be living in US to be able to file jointly. This is both by IRS rules and treaty Article XXV.

The spouse can continue to live in canada, and MFJ can still be filed. The key to HIM not having to file in Canada is not going back to vist, but having her visit him.

[Steven]

Yeah, but she's got to file as well, I was trying to make it simple for both of them. She can claim to be US resident if she wants.

[agnelson]

No, she does not have to file in US if she does not meet either of the SPT or GC tests, and her US resident spouse chooses to file MFS. This would be similar to how many USC living in Canada married to a non-USC file their 1040.

Technically, one would not be claiming to be resident, she would electing to be treated as a resident. Subtle difference.