To do list for TN Visa income tax

[xavierbe]

I started working in the US mid October 2008 on a TN, I worked in Quebec previously. By reading a little on the web, that makes me a non resident alien in the US for this given year (less than 183 days in the US). I saw that I need to file the US 1040NR form but what about all the rest? I'm basically trying to find a simple "to do list" that applies to my situation for both US and Canada income tax. I plan on working the full year of 2009 and 2010 probably for the same US company (in process of getting H1B). Has someone been in the same situation and could tell me what needs to be done? Is 1040NR enough on the US part? And then a simple foreign tax credit on the Canadian part (along with the regular forms)?

Thanks.

[Steven]

You should already have filed a 1040NR for 2008, you've missed the filing deadline. It's pretty simple, you just file 1040NR and 8840 if it's less than 183 days and use the W-2 (equivalent of a T4) to fill it in. On the Canadian end you use forms T2209 and T2036 to claim a foreign tax credit for the withholding taxes.

For future years it depends on your circumstances, if you think you're going to be living full-time in the US then it probably makes more sense to move your tax home to the US. The simplest way of doing this is to tell the CRA (either on the phone or your final T1) that you left on 31st December, then you file a 1040 like any American does for 2009. If you move your tax home mid-year then you have to file dual status, which is explained in IRS publication 519, plus you also have to pro-rate your T1 to the number of days you were in Canada.

Bear in mind to move your tax home to the US you need to sever all residential ties to Canada, i.e. healthcare card, driver's licence, etc. anything only a resident could get. You can keep your bank account and RRSP but you must tell them you are non-resident for tax purposes and if you have an RRSP you must declare it to the IRS on Form 8891.

The IRS publications blather on at great length about the "substantial presence test" which isn't terribly important for Canadians due to the tax treaty. If for some reason you enjoy paying Canadian taxes or cannot sever your residential ties you can be non-resident almost indefinitely (until the IRS stop believing you) by making a tax treaty claim on Form 8833.

The other thing to bear in mind is if you move your tax home to the US, it can be a bit of a pig to move it back again to Canada when you leave, which is why it's not a good idea to do it if you only plan on being there for a year or so. As you will no doubt realize while reading IRS publication 519.

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