TN VISA and Taxes

Junoon123
New Member



Joined: 28 Nov 2007
Posts: 8
Location: chicago

Posted: Tue May 13, 2008 4:32 pm

 

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I was wondering if someone can help me out.
I am working in the US on TN visa and i was told that i was suppose to file taxes in both country apparntly i filed taxes in canada first instead of the US. I still haven't filed taxes in the US and am wondering what to do now.

In the US i have filed for extension.

Please guide me and let me know what to file in both countries. In Canada i filed taxes under T4A

Thanks

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 819
Location: Calgary

Posted: Wed May 14, 2008 10:55 am

 

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http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

1040NR and the relevant attachments, the most important of which is claiming the tax treaty exemption. Even with an extension you have to file by June 15th to claim tax treaty status.

It's not a good idea to move your tax home to the US, especially on a TN-1, so you carry on filing a T1 for wherever you lived in Canada every year and claim the foreign tax credit, and you file a 1040NR in the US every year with the relevant attachments.
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Steve.

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bmw
New Member



Joined: 07 Apr 2008
Posts: 2
Location: Victoria

Posted: Thu May 15, 2008 4:00 pm

 

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If one files a 1040NR does that apply to federal+state taxes, or just federal?

The reason I ask is I understand that state and federal taxes are separate withholdings from the paycheck. Also, even a non-resident alien has to file both state and federal returns. Am I wrong?

I would hate to have to pay Canada-federal, Canada-provincial and US-state.

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Junoon123
New Member



Joined: 28 Nov 2007
Posts: 8
Location: chicago

Posted: Thu May 15, 2008 7:32 pm

 

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Steve i have a follow up question. I thought i had to only file 1040EZ since i lived in the US for the entire year?
2nd i have already filed taxes in Canada in other word i have paid the canadian govt the amount i owed to the US govt what course of action can i take?

Are their any accountants i can talk to here in the US or Canada?

Please adivce

Thank You

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eddycurrents
CanuckAbroad Regular



Joined: 18 Jun 2007
Posts: 42

Posted: Tue May 20, 2008 11:09 am

 

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Steve I don't understand your advice -- if you are living in the US you want to declare yourself a non-resident of Canada so you don't have to pay Canadian taxes.

The downside of being a non-resident is it goes against the spirit of TN, which is supposed to be temporary. That creates occasional border hassles. However I would rather deal with those than pay taxes to a country I don't live in.

I declared myself non-resident after I sold my house in Canada and it was granted some months later. I have not paid taxes to Canada nor filed a Canadian return since.

At the time I had RRSPs, which don't count against your non-resident status, and a Canadian bank account and credit card, which do. However I explained in a letter that I needed the Canadian credit card because couldn't get a US credit card, because I had no credit rating in the US, and I needed the Canadian bank account to pay the Canadian credit card. They judged that acceptable.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 819
Location: Calgary

Posted: Mon May 26, 2008 8:35 pm

 

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Having done it myself and having spent a long time reading up on it and also holding qualifications in this area, the conclusion I have reached is that it is generally a bad idea to move your tax home to the US especially on a TN-1. TN-1 is for temporary workers, so by definition you plan on leaving the US at some point. To move your tax home to the US you have to sever all residential ties to Canada. Whereas to get TN-1 you have to show some sort of residential ties to Canada to prove you are there temporarily.

The two work at cross-purposes.

In addition, it makes filing more complicated (arguably, it depends on your tax situation) if you move your tax home to the US because you have to file dual status in the first year that you move (which means usually three tax returns, one for Canada, one non-resident one for the US for the portion of the year you were in Canada, and one US one for the part of the year you were in the US). It also makes it impossible to contribute to your RRSP or to take income from an RRSP without paying income tax and/or capital gains tax.

If you move your tax home to the US you can also face Canadian departure tax (for example if you have investments in a mutual fund outside of an RRSP, or by far the worst scenario - stock in a private corporation).

Generally imv it only makes sense to move your tax home to the US if you are certain you plan on permanently living there forever. There's just no point messing up your RRSP, facing departure tax, screwing up your capital gains tax calculations (because you face CGT on your assets for the years you were in Canada, then the years you were in the US), doing pro-rated personal exemptions, doing dual-status filing etc. just for a few years.

The only reason to do it temporarily is if you forsee a really significant tax savings by doing it AND you really have paid attention to all the paperwork that you're going to have to file.

The really big problem I see with moving it to the US and you're in a temporary status is what do you do if you are ever refused entry? All of a sudden, you are a resident of Canada again and you have to file a truckload of tax paperwork to sort out that mess.
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Steve.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 819
Location: Calgary

Posted: Mon May 26, 2008 8:42 pm

 

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You both need to read that pamphlet I posted the link to. And the instructions for the T1 return. You don't get dual taxed if you remain a resident of Canada for tax purposes (which doesn't necessarily mean you are physically there). Canada has a foreign tax credit for taxes paid in the US.

However, if you move your tax home to the US, the US only exempts up to I think $80,000 or so of income from US taxes, so if the CRA decided for whatever reason that you still had residential ties to Canada and assessed income tax against you, you couldn't avoid dual taxation if your income was over $80,000 as the US foreign tax credit wouldn't cover all of it.

Which is another good reason not to move your tax home to the US, imo.
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Steve.

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