taxes and residency

Hello

I've searched throughout the forum but havent found a similar post that can answer my question.

I was working in the US on a TN visa for 2 years since dec 2006. I've returned to Canada in Jan of 2009. While in the US i filled my taxes etc (except this year yet). However i did not file any Canadian taxes because i had called the CRA and they said to send in a letter declaring that i had no ties in canada and that would be enough. Turns out they never recieved that letter or added it to my information. So technically i was still a resident all this time and haven't been paying my taxes. The man on the phone explained that i could send in another letter stating when i left the country and a second letter stating the time that i've returned and that i would be considered non resident for tax purposes.

Speaking with H+R block in canada though provided me with different information. They said that because of my ties i had (which are all secondary only i belive) still in canada. (Drivers licence, bank account, RRSP) That i was still actually a resident all along and that i will have to pay my taxes ( with the penalties and exemptions ) for the previous 2 years. However if the taxes that canada would have had me pay were less that the ones i already paid in the US i wouldn't have to pay canada anything.

Has anyone else been in a similar situation and can share their experiences or thoughts?

Thanks

Since Canadian taxes are higher than that in US, you will have to pay difference in taxes to CRA with late penalties if any for the two years you worked in US.

From a legal standpoint you were a resident of Canada if you maintained residential ties, have a read of form NR-73. So you would have to file T1s for those two years, claim a foreign tax credit for the US taxes you paid and pay the difference to the CRA as Canadian rates are higher.

Whether the CRA actually cares is a different matter, depends to some extent on how you were filing in the US as well, whether you filed as a resident on 1040 or a non-resident on 1040NR. If you filed on 1040 beware of the fact that there is a small truckload of paperwork to be filled out to move your tax home out of the US, have a read of IRS publication 519. The main one is 1040-C. But you may also have to file dual status in the US for the year you left and you may also have to file dual status in Canada as well.

But it gets you out of the back taxes, provided the CRA doesn't cotton on to the fact you had residential ties for those years.