Will I be able to qualify to be a non-resident?

[Vasant56]

Hi everyone,

I'm moving to the States in the next few weeks, and I've been told that the best course of action is to apply to be a non-resident in Canada. Now, to be qualified, I'm told, I need to reside outside of Canada for exactly 6 months. Interestingly, it looks like by the end of 2009 I will have been outside of Canada for around 5 1/2 months.. am I ineligible to apply for non-residency? Is it in my interest to try to find a way to get down to the states an extra two weeks early (just in case?).

Also, I have very few ties in Canada (drivers license, bank account, etc) which I can cancel or move to the states if I need to, but I do have a mutual fund that I don't want to cash out. What will happen if I leave that in Canada?

Any advice would be much appreciated. Thanks a lot!

[Reba]

What do you mean "apply for non-residency"?

What status will you have in the US?

[Vasant56]

I'm sorry.. i meant will i be able to apply to be a Canadian non-resident?

[Steven]

No, because you still have a valid Canadian DL from the sounds of it, so you do have residential ties to Canada. There's caselaw that basically that alone and other minor ties means you're resident in Canada for tax purposes, plus it sounds as though you meet the "significant presence" test as well.

You can apply for a ruling on CRA form NR-73.

What you should aim for if you really want to do this is to be non-resident from the day you left, but you need to sever all residential ties now to pull that off. A mutual fund is not a residential tie, nor is a bank account providing you've notified the bank you're non-resident for tax purposes and they're sending you an NR4 every year instead of a T5.

If the mutual fund is an RRSP, you have to declare this to the IRS on Form 8891 when you file your taxes. If it's not, then you probably will owe departure tax to the CRA for it.

Departure tax is covered here: http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... n-eng.html

The general guide for the T1 explains how residency is defined, essentially if you leave mid-year you pro-rate your T1 for that year to the days you were in Canada.

If you move your tax home to the US mid-year you have to file dual status in the US, which is explained in IRS publication 519.

If you want to file non-resident in the US instead, that is explained in 519 and also in this publication: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

Generally speaking, if you're moving to the US for a relatively short period of time then it's not worth the hassle of moving your tax home into the US and back again as you will realize after reading through all that!