TD / TN Help - Working in Canada

Hi there,

I have a bit of an odd situation that I need some expert advice on. I am currently on a TN working in the US in my first year. My wife is a teacher and she cannot get sponsored here for a TN or H1B easily so she has received a job offer in Canada and she is currently on a TD in the US. Does she have to report working in Canada? She will be moving back permanantly and will be visiting me here and there.

What are the steps?

Thank you for your help!

No. She just moves.

Taxes might get more complicated if you're filing as a resident in the US, because your spouse becomes a non-resident so you can't file jointly anymore.

She is being filed as a dependant in the US. She will be working part time in Canada for barely 80 hours. how does that affect me?

Thanks

You said she's moving "permanently". If it's permanent she has to file dual-status in the US for this year and file a T1 for the portion of the year she's in Canada (MUCH simpler indeed if she can move on January 1st or establish residential ties on that date). You have then have to file as an individual next year and explain to the IRS why you aren't filing jointly anymore.

This assumes you are filing as a resident, if you were filing as a non-resident (on 1040NR) you have a choice, you can still include her on the 1040NR or not, but as her income is all Canadian-source the tax bill will be the same. And you file your T1 as per usual.

Have a read of IRS publication 519.

just sounds expensive . and confusing

You said she's moving "permanently". If it's permanent she has to file dual-status in the US for this year and file a T1 for the portion of the year she's in Canada (MUCH simpler indeed if she can move on January 1st or establish residential ties on that date). You have then have to file as an individual next year and explain to the IRS why you aren't filing jointly anymore.

This assumes you are filing as a resident, if you were filing as a non-resident (on 1040NR) you have a choice, you can still include her on the 1040NR or not, but as her income is all Canadian-source the tax bill will be the same. And you file your T1 as per usual.

Have a read of IRS publication 519.

It's not expensive, it's just a bit complicated. The trick to it is for her to establish residential ties to Canada on January 1st.

Then you just file a 1040 jointly for 2008, and then for 2009 you file singly and she files singly in Canada. (Provided you're filing as residents of the US right now).

Have you even filed in the US yet? If not the best thing to do is probably to file as non-residents for 2008, i.e. you file a 1040NR jointly and a T1 jointly. But you must notify your employer on a W-4 if you file as a non-resident as they have to do withholding differently.

Actually thinking about this if you're both Canadians and she lives in Canada, a spouse is a residential tie, so basically you have to file jointly in Canada, and then you file jointly as non-residents in the US. So you file a 1040NR and an 8840 at tax time in the US, and a T1 with a foreign tax credit in Canada. Effectively you end up paying the Canadian tax rate for whatever Province she lives in.

I am filing resident status for the US for myself and I will show her deperature Jan 1, as the job she is getting is temporary. The point of moving to the US was to share in tax benefits. I can still claim her as a dependant then even though she has part time work for 20 days right .

It's a bit dicey because she is a Canadian working a Canadian job in Canada. For 20 days though she might be able to get away with it.

So you would file a 1040 jointly in the US, and a joint non-resident T1 in Canada. Bear in mind the CRA may send you a nasty letter though, or ask her to fill in an NR-73 to establish her residency status. So it is very important indeed to sever all residential ties to Canada absolutely. If you still have a Canadian bank account you need to tell them you are non-resident for tax purposes so they withhold Part XIII tax. I know for a fact the CRA check that one, because they receive a T5 from the bank (and they told me it's one of the things they check).

If you have a read of NR-73 it will give you an idea of what you need to do.

The problem is if you sever all residential ties to Canada, you have nothing to show non-immigrant intent when you renew TN-1 status, which may cause you a problem as USCIS usually require some evidence of residential ties to Canada.

The advice I always give on here is to carry on filing in Canada for at least the first year and file as non-resident in the US, because moving your tax home to the US and then moving it back again is a ton of paperwork and you should wait to see how things are going to work out before burying yourself in that. Doing it twice in two years would be a real pig.

You will probably end up paying more tax doing it that way as Canadian rates are higher but unless you're in a high tax bracket it's usually worth it.

Bear in mind if you moved to the US this year, you have to file dual-status this year and also file a pro-rated T1 for the portion of the year you were in Canada (if you want to move your tax home to the US). IRS publication 519 explains how to do this and the general guide for the T1 return. So three tax returns. Which like I say is a real pig, because say you moved back to Canada in the middle of next year, you would have to file three tax returns, a 1040-C and a FinCEN form and various other things in 2010.

If you contribute to an RRSP or an RESP it buggers that up too.

In fact if you moved to the US during 2008, and then your wife starts work in Canada before the end of this year, you actually have to file dual-status in the US and Canada, so it's four pro-rated tax returns. I.e.: a 1040NR and a T1 covering the portion of the year you were in Canada, and a 1040 and a non-resident T1 for the remainder of the year.

Not something to volunteer for unless you're going to save a lot of money doing it that way.