Help on Filing the 1040NR and 8840

This is my first post and so far have found some great information from this site and thought I would reach out and see if someone can help clarify some matters for me

1. Would it be more cost efficient for me, while in the USA, to file my US taxes here instead of paying someone to do them while home in Canada(next weekend)? And while home just filing the Canadian one separately?

2.For Form 8840:
-What is defined as a "US Tax Payer Identification Number"? Would this be a SS #?
-I am in the USA on a TN-1, I currently work here, and did for 70 days in 2007. Would the US by my Tax-Home or would Canada be? The definition says main place of business, employment, etc.
-What is defined as a government-sponsored "national" health plan? I pay regularly into Medicare, but do not collect


Also, if I have no dependents and my only source of income in the US is from work, should I just file a 1040NR-EZ instead?

I am sure I will get more as I begin filing the 1040NR, I just printed the Instruction form and reading through it now.


Thank you,

Chris

I wouldn't pay anyone to do my taxes, and don't use software that you pay for either, personally I think it's all a rip-off. You only need an accountant if you're really stuck.

Read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

Your tax home is Canada. Form 8840 is for claiming a tax treaty exemption, obviously the US does not have a treaty with itself!

If you were resident in Canada for more than 90 days in 2007 then really your only option is to basically file your taxes the same way you did when you lived in Canada, i.e. T1 with T4, T5 etc. as you previously did. The difference is that you must file a 1040NR and an 8840 in the US with basically all the same paperwork attached that you do in Canada. The only other difference is obviously you will have a W-2 and maybe a 1099 that you also have to attach. I'm not sure what the exchange rate they use is at the moment, there is something about it in the instructions for the T1.

Yeah, you can use a 1040NR-EZ if it's simple (that form didn't exist when I lived in the US). The whole thing is a total farce imo, I always used to laugh when I filled it in. It only really matters if you have multiple sources of income and a really complex situation in the US and you have none W-2 income sources to list on the return. If you've just got a W-2 and a 1099 from the bank all you're doing with the form is telling them to send the money to the CRA.

If you have a SSN, you use that instead of an ITIN. ITINs are for people who can't get an SSN.

Bear in mind you do also have the option of moving your tax home to the US. I.e. you file on T1 that you permanently left Canada on x date and then you file a 1040 in the US covering the days you lived there. But if you do that you mustn't have any residential ties in Canada, and you can become subject to the exit tax.

The upside is that it can be less paperwork to do that (and you pay less tax usually in the US) - the downside is that if you have no residential ties to Canada, it can make renewing TN-1 status tricky so it's not a wise move unless you plan on staying a long time.

If you stay for more than five years the IRS will deem the US as your tax home anyway and that's when it gets really messy, because you have to sever all ties to avoid dual taxation.

And that's when I left!

Oh yeah, get a W-8BEN application form from the bank and file that. Because all the tax on your bank interest is going to Canada.

Steven,

since you offered such an awesome response, I was wondering if you could let me know if I will be doing this right. I'm extremely confused.

I moved from Canada to Chicago from Aug 1 2006 to July 31 2007, then moved back to Canada on Aug 31 2007. I never received an assessment for my 2006 return so I am basically doing this for the first time.

My plan is to (for 2007):

1. Fill out a T-1 with both my Canadian and US income. This means I will have to pay extra tax to Canada.
2. Fill out the US version.
3. Fill out a 1040NR for the US to give me my tax paid to Canada back.

Is that basically right? Are there any steps I am missing? I tried reading the link you posted but it made my head spin

It's an 8840 to claim the tax treaty exemption, not just the 1040NR.

You fill out the T1 as per usual, you attach evidence of your US income to it (W-2, 1099s), you have to use whatever exchange rate it is for that date (ask the CRA if you are unsure). Then you work out your taxes as per usual, and send a cheque to the CRA for any tax you owe.

Basically identical to a normal tax return with some unusual sources of income and an exchange rate calculation, so matching the boxes from the W-2 to the T1 and having the exchange rate right is the real trick to doing it.

The US end is basically a lot of form filling that boils down to: "please send my withholding on my W-2 and 1099s to Ottawa".

So you fill in the 1040NR-EZ, attach W-2s, 1099s and anything else you need to it, T4s, etc. and then most importantly, attach an 8840 to it.

Wow, thanks for the help Steve, that makes it so much clearer.

Two last questions:

1. How do I get my double tax back? If I send a cheque to Ottawa, and the US sends my withholding to Ottawa, does Ottawa send me back a refund afterward?

2. For 2006, if I only lived in the US for 150 days, I'm not eligible for the 8840, right? How does it work then? Same way just without the 8840?

Sorry to be a pain, and thanks again.

You have to claim a closer connection to Canada, there are two ways of doing it, 8840 or 8833 (Article IV claim). 8840 is for people who don't meet the substantial presence test, 8833 is for people who do, however in practical terms they have an identical effect so frankly I don't think it really matters which one you use. At least for employment income. If you have rental income it might.

So work out if you have a "substantial presence" using the instructions in that CRA pamphlet or on the 8840. I'm pretty sure you don't from the sounds of it, so you use 8840.

On #1, I mis-remembered it, you have to file for a foreign tax credit, they don't refund it directly. You file for a foreign tax credit to reduce the tax that you pay in Canada by the equivalent that was withheld in the US. T2209 for Federal and T2036 for Provincial.

I'm afraid they can't make it too easy.

Hello

I came on an assignment with a company on TN visa.I was told on TN visa i can be resident or non resident based on the 183 day test.

Got my 1040NR done at http://www.VisaTaxes.com

They also have an excellent tax forum at http://forum.visataxes.com

Hope it helps!

Actually I discussed it with the IRS as I mentioned in another thread, they're not sure on what TN-1 can and cannot do because of a rather confusing legal situation. They told me they'd get back to me after they'd looked into it.

Certainly you can file as a non-resident though, which you have.

The information previously posted is most likely incorrect. The US Form 8840 is only available to those persons who have been present in the US for 183 days or less in the taxable year. Subject to a few limited exceptions, if a Canadian is performing services in the US, the income is taxable in the US under the applicable Treaty, so Form 8833 will not relieve the employee of his US tax obligation. Additional complications arise where the employee has a US 401(k) pension plan or is commuting across the border.

This area of the tax law is extremely tricky. You would be well served to get advise from a tax professional experienced in US cross-border work.