Married to US citizen,retired no US income-taxes?

[gbstevens47]

I have moved to the US and married a US citizen. We have filed for change in status, I-130 and I-485. Awaiting results. In Canada I have two bank accounts and all my RRSPs etc. I am retired and my only income is CPP and payments from my RRSPs. I have some bank interest in Canada and some in the US. No other US income. I know I have to file in Canada but since I have no income in the US do I have to file in the US? I have mortgage interest payments in the US. Can my wife use those on her taxes. She is listed on the deed but her name was not on the loan and is not on the 1098 form I got from the bank.
I filed income tax returns in Canada and the US fro 2006 and 2007 as I was working in the US for parts of those years under an L-1. I keep seeing reference in other posts to an "exit tax" if I have left Canada. Does this apply to me if I stay in the US? Technically I have an address in Canada at my sisters residence but I do own property in NC. Anything to help me figure out what to do re taxes would be much appreciated. Thanks.

[Reba]

Yes, you have to file in the US, because you are married to a US citizen. NO way around that I'm afraid.

You will have to claim your RRSP income, and any interest income on your bank accounts, etc.

Do you live in North Carolina? You may want to check with a financial adivsor about your RRSPs etc. There's some weird laws here in this state, and I had to cash out my RRSPs when I moved down here because the state law against foreign managed investment funds.

There's a cross border accounting firm SErbinski that you may be able to get some advice or info from.

[Steven]

If you marry a US citizen and do AOS and become an LPR, by law you MUST file as a resident of the US and you must declare all your worldwide income to the US Govt. and pay US taxes on it (if there are any). You must also file jointly with your US spouse.

If you have any Canadian-source income you file in Canada using the non-resident T1 (assuming you have reportable income, read the instructions). You MUST sever all residential ties to Canada pretty much, DL, OHIP, etc., otherwise you may end up being considered a resident of both places in which case you would end up getting taxed twice.

In the first year that you file as a resident of the US, you must file as "dual-status", i.e. non-resident for the first part of the year and resident for the second part of the year. You may also need to do this in Canada, i.e. resident for the first part of the year and non-resident for the second part of the year. This is why it's always best to move your tax home on January 1st if you can pull it off, because it saves you a lot of paperwork. If you move tax homes mid-year then you have to pro-rate your personal exemptions based on the number of days you lived in either country.

There is a "departure tax", essentially how this works is that it is a capital gains tax of 25% on your assets, excluding your principal residence and $50,000 of assets. So for the average Joe you're unlikely to be hit with it. If you have more than one home or you have substantial investments outside of a tax shelter (i.e. excluding RRSPs and the like) then you may be hit with it. You are deemed to have disposed of your assets on the date of departure at FMV, as determined by the CRA.

Under the 2008 tax treaty, distributions inside of RRSPs are no longer subject to US income tax, so when you file 1040 all you have to do is declare them to the IRS on Form 8891. You may also need to file the FinCEN form for foreign assets, which you must file for assets outside the US worth more than $10,000 - this is not an IRS form, it is a Treasury Dept. form.

If you have Canadian-source income subject to tax then you can claim a foreign tax credit in the US on Form 1116 so you don't get taxed twice after you've filed your non-resident T1.

Have a read of IRS Publication 519 which explains how to do a dual-status return, once you've moved your tax home though I'm afraid you've got to start hunting through the more obscure instructions in the regular 1040 package as obviously most US taxpayers don't have foreign-source income from things like CPP.

This contains more info on the departure tax: http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... n-eng.html

FinCEN form: http://www.fincen.gov/forms/files/f9022-1_fbar.pdf