Filing Canada & US Taxes

[sly_wolf 199]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

Edited October 30, 2008 by sly_wolf

[sly_wolf 199]

I think the first thing we discussed was not activating the visa until after the New Year to avoid being considered a PR and having to file taxes. Being married to a USC does not mean you have to file taxes. And if you don't live together at all, you certainly don't have to file them. I filed head of household last year because my husband and I never lived together during 2007. He had no reason to file in the US.

As to the earlier question about whether my husband has previously filed in the US or has any US-derived income the answer is no. But having filed in previous years does not obligate you to file in future years if you do not meet the criteria that requires that you file. Just be sure to have your proof on file on the off chance that you are audited. I really wouldn't worry too much about it though. If you are in the right, you are in the right.

Now, I have heard of situations where the border guys forced someone to activate a visa before they really wanted to. We may be in that same situation. But I don't think that it is typical for this to occur. If you don't have all of your stuff with you you really aren't moving to the US and so activating doesn't make sense. And it would require extra work on the part of the border guys so I could see them going along with non-activation. Going for a visit is not the same thing as going to live.

We're at the hairy edge of where the tax credit would help us so if we were forced, it wouldn't likely hurt too much to file jointly. But I haven't run the numbers to say for certain.

BTW, how do you feel about the drop in the Looney? Talk about bad timing. I'm hoping that between the time my husband sells his house and the time he's ready to bring that money here that we reach parity again. Don't know how likely that is to occur, but I'm hoping. And maybe it'd make sense to drag out the divestment from Canada a bit, anyway.

How often and for how long your husband visits you in the U.S. factors in as well. I have read that filing jointly is typically the best from a tax standpoint.

I think the looney will pick up and level off somewhere .... who knows where. Its already done so. I am more concerned with the economy overall ..... I think we are in for some tough times over the next few years.

Sly

[zyggy 9]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

K1 in itself does not require one to file a US Tax return. The substantial presence test would apply for a K-1. If one were entering in the latter half of the year, odds are that that test wouldn't be met.

Obtaining Permanent Resident Status does obligate one to file a US Income tax return for the entire year due to the Green Card test. If you're paying taxes in Canada, remember that one can get exclude income up to a certain amount and then take a foreign tax credit for the rest, or if it's better for you, you can take a foreign tax credit for everything. You should be able to exclude any taxes entirely for any state return since you wouldn't have been resident there.

On the house, do something about the house ASAP. There's nothing you can do about the Loonie and Financial experts generally believe the Loonie will continue to drop against the US dollar as it looks increasing likely that the next administration will do what it takes to get the financial house in order and oil and commodity prices will likely continue to remain low for the forseeable future (next 2 years or so). Having a house in Canada that is available to reside in is a key test in determining if one is a deemed resident of Canada. If you are judged as a deemed resident, you will be required to pay taxes in Canada even if you don't live there. If you rent the house, then you will not be considered a deemed resident, but will be required to pay non-reisdent (25%) taxes on any rental income you may have.

On a side note, has your spouse been filing as married the years you've been in Canada. If your spouse has been filing as single, that is incorrect and will need to amend her past returns. Your spouse has the option to treat a non-reisdent spouse as resident for tax purposes. There are many times where this treatment will result in a better tax situation there are also times where it won't. SOmething to think about. I would go ahead and do your taxes by considering you a non-resident and filing as MFS and doing it again with treating you as a resident, including your foreign income and filing as MFJ. Choose the method that gives the better tax treatment.

Edited October 30, 2008 by zyggy

[Pandora01 0]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

Not married yet but will be soon!

Things might be different for me indeed but this thread made me realize it's something I have to check into since I'm moving and getting married in the US this year. At first I didn't think I'd have to bother with taxes before next year since it's obvious I won't be working in the US in 2008 but now I'm not so sure.

Yeah, a cross border tax expert will be needed indeed. I can see hours of 'interesting' reading ahead! One thing is sure, I don't want to mess with the IRS so I'll do my research. Thank you, Sly

[sly_wolf 199]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

K1 in itself does not require one to file a US Tax return. The substantial presence test would apply for a K-1. If one were entering in the latter half of the year, odds are that that test wouldn't be met.

Obtaining Permanent Resident Status does obligate one to file a US Income tax return for the entire year due to the Green Card test. If you're paying taxes in Canada, remember that one can get exclude income up to a certain amount and then take a foreign tax credit for the rest, or if it's better for you, you can take a foreign tax credit for everything. You should be able to exclude any taxes entirely for any state return since you wouldn't have been resident there.

On the house, do something about the house ASAP. There's nothing you can do about the Loonie and Financial experts generally believe the Loonie will continue to drop against the US dollar as it looks increasing likely that the next administration will do what it takes to get the financial house in order and oil and commodity prices will likely continue to remain low for the forseeable future (next 2 years or so). Having a house in Canada that is available to reside in is a key test in determining if one is a deemed resident of Canada. If you are judged as a deemed resident, you will be required to pay taxes in Canada even if you don't live there. If you rent the house, then you will not be considered a deemed resident, but will be required to pay non-reisdent (25%) taxes on any rental income you may have.

On a side note, has your spouse been filing as married the years you've been in Canada. If your spouse has been filing as single, that is incorrect and will need to amend her past returns. Your spouse has the option to treat a non-reisdent spouse as resident for tax purposes. There are many times where this treatment will result in a better tax situation there are also times where it won't. SOmething to think about. I would go ahead and do your taxes by considering you a non-resident and filing as MFS and doing it again with treating you as a resident, including your foreign income and filing as MFJ. Choose the method that gives the better tax treatment.

Correct me if I am wrong, but filing as head of household would also be incorrect then?

Sly

[zyggy 9]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

K1 in itself does not require one to file a US Tax return. The substantial presence test would apply for a K-1. If one were entering in the latter half of the year, odds are that that test wouldn't be met.

Obtaining Permanent Resident Status does obligate one to file a US Income tax return for the entire year due to the Green Card test. If you're paying taxes in Canada, remember that one can get exclude income up to a certain amount and then take a foreign tax credit for the rest, or if it's better for you, you can take a foreign tax credit for everything. You should be able to exclude any taxes entirely for any state return since you wouldn't have been resident there.

On the house, do something about the house ASAP. There's nothing you can do about the Loonie and Financial experts generally believe the Loonie will continue to drop against the US dollar as it looks increasing likely that the next administration will do what it takes to get the financial house in order and oil and commodity prices will likely continue to remain low for the forseeable future (next 2 years or so). Having a house in Canada that is available to reside in is a key test in determining if one is a deemed resident of Canada. If you are judged as a deemed resident, you will be required to pay taxes in Canada even if you don't live there. If you rent the house, then you will not be considered a deemed resident, but will be required to pay non-reisdent (25%) taxes on any rental income you may have.

On a side note, has your spouse been filing as married the years you've been in Canada. If your spouse has been filing as single, that is incorrect and will need to amend her past returns. Your spouse has the option to treat a non-reisdent spouse as resident for tax purposes. There are many times where this treatment will result in a better tax situation there are also times where it won't. SOmething to think about. I would go ahead and do your taxes by considering you a non-resident and filing as MFS and doing it again with treating you as a resident, including your foreign income and filing as MFJ. Choose the method that gives the better tax treatment.

Correct me if I am wrong, but filing as head of household would also be incorrect then?

Sly

No, there is an exception for head of household if the other spouse is not present for a certain portion of the tax year, I believe it's the last 6 months and there are more stringent requirements on who can be considered a "dependent" to qualify.

Edited October 30, 2008 by zyggy

[sly_wolf 199]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

K1 in itself does not require one to file a US Tax return. The substantial presence test would apply for a K-1. If one were entering in the latter half of the year, odds are that that test wouldn't be met.

Obtaining Permanent Resident Status does obligate one to file a US Income tax return for the entire year due to the Green Card test. If you're paying taxes in Canada, remember that one can get exclude income up to a certain amount and then take a foreign tax credit for the rest, or if it's better for you, you can take a foreign tax credit for everything. You should be able to exclude any taxes entirely for any state return since you wouldn't have been resident there.

On the house, do something about the house ASAP. There's nothing you can do about the Loonie and Financial experts generally believe the Loonie will continue to drop against the US dollar as it looks increasing likely that the next administration will do what it takes to get the financial house in order and oil and commodity prices will likely continue to remain low for the forseeable future (next 2 years or so). Having a house in Canada that is available to reside in is a key test in determining if one is a deemed resident of Canada. If you are judged as a deemed resident, you will be required to pay taxes in Canada even if you don't live there. If you rent the house, then you will not be considered a deemed resident, but will be required to pay non-reisdent (25%) taxes on any rental income you may have.

On a side note, has your spouse been filing as married the years you've been in Canada. If your spouse has been filing as single, that is incorrect and will need to amend her past returns. Your spouse has the option to treat a non-reisdent spouse as resident for tax purposes. There are many times where this treatment will result in a better tax situation there are also times where it won't. SOmething to think about. I would go ahead and do your taxes by considering you a non-resident and filing as MFS and doing it again with treating you as a resident, including your foreign income and filing as MFJ. Choose the method that gives the better tax treatment.

Correct me if I am wrong, but filing as head of household would also be incorrect then?

Sly

No, there is an exception for head of household if the other spouse is not present for a certain portion of the tax year, I believe it's the last 6 months and there are more stringent requirements on who can be considered a "dependent" to qualify.

I assume that would include any visits during the last 6 months?

Sly

[MsZ 6]

He filed married in Canada and he had all of my financials (including a W-2 an a copy of my US filing as I filed before he did). And, he would not have benefited by considering me resident. Visits are not a consideration here.

From the IRS : "Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household. "

Next year, everything goes wonky of course.

There's a slight chance his house will sell as he has a friend who is interested. If not, we're looking at listing and who knows how long that will take.

[zyggy 9]

This thread is really interesting. I'm about to move to the US in a few days and now I'm wondering if I'll have to file taxes in US for 2008. I saved the link mentioned higher in the thread and will definitely study it. Thank you for bringing up the subject.

If you are married and moving before the end of the year you will have to file something with the IRS. Except with a K1 in your case I am not sure. Always good to check with a cross border tax expert.

Sly

K1 in itself does not require one to file a US Tax return. The substantial presence test would apply for a K-1. If one were entering in the latter half of the year, odds are that that test wouldn't be met.

Obtaining Permanent Resident Status does obligate one to file a US Income tax return for the entire year due to the Green Card test. If you're paying taxes in Canada, remember that one can get exclude income up to a certain amount and then take a foreign tax credit for the rest, or if it's better for you, you can take a foreign tax credit for everything. You should be able to exclude any taxes entirely for any state return since you wouldn't have been resident there.

On the house, do something about the house ASAP. There's nothing you can do about the Loonie and Financial experts generally believe the Loonie will continue to drop against the US dollar as it looks increasing likely that the next administration will do what it takes to get the financial house in order and oil and commodity prices will likely continue to remain low for the forseeable future (next 2 years or so). Having a house in Canada that is available to reside in is a key test in determining if one is a deemed resident of Canada. If you are judged as a deemed resident, you will be required to pay taxes in Canada even if you don't live there. If you rent the house, then you will not be considered a deemed resident, but will be required to pay non-reisdent (25%) taxes on any rental income you may have.

On a side note, has your spouse been filing as married the years you've been in Canada. If your spouse has been filing as single, that is incorrect and will need to amend her past returns. Your spouse has the option to treat a non-reisdent spouse as resident for tax purposes. There are many times where this treatment will result in a better tax situation there are also times where it won't. SOmething to think about. I would go ahead and do your taxes by considering you a non-resident and filing as MFS and doing it again with treating you as a resident, including your foreign income and filing as MFJ. Choose the method that gives the better tax treatment.

Correct me if I am wrong, but filing as head of household would also be incorrect then?

Sly

No, there is an exception for head of household if the other spouse is not present for a certain portion of the tax year, I believe it's the last 6 months and there are more stringent requirements on who can be considered a "dependent" to qualify.

I assume that would include any visits during the last 6 months?

Sly

No.. residing. Visits don't count.