TN Status +Taxes + Accountants in NYC?

[lnishikawa]

Hello everyone,

I began working in the US in July under TN status and I am lost on the whole taxation issue. If anyone could recommend an accountant in the NYC area who could help me navigate both systems, it would be greatly appreciated.


And in case anyone out there has been through this and wants to help, my main questions are:

1 - where am I am considered a resident for tax purposes?
-- I do not own property and have no "permanent home"
-- I have lived in the US continuously from Sept-06 to June-08 as a full time student under F1, from July onward under TN.
-- In 2006 I was a non-resident alien, in 2007 I was a resident alien but claimed Canadian residence under the treaty
-- I seem to have ties to both countries: Canada = whole family, drivers license, bank accounts, student loans, "permanent address"; US = job, bank accounts, current residence.

2 - if I qualify for both, and it is a question of where I choose to deem as my "permanent home," then what would be most beneficial? I am leaning toward Canada since I have a huge amount of rolled-over tuition tax credits there that I would be silly not to use.

3 - if I decide to be a Canadian resident under the treaty, then can I claim some kind of exemption from witholding in the US?

Thanks a lot! This forum has been a HUGE help since I moved here.


Cheers,
Laura

[Steven]

Canada is your principal residence from the sounds of it because you filed an 8843 last year and your DL is still Canadian.

This situation is a tad unusual because you changed status, and F-1 gives you certain tax advantages that don't apply to TN-1.

You can either file resident in the US for the whole year, but if you do that you may owe FICA withholding if you were working as a student and claimed the student exemption.

Or you can file as dual-status for the year, i.e. non-resident until you became TN-1.

Or you can file as non-resident for the whole year.

Depends on how confident you are of remaining in the US really, because you don't want all the hassle of moving your tax home there and then find out you have to move back to Canada.

I assume you're in a fairly low tax bracket, so paying Canadian income taxes shouldn't be that onerous for 2008, which means you should file as non-resident for the whole year (and legally you should because you have a Canadian DL).

So basically you do it the exact same way you've done it before, i.e. a T1 in Canada for wherever you're from, and a 1040NR - except this time you file Form 8840 instead of 8843. The difference being that you are not exempt from FICA withholding as TN-1; if you were exempt for part of the year as F-1, file both forms and include a letter of explanation that you changed status mid-year (assuming you were working while a student and got a W-2 covering that period, otherwise it doesn't really matter about the 8843 - if social security taxes were withheld while you were on F-1 you can claim them back on Form 843, however this just reduces your foreign tax credit in Canada so it usually doesn't matter that much).

You can claim a foreign tax credit in Canada on the T1 for all the US withholding (except I think medicare, check on that one, I've forgotten), assuming the Canadian rate is higher than the US rate. If it's lower (which it might be in this case) you can only claim up to whatever the Canadian marginal rate is, so effectively you pay the US tax rate in that situation. The general guide for the T1 explains how to claim a foreign tax credit, you may also be able to claim a Provincial credit for any State income tax.

Bear in mind you must give your employer a W-4 specifying your tax status in the US, the bottom of page 24 of IRS publication 515 explains how to do this (don't get confused about Form 8233, this doesn't apply to people directly employed under TN-1).

If you find at the end of next year your job is secure and you're going to be staying awhile, then you can file as resident for 2009 using a regular Form 1040. It's much simpler doing it that way as you are effectively filing non-resident for the whole of 2008 and resident of the US for the whole of 2009, which saves pro-rating personal exemptions, filing dual-status, etc.

One snag to bear in mind is that you must have "bona fide non-immigrant intent" to get TN-1 and to file as a US resident you must sever all residential ties to Canada - so changing to resident US tax status may affect your immigration status.

Also if you file as a resident of the US for 2009, remember to notify the CRA that you ceased to be a resident of Canada for tax purposes on January 1st, 2009. There is a checkbox on the T1 for this purpose but at this point you may not know whether you're going to file as a US resident or non-resident for 2009.

Download IRS publication 519 for more information.

[lnishikawa]

wow, thanks a lot. sounds complicated but I think you answered my question.