Resident or nonresident for tax purposes?

We moved to California mid-July last year, my husband started working on TN-1 status (and me and kids had TD status). Since we plan on staying here, as of October 1st last year our status changed, so we now hold H1B and H4 status.

We do not fulfill substantial presence test for the previous year, but we plan to stay in the States and have to file tax return here, my question is - are we considered nonresident aliens or resident aliens? Does something change in the alien status when you switch from TN-1 to H1B?

I really want the simplest tax filing option, do not want to complicate further tax returns. Both me and my husband used to work in Canada, if that's important for the decision. I also canceled UCCB (Universal Child Care Benefit) as of July last year, did not want to have problems when filing taxes for 2009.

From what I already read on this forum, we should have two options:

1. File 1040NR and 8840 in the States and T1 in Canada with claiming foreign tax credits on T2209 and T2036.

2. Claim dual status, file prorated T1 in Canada, in the States file 1040NR up to mid-July and prorated 1040 for the rest of the year.

What do I need to do next tax year in the States if I choose option 1 or 2?

I started reading recommended IRS publication 519, but it`s going to take a while, so I was hoping I might get some answers here. Thanks in advance!

1 is absolutely incorrect. you are not Cdn residents, you are US residents, both by treaty, and now by SPT.

2 is the correct way. But the best way is filing a full-year 1040 and exempting Cdn wages from before the move using form 2555. This allows you to file jointly and get all US tax deductions. Cdns have the right to do this by treatyy.
Neither way has impact on Cdn return, which will be a departure return using the CRA emigrant guide as your instructions. Then yo uare done with Cdn taxes.


first year taxes are complicated. period. But they will not be complicated in futuire regardless of what you do this year, so best pay least tax possible this year.

By filing full-year 1040, you can ignore Pub 519.