I don't THINK I need to file a US Tax return

[dearheart 0]

My husband (CDN) and I (USC) recently moved to the States. (Nov 1/07) My husband had an income in Canada and is considered a resident for tax purposes in Canada. I had no income. (stay-at-home mom). We will be filing a tax return in Canada. We are currently living with my parents in California waiting out the AOS process with no income. So, I have had no income in Canada or USA EXCEPT when we sold our jointly owned home. I bought TurboTax and entered in the amounts for the sale of the home, but the profit doesn't even matter when it comes to filing. TurboTax said it is not enough to even show up on the return. So, I am thinking that I do not need to file a tax return at all? Am I right in thinking that my husband (Canadian) doesn't need to file because he hasn't worked in the States at all for 2007.

Thanks in advance.

[Delicia 1]

A sale of a primary residence is generally not considered taxable gains if the home was 'homesteaded.' And if you had no other income in 2007, then I agree, you are not required to file a U.S. tax return for 2007.

[Converse34 1]

I agree too. Unless you make over a certain amount (unsure of how much) you do not need to file.

[zyggy 9]

Is your husband a PR at any time i n2007. If so he is required to file for the entire tax year. He must declare his earings in Canada but can both exclude them and take a foreign tax credit.

[Chica Yeyé 41]

Is your husband a PR at any time i n2007. If so he is required to file for the entire tax year. He must declare his earings in Canada but can both exclude them and take a foreign tax credit.

Wise words ziggy. How does one go about this then? File double returns with IRS and Canada Revenue?

[Kathryn41 3,205]

yes, your husband would have to file with both Canada and the US. His income, however, would only be taxed in Canada as he would claim the Foreign Income Tax Credit on his US returns. The Canadian return also serves as his 'exit' tax return. If he had no income in the US in 2007 he should be able to claim 100% of his tax credits in Canada even if he didn't live there the full year. He needs to complete the Canadian Tax Return first as he will require the information from that return in order to prepare the US return. He won't be able to efile the US return either - it will need to be a paper copy as the Foreign Tax Credit form is only available in paper (unless it changes for last year). There is a useful guide for Emigrants at the Canada Revenue Agency website

http://www.cra-arc.gc.ca/tax/nonresidents/.../leaving-e.html. It is also useful to consult one of the big tax guides that is printed this time of year to see the section on Foreign Residents and US tax returns. Here is also a useful link to the Help feature on the IRS website - we contacted them a number of times and received useful advice: http://www.irs.gov/help/article/0,,id=97185,00.html

Edited January 10, 2008 by Kathryn41

[zyggy 9]

Is your husband a PR at any time i n2007. If so he is required to file for the entire tax year. He must declare his earings in Canada but can both exclude them and take a foreign tax credit.

Wise words ziggy. How does one go about this then? File double returns with IRS and Canada Revenue?

Yes.. they would have to file a return with the IRS (as preferably married filing joint) and a leaving Canada return with Revenue Canada. All Canadians leaving Canada MUST file a leaving Canada return, even if they had absolutely no income.

[dearheart 0]

Zggy - My husband was not a PR in 2007 at all. He received his Employment Authorization in Feb 2008 and we are still waiting for the Green Card, so from what you said I am understanding that he does not need to file US taxes for 2007. He will file his exit return for Canada.

According to Kathryn, since my husband did not become a PR or resident of any kind in 2007 of the US he can clain 100% of his tax credits? When I enter in the exit date of Oct 29, 2007 the tax credits are pro-rated by QuickTax - should I override this?

I, myself was not a resident of the US at any time in 2007. I am a USC and know that if I meet the filing requirements I need to file no matter where I live. Looking at the filing requirements for persons living abroad and in the US I am under the minimum amount for any category.

"Filing Requirements

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad.

Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2007 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

Filing Status* Amount

Single $8,750

65 or older $10,050

Head of household $11,250

65 or older $12,550

Qualifying widow(er) $14,100

65 or older $15,150

Married filing jointly $17,500

Not living with spouse at end of year $3,400

One spouse 65 or older $18,550

Both spouses 65 or older $19,600

Married filing separately $3,400

*If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. "

The only "income" I received was the Universal Child Care Benefit of $2400.

Regarding the Treating of my husband as a resident I found this on the IRS website:

"Nonresident Alien Spouse Treated as a Resident

If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U.S. resident. This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year.

If you make this choice, the following two rules apply.

You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect.

You must file a joint income tax return for the year you make the choice.

This means that neither of you can claim tax treaty benefits as a resident of a foreign country for a tax year for which the choice is in effect.

You can file joint or separate returns in years after the year in which you make the choice. "

So, if you can help me understand... If we make this choice to treat him as a resident for 2007, then the tax treaty benefits would not be able to be claimed. So would my husband then end up owing the US gov't taxes for 2007 since he didn't pay any to the US during the year?

We will be receiving a $2300 return from the Canadian Tax Return for 2007. Would it really benefit us to file US Taxes for 2007 when neither of us have to in the first place?

I am so sorry I am so dense when it comes to this. i am sincerely trying to understand.

Thanks for your patience.

[dearheart 0]

oh, and to be clear, I am filing my Exit return with Canada also.

[zyggy 9]

No.. you can only get the credits until the date you physically left Canada. The proration that the program did is absolutely correct. Do not override it.

WHen it refers to tax treaty benefits... that's really going beyond your scope for your type of return. THe fact that you can exclude your income or take a foreign tax credit is not part of the tax treaty benefits.

[zyggy 9]

Double post

Edited March 4, 2008 by zyggy

[Allie 5]

No.. you can only get the credits until the date you physically left Canada. The proration that the program did is absolutely correct. Do not override it.

WHen it refers to tax treaty benefits... that's really going beyond your scope for your type of return. THe fact that you can exclude your income or take a foreign tax credit is not part of the tax treaty benefits.

Then Lorry only claims my pension income in Canada from the day I activated the Visa (June 26). Is that how this will work Ziggy or does she claim my years pension income, the EI collected while here in the U.S. and taxable amount on it for the whole amount.

Sorry but this tax yr. has me totally confused. I always filled it out in Canada but that IRS site only creates confusion when trying to make sense of it all

[zyggy 9]

No.. you can only get the credits until the date you physically left Canada. The proration that the program did is absolutely correct. Do not override it.

WHen it refers to tax treaty benefits... that's really going beyond your scope for your type of return. THe fact that you can exclude your income or take a foreign tax credit is not part of the tax treaty benefits.

Then Lorry only claims my pension income in Canada from the day I activated the Visa (June 26). Is that how this will work Ziggy or does she claim my years pension income, the EI collected while here in the U.S. and taxable amount on it for the whole amount.

Sorry but this tax yr. has me totally confused. I always filled it out in Canada but that IRS site only creates confusion when trying to make sense of it all

Pension Income earned while you were in Canada must be reported but can be excluded or claim a Foreign Tax Credit...

Pernsion Income/EI Income earned while in the US must be reported, but can get Foreign Tax Credit on taxed Canada took.

[dearheart 0]

No.. you can only get the credits until the date you physically left Canada. The proration that the program did is absolutely correct. Do not override it.

WHen it refers to tax treaty benefits... that's really going beyond your scope for your type of return. THe fact that you can exclude your income or take a foreign tax credit is not part of the tax treaty benefits.

When you are talking about filing for the tax credit benefits is it that on our 1040 we will have a loss and will be able to carry this forward to next year? I am using Turbo Tax and I am attempting to fill it out as joint, married. I am filling out the information for my husbands income in the section of Less Common income - Foreign Income. It askes if i want to complete the foreign earned income exclusion. Am I on the right track if we are going to declare that we want to be treated as US Residents for 2007? Is this the benefit you were talking about - that our loss will carry forward to 2008 and we will get a better refund for 2008?

So when I enter in the info (as best as I am understanding all this) my Tax Summary looks like this:

Total income: -47,427

Adjusted gross income: -47,427

Itemized/standard deduction: 10,700

Exemption amount: 13,600

Balance due: 0

You must file form 1040 because you had miscellaneous taxable income(loss).

Am I getting close to understanding?