Filing Taxes

[Shawna and James 4]

Hello fellow Canadians! I have a question about filing taxes. I am not employed currently, but I figure even if I was, the answer would be the same since I know you still have to file taxes in Canada when you live there whether you were employed or not. So my question is this: Now that I live in the US as a permanent resident (and have been here since July 12th of this year), do I still file taxes in Canada? My Husband is an accountant, and he says for the US, if you have lived 11 out of 12 months out of the country, you are exempt from filing US taxes, but anything less you would be required to file taxes on your income even from a foreign source. Of course, that us the US policy, and I am unsure of the Canadian policy. Obviously, if the Canadian policy is the same, then my answer would be this year, yes. But in the future, no since I would be residing in the us 12/12 months of the year from here on out.

Any information would be greatly appreciated!

thanks!

[Erin & Marc 0]

I am in the same boat...wondering how things will play out for me this year. Are you filing "Married filing Jointly"? Can job related travel expense be claimed by the Canadian?

[Inky 1,110]

Did you file your exit return? If you filed your exit return from your final year in Canada then you do not have to file taxes in Canada unless you are still getting income from Canada.

[Kathryn41 3,205]

If this is your first year in the US, then you need to file what is called an "Exit tax return' with Canada. You use the same tax form as the regular one for your Province but you file it with the International Tax Office in Ottawa. You fill it out showing the date you left Canada, and if you had no income after that time from any non-Canadian sources at all, you can also write a letter to accompany your return asking them to treat the return as your World Income for the full year as 100% of your income was from Canadian sources. This way you can claim 100% of the year's tax credits, allowing for a really good refund. If you have non-Canadian income during that year, then you would have to pro-rate the deductions to the date you left Canada and not have your Canadian income treated as your World Income for the year. There is a great booklet available from Canada Revenue Agency called "Emigrants and Income Tax". http://www.cra-arc.g...E/pub/tg/t4056/

Plan on doing your Canadian taxes first because you have the option of filing your US taxes as "Married, Filing Jointly" and including your Canadian income under World Income. You would translate the amount into US dollars and report it on the US return, and can then take a Foreign Tax Credit" for the tax you paid in Canada, which basically cancels it out. This allows you to claim benefits on the US return that you would otherwise not be eligible to claim. Remember to file your Canadian return early enough so you can include the information in your US return. If CRA changes the tax return numbers, you may later have to file an Amended US return to incorporate the final information from CRA.

Not to dispute your husband's statement, but according to the IRS American Citizens are required to file income tax returns even if they do not reside in the US regardless of whether they lived in the US for 1 month, 0 months or 12 months. The US taxes on citizenship where ever that citizen lives, although filing/taxation requirements can be modified by specific tax treaty agreements the US holds with other countries. Canada taxes on Residency so if you are no longer resident in Canada you are not required to file taxes unless you have Canadian income. Permanent Residents are required to file tax returns each year with the IRS regardless of their income or lack of it. You need to submit returns or proof from IRS that you are not required to file a return when you seek further immigration benefits.

Edited December 15, 2011 by Kathryn41

[Erin & Marc 0]

Thanks for the information! Very Helpful

[Shawna and James 4]

Definitely very helpful! thank you so much!

[Rayoflight 10]

I am doing my POE in two days on a K1 Visa. I have an RBC USA bank account that accumulated less than $2 in interest for 2011. Will I have to file 2011 taxes with the IRS because of this?

If this is your first year in the US, then you need to file what is called an "Exit tax return' with Canada. You use the same tax form as the regular one for your Province but you file it with the International Tax Office in Ottawa. You fill it out showing the date you left Canada, and if you had no income after that time from any non-Canadian sources at all, you can also write a letter to accompany your return asking them to treat the return as your World Income for the full year as 100% of your income was from Canadian sources. This way you can claim 100% of the year's tax credits, allowing for a really good refund. If you have non-Canadian income during that year, then you would have to pro-rate the deductions to the date you left Canada and not have your Canadian income treated as your World Income for the year. There is a great booklet available from Canada Revenue Agency called "Emigrants and Income Tax". http://www.cra-arc.g...E/pub/tg/t4056/

Plan on doing your Canadian taxes first because you have the option of filing your US taxes as "Married, Filing Jointly" and including your Canadian income under World Income. You would translate the amount into US dollars and report it on the US return, and can then take a Foreign Tax Credit" for the tax you paid in Canada, which basically cancels it out. This allows you to claim benefits on the US return that you would otherwise not be eligible to claim. Remember to file your Canadian return early enough so you can include the information in your US return. If CRA changes the tax return numbers, you may later have to file an Amended US return to incorporate the final information from CRA.

Not to dispute your husband's statement, but according to the IRS American Citizens are required to file income tax returns even if they do not reside in the US regardless of whether they lived in the US for 1 month, 0 months or 12 months. The US taxes on citizenship where ever that citizen lives, although filing/taxation requirements can be modified by specific tax treaty agreements the US holds with other countries. Canada taxes on Residency so if you are no longer resident in Canada you are not required to file taxes unless you have Canadian income. Permanent Residents are required to file tax returns each year with the IRS regardless of their income or lack of it. You need to submit returns or proof from IRS that you are not required to file a return when you seek further immigration benefits.

[Kathryn41 3,205]

Well, it appears that if you meet taxable income levels in the US then you are required to declare all interest, even if it is less than $2 and even if the bank does not issue you a form 1099-INT (which they usually do not do for less than $10 interest). If your POE is in 2 days as a K-1, I would think it is virtually impossible for you to earn the minimum income level that is required for filing a US tax return. So, if you do not meet the minimum income level for filing a US return, then you do not have to report the interest earned by your US account. If you do meet the minimum income level required to file a tax return, then you do have to report the interest.

http://www.irs.gov/pub/irs-pdf/i1040.pdf See page 8 for the table listing income filing requirements.

I would say in your circumstances, no. Unless - and this is a big unless - you and your spouse decide to file as married, filing jointly and you decide to file as a resident alien for the whole year - which means you would then declare all of your US and Canadian income and take a Tax Credit for the tax paid in Canada. This is only possible if you and your US partner are married before the end of 2011. If you are not married, then there is no benefit for you filing as a resident alien and you won't need to file a US tax return as your US income does not meet the minimum income level that requires you to file a tax return in the US.

[Rayoflight 10]

We will not be getting married until January. I will have no income in the USA for 2011 other than the interest I was talking about.

Well, it appears that if you meet taxable income levels in the US then you are required to declare all interest, even if it is less than $2 and even if the bank does not issue you a form 1099-INT (which they usually do not do for less than $10 interest). If your POE is in 2 days as a K-1, I would think it is virtually impossible for you to earn the minimum income level that is required for filing a US tax return. So, if you do not meet the minimum income level for filing a US return, then you do not have to report the interest earned by your US account. If you do meet the minimum income level required to file a tax return, then you do have to report the interest.

http://www.irs.gov/pub/irs-pdf/i1040.pdf See page 8 for the table listing income filing requirements.

I would say in your circumstances, no. Unless - and this is a big unless - you and your spouse decide to file as married, filing jointly and you decide to file as a resident alien for the whole year - which means you would then declare all of your US and Canadian income and take a Tax Credit for the tax paid in Canada. This is only possible if you and your US partner are married before the end of 2011. If you are not married, then there is no benefit for you filing as a resident alien and you won't need to file a US tax return as your US income does not meet the minimum income level that requires you to file a tax return in the US.

[Kathryn41 3,205]

Then there is no need for you to file a US tax return as you do not meet the minimum income level . One less thing to worry about!

[Rayoflight 10]

Whohooo.. lol.. now I hope they let me on my flight with all my luggage.... eek!

Then there is no need for you to file a US tax return as you do not meet the minimum income level . One less thing to worry about!

[Paul H 4]

This seems to the the thread to ask tax questions so here goes...

Jenni's POE was Oct 16 2011 and we were married Nov 12 so it is possible for us to file U.S. taxes as joint, however, in order to do that I understand that Jenni would have to complete her Canadian taxes first to be able to claim the foreign credit.

Is it worth the wait? I could file my taxes and get my refund by early February. If I wait to include Jenni's taxes we'll have to wait several more months and it might not be ready by April 15. What would I lose if I just file separately and Jenni doesn't file at all since she hasn't made any income in the U.S. as of yet?

Also if we don't file jointly this year can we get the foreign credit when we file jointly next year?

Thanks!

[Dave&Roza 748]

This seems to the the thread to ask tax questions so here goes...

Jenni's POE was Oct 16 2011 and we were married Nov 12 so it is possible for us to file U.S. taxes as joint, however, in order to do that I understand that Jenni would have to complete her Canadian taxes first to be able to claim the foreign credit.

Is it worth the wait? I could file my taxes and get my refund by early February. If I wait to include Jenni's taxes we'll have to wait several more months and it might not be ready by April 15. What would I lose if I just file separately and Jenni doesn't file at all since she hasn't made any income in the U.S. as of yet?

Also if we don't file jointly this year can we get the foreign credit when we file jointly next year?

Thanks!

You have a few options and depending on which one benefits the two of you tax wise might be what you want to do. Check out the IRS website to see which method is best for your situation. You can file jointly, file seperately, file jointly and claim your wife as a US LPR for tax purposes (no credit for her Canadian income) or you can file jointly and claim your wife as a resident alien (I believe) and get a credit for her income and I think you also get her standard deduction. I only looked into filing jointly and claiming the wife as a LPR for tax purposes as she made very little in her country and the standard deduction saved me close to $8000. Also, you can file for an extension as long as you pay any taxes due by April 15th. Of course there is also the AOS documentation and a jointly filed tax return may be of a benefit--you must weigh the pros and cons of each choice and determine which on eis best for your situation.

Dave

[alizon 77]

My husband is still living and working in Canada since our application is only now getting to NVC. Any idea what we should do about taxes? Obviously we both have to file in our respective countries as married since we are, but I'm assuming/hoping we don't have to report each others' income to our own governments? None of my income was made in Canada and I haven't lived there, and same for him and the US. If I'm allowed to file jointly in the US and exclude all of his income, I could get a serious jump in my refund...but I don't know if filing jointly is allowed in our situation or if I'll have to pay taxes on his income if I do that. And will he get any tax benefit for being married in Canada or will he have to be taxed on my income regardless of where it was made and where I reside? So confusing...

Edited January 4, 2012 by alizon