Filing Canada & US Taxes

[jedinite 0]

Hi everyone, I wanted to get input from you and start a thorough thread about filing your taxes after you get your PR status.

My question is: Do I file US World Income tax (Form 2555) if I did not work one day in the US in the year that I received my PR Status.

Most of the posts I've found on VJ all relate to collecting EI (are their that many unemployed or unable people immigrating?). Unlike those EI posts I am a working individual and small business owner. I already have a SSN number and have filed in taxes in the US for several years including last year, 2007. But for this year, 2008, I was living and working entirely in Canada. I have my interview scheduled for the beginning of December which means I'll more than likely get my PR Status a week later. Which means that I will be able to enter the US as a Permanent Resident before year end.

However, I will probably work the remainder of the year (the rest of Dec after I get my visa) in Canada. So now am I required to declare my world income to the IRS even though I did not work or earn any money in the US for the year and was not a resident until the end of the year. My wife still lives in and works in the US, so does this also affect how I file my 2008 taxes.

I know for sure I must do my Canadian Taxes and I will get foreign input taxes for the US if I do have to file world income. If I must file to the IRS as well do I get to apply my tax credit to our joint filing (my wife and my US tax return)?

Thanks for any input. If I was unclear or confusing let me know so I can clarify it.

Here's a quick breakdown so it's easy to follow:

1) Already have SSN because I worked in the US between 2002 to 2007 with a TN-1 Visa

2) Filed Taxes to the IRS for 2007 (married in 2007 as well)

3) Did not live or work in the US between 11/2007 to Present

4) Obtaining CR-1 Visa in Dec 2008

5) Will only be working and earning money in Canada for all of 2008

Do I file to the US?

Also as a side note:

Own and operate a small business (incorporated) in 07/2008

This business will continue to operate into 2009

How will this affect my taxation or my immigration?

[MsZ 6]

I was under the impression that unless you activate your visa that you are not actually living here as a PR.

We're going to be in the same boat -- my husband will remain in Canada until after the New Year and then we'll make the move.

[jedinite 0]

I was under the impression that unless you activate your visa that you are not actually living here as a PR.

We're going to be in the same boat -- my husband will remain in Canada until after the New Year and then we'll make the move.

Oh that's how it works. So now, if I go down to visit my wife and the in-laws at Christmas does the PR status automatically activate when I cross the border?

And did you husband work in the US previously? I'm concerned because I filed taxes last year but I don't want to be audited or questioned if I don't file taxes this year, do you know how it works?

[sly_wolf 199]

I was under the impression that unless you activate your visa that you are not actually living here as a PR.

We're going to be in the same boat -- my husband will remain in Canada until after the New Year and then we'll make the move.

Oh that's how it works. So now, if I go down to visit my wife and the in-laws at Christmas does the PR status automatically activate when I cross the border?

And did you husband work in the US previously? I'm concerned because I filed taxes last year but I don't want to be audited or questioned if I don't file taxes this year, do you know how it works?

You do not have to be necessarily living in the US to be required to do a tax return. The IRS will use the fact that you are married and also applied for residency (green card).

So yes you will need to do a US tax return. You will also probably be best to file as joint with your wife in the US.

Sly

Edited October 29, 2008 by sly_wolf

[sly_wolf 199]

I was under the impression that unless you activate your visa that you are not actually living here as a PR.

We're going to be in the same boat -- my husband will remain in Canada until after the New Year and then we'll make the move.

Oh that's how it works. So now, if I go down to visit my wife and the in-laws at Christmas does the PR status automatically activate when I cross the border?

And did you husband work in the US previously? I'm concerned because I filed taxes last year but I don't want to be audited or questioned if I don't file taxes this year, do you know how it works?

You do not have to be necessarily living in the US to be required to do a tax return. The IRS will use the fact that you are married and also applied for residency (green card).

So yes you will need to do a US tax return. You will also probably be best to file as joint with your wife in the US.

Sly

And yes you would get the Foreign income and/or Foreign tax credit.

Sly

[trailmix 77]

Hi,

I don't know the answer to all your questions - but have put my input below.

Most of the posts I've found on VJ all relate to collecting EI (are their that many unemployed or unable people immigrating?). Unlike those EI posts I am a working individual and small business owner. I already have a SSN number and have filed in taxes in the US for several years including last year, 2007. But for this year, 2008, I was living and working entirely in Canada. I have my interview scheduled for the beginning of December which means I'll more than likely get my PR Status a week later. Which means that I will be able to enter the US as a Permanent Resident before year end.

You weren't a U.S. permanent resident, so my understanding is that you were not required to file in the U.S. At least we didn't.

As for the many posts you have seen about people on EI filing taxes, the answer is no, there are not that may unemployed people immigrating. The thing is people who immigrate to be with their Husband/Wife are generally entitled to collect EI once they have quit their employment in Canada.

However, I will probably work the remainder of the year (the rest of Dec after I get my visa) in Canada. So now am I required to declare my world income to the IRS even though I did not work or earn any money in the US for the year and was not a resident until the end of the year. My wife still lives in and works in the US, so does this also affect how I file my 2008 taxes.

This part I don't know, I would imagine what you tax 'home' is considered to be, but again, i'm not sure.

I know for sure I must do my Canadian Taxes and I will get foreign input taxes for the US if I do have to file world income. If I must file to the IRS as well do I get to apply my tax credit to our joint filing (my wife and my US tax return)?

Your tax credits from who? Canada or the U.S.

The rest I am unsure of. As for the 'automatically activating' your visa question, no, it won't automatically be activated. You would need to present yourself at a port of entry as an immigrant and turn over your paperwork and have it processed.

I guess technically you could cross the border for a visit and not activate it.

Edited October 30, 2008 by trailmix

[sly_wolf 199]

Take a look at this link. This will help you determine whether you need to do a US income tax return.

http://www.irs.gov/publications/p519/ch01.html#d0e526

Look closely at the Resident Aliens heading,

Green Card Test heading and Establishing a closer connection heading:

Take note: You cannot claim you have a closer connection to a foreign country if either of the following applies:

You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or

You had an application pending for adjustment of status during the current year.

Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms. Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities

Form I-485, Application to Register Permanent Residence or Adjust Status

Form I-130, Petition for Alien Relative, on your behalf

Form I-140, Immigrant Petition for Alien Worker, on your behalf

Form ETA-750, Application for Alien Employment Certification, on your behalf

Form DS-230, Application for Immigrant Visa and Alien Registration

Based on that you would be considered a resident alien for tax purposes and must file a tax return.

Sly

[trailmix 77]

Take a look at this link. This will help you determine whether you need to do a US income tax return.

http://www.irs.gov/publications/p519/ch01.html#d0e526

Look closely at the Resident Aliens heading,

Green Card Test heading and Establishing a closer connection heading:

Take note: You cannot claim you have a closer connection to a foreign country if either of the following applies:

You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or

You had an application pending for adjustment of status during the current year.

Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms. Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities

Form I-485, Application to Register Permanent Residence or Adjust Status

Form I-130, Petition for Alien Relative, on your behalf

Form I-140, Immigrant Petition for Alien Worker, on your behalf

Form ETA-750, Application for Alien Employment Certification, on your behalf

Form DS-230, Application for Immigrant Visa and Alien Registration

Based on that you would be considered a resident alien for tax purposes and must file a tax return.

Sly

Lots of information on that page, my only question would be, does that part of the information actually stand on its own?

[sly_wolf 199]

Take a look at this link. This will help you determine whether you need to do a US income tax return.

http://www.irs.gov/publications/p519/ch01.html#d0e526

Look closely at the Resident Aliens heading,

Green Card Test heading and Establishing a closer connection heading:

Take note: You cannot claim you have a closer connection to a foreign country if either of the following applies:

You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or

You had an application pending for adjustment of status during the current year.

Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms. Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities

Form I-485, Application to Register Permanent Residence or Adjust Status

Form I-130, Petition for Alien Relative, on your behalf

Form I-140, Immigrant Petition for Alien Worker, on your behalf

Form ETA-750, Application for Alien Employment Certification, on your behalf

Form DS-230, Application for Immigrant Visa and Alien Registration

Based on that you would be considered a resident alien for tax purposes and must file a tax return.

Sly

Lots of information on that page, my only question would be, does that part of the information actually stand on its own?

Based on what I have read and also told by a tax expert, the IRS or "taxpayer" establishes whether you are a resident or non resident alien for tax purposes and there are certain tests or rules that they apply. People are in different situations and there are cases where a "non resident" may still be required to file a US tax return.

In this case it would be advised that the OP do a US tax return due to his circumstances. According to the IRS rule he would be considered a resident alien for tax purposes simply due to the green card test.

Sly

[thetreble 19]

If I must file to the IRS as well do I get to apply my tax credit to our joint filing (my wife and my US tax return)?

What do you mean by tax credit?

[trailmix 77]

Based on what I have read and also told by a tax expert, the IRS or "taxpayer" establishes whether you are a resident or non resident alien for tax purposes and there are certain tests or rules that they apply. People are in different situations and there are cases where a "non resident" may still be required to file a US tax return.

In this case it would be advised that the OP do a US tax return due to his circumstances. According to the IRS rule he would be considered a resident alien for tax purposes simply due to the green card test.

Sly

I agree there are cases where a non-resident may be required to file.

In reading the green card test it doesn't sound to me as if the OP would fall under that category. Sounds to me, when they talk about changing your status, that they are talking about people who are actually in the U.S. and are filing for an Adjustment of Status as opposed to someone living and working in Canada while his or her application is being processed.

In his case I think a lot depends on whether or not he decides to activate his visa in December or not.

[sly_wolf 199]

If I must file to the IRS as well do I get to apply my tax credit to our joint filing (my wife and my US tax return)?

What do you mean by tax credit?

It's the Foreign tax credit for taxes paid to Canada from employement income.

Sly

[sly_wolf 199]

Based on what I have read and also told by a tax expert, the IRS or "taxpayer" establishes whether you are a resident or non resident alien for tax purposes and there are certain tests or rules that they apply. People are in different situations and there are cases where a "non resident" may still be required to file a US tax return.

In this case it would be advised that the OP do a US tax return due to his circumstances. According to the IRS rule he would be considered a resident alien for tax purposes simply due to the green card test.

Sly

I agree there are cases where a non-resident may be required to file.

In reading the green card test it doesn't sound to me as if the OP would fall under that category. Sounds to me, when they talk about changing your status, that they are talking about people who are actually in the U.S. and are filing for an Adjustment of Status as opposed to someone living and working in Canada while his or her application is being processed.

In his case I think a lot depends on whether or not he decides to activate his visa in December or not.

True, if he does not activate it he wont meet that test. In the end as long as he complies with the IRS rules. Better to be safe then sorry In any case besides the extra paper work he should not be paying tax in the US.

Sly

[MsZ 6]

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.

[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.