Maintaining Canadian residency while at studies in the US

[CA mom]

Hi! My husband is doing his Ph.D. in the US and I have accompanied him, so that we could raise our son together and have other children (we had another son while in the US). We have filed CA taxes as residents, because we did not meet the requirements for non-residents (we knew when we left Canada that our stay in the US would be temporary, for instance). However, now CRA claims that I cannot file as a resident and is asking me for thousands of dollars of CCTB to be payed back. I never misrepresented our circumstances here when filing our tax returns, and our US income is only my husband's stipend from the university where he is doing his Ph. D. I am in the US on an F2 visa, which specifically prohibits me from working or having ANY US income. We are not allowed to file US taxes as US residents, and we have been filing them as non-residents. Could someone please provide specific information as to how CA residency for tax purposes is determined for canadians who go abroad to study? I have read the residency bulletin from the CRA site but comments on forums seem to indicate that Canadians studying abroad are considered factual residents in Canada. I would appreciate any help!
Thank you,
CA mom

[agnelson]

You are correct that your tax status, by both IRS/CRA regs and by treaty is a Cdn tax resident -- a deemed resident or a factual resident, depending on how many Cdn ties you have. It is not so much the temporary nature of your stay in US that satisfies this. It is rather your husband (and your) F-status in the US ,which precludes you from satisfying US residency rules, which essentially ties you to canada.

You are probably a deemed resident, because, although having insufficient residency ties to canada, to be considered a true factual resident of canada, you cannot be considered a US resident by their rules.

Factual residents, or Deemed residents, like you, are entitled to CCTB.

Is it possible that you have been filing a 'normal' Cdn tax return for your former province of residence? If so, that is perhaps why your CCTB is being contested. You should be filing the return for Non-residents and Deemed residents. This way your return is routed thru the International Office, which is more savvy (we hope) in dealing with your situation. The method of final tax calculation is different than for a resident of the provinces, so you need to take a look at this and probably re-file.

http://www.cra-arc.gc.ca/formspubs/t1gn ... s-eng.html

In the guide for that return you will see that you are CCTB eligible.

For CCTB, along with proving your eligibility. You may need to provide the following to buttress your case:
Documenatary proof of both your statuses throughout your time in US (I-94, I-20, etc) as well as copies of your 1040NRs to show that at no time you have met or claimed US residency.

Remember its not your ties in Canada, nor the temporary nature of your time in US that make your deemed or factual resident, it is your inability to be considered resident in US that makes it so.

All the best

-- Wed Nov 04, 2009 11:38 am --

Did you submit an NR73? I don't usually advise sending this, but in your case it may help as well. It will prove that yiu are not a US resident.

[CA mom]

Thank you very much! Indeed we have been filing 'regular' returns. I will follow your advice immediately!
CA mom

-- Wed Nov 04, 2009 1:48 pm --

Hi agnelson,
'
Sorry to impose on you, but would the line below be the one that applies to me/my husband?

"■ a person who, under a tax treaty, agreement or
convention between Canada and another country, is
exempt from tax on 90% or more of your income from all
sources in your new country of residence because of your
relationship to a resident (including a deemed resident)
of Canada; or"

I can't find any other category where we would qualify. So he would be a 'deemed resident' because 90% of his worldwide income is exempt from tax under the US-CA tax treaty? And I would be a 'deemed resident" because I am his dependent?

Thank you very much for your help!
CA mom

-- Wed Nov 04, 2009 6:56 pm --

agnelson, I found another of you posts on this topic, stating:
"There is a principal that one cannot be considered a Cdn tax non-resident unless and until one establishes tax residency elsewhere."

Where could I find the 'official' source or reference for this principle? I would like to provide the CRA with all the references possible when I re-file as a 'deemed resident', to avoid any misunderstandings.

thank you,
CA mom

[Steven]

There isn't much (if any) difference anymore between non-resident and resident returns in your situation if I remember the CRA guide correctly, they changed the forms a few years back, the tip-off is your American address on the T1 probably, but he's right, whatever forms you're using you need to file through the correct CRA office that deals with overseas returns.

To cut a long story short, they've made a mistake. Noted on here before the CRA likes to do this so they can go after departure tax.