Canadian Taxes & Bank Account

[klgck 153]

Hi everyone,

 

I plan to move to the US in January, and will work until about January 7th.

 

1. Will I file my 'exit taxes' in April 2021 for the 2020 year (aka 7 days of working) or do I file my 'exit taxes' in April 2020 for the 2019 tax year?

2. I was also wondering if I should/need to file taxes in the US regardless for the 2020 year since I am still paying interest on my student loan and can receive a tax credit, and will be working approx. 7 days in 2020. 

3. Will I file through mail vs. online in April 2020 for the 2019 year? Normally, I have someone else do my taxes, so I am not sure how it works and how it will work in the future.

 

I also have questions regarding my bank account: I currently have money in my savings account to continue paying my student loan payments while unemployed, and just to have extra money to help support my fiance and I. Would it be wise to just keep the money in my chequing vs. savings so that I don't accrue interest and have to deal with that during tax season or would that not really make a difference? I plan to keep the account open for awhile, too. Not sure if/when I will close it. 

 

Thanks! 

[Moe428 129]

 1.  If you have income for those 7 days, you will have to file taxes in April 2021 for 2020.  Also, when you file in 2021, make sure you set your exit date in the filing.

2.  If you are working in 2020 in the US, you will need to file in the US.  If you are not working, but your spouse is (presuming you are married on Dec 31 2020 and have an SSN), your spouse can/should file jointly with you for the 2020 year. The income you earned in those 7 days in Canada should not be included in the US filing.

3.  Even though CRA says you have to file through mail if you are not living in Canada, you can file online only if you haven't exited for that filing year.  i.e. when filing for year 2019 in 2020, you can file online.  I spent 30 mins discussing this on the phone with CRA representatives.  You can temporarily set your address in CRA online account to a trusted relatives' account (ideally parents) and then file online (this is what CRA suggested I do).  For 2020 tax year, you will have to file through mail.

 

If you are making interest in savings account after your exit date, you will have to end up filing a tax return for that earned interest.  So I would recommend moving that money into chequing, or again giving it someone you trust so they can put it in a savings account under their name.  And if that savings account is TFSA, that can present other problems, so I'd recommend any TFSA be liquidated.

Edited December 3, 2019 by Moe428

[klgck 153]

8 hours ago, Moe428 said:

 1.  If you have income for those 7 days, you will have to file taxes in April 2021 for 2020.  Also, when you file in 2021, make sure you set your exit date in the filing.

2.  If you are working in 2020 in the US, you will need to file in the US.  If you are not working, but your spouse is (presuming you are married on Dec 31 2020 and have an SSN), your spouse can/should file jointly with you for the 2020 year. The income you earned in those 7 days in Canada should not be included in the US filing.

3.  Even though CRA says you have to file through mail if you are not living in Canada, you can file online only if you haven't exited for that filing year.  i.e. when filing for year 2019 in 2020, you can file online.  I spent 30 mins discussing this on the phone with CRA representatives.  You can temporarily set your address in CRA online account to a trusted relatives' account (ideally parents) and then file online (this is what CRA suggested I do).  For 2020 tax year, you will have to file through mail.

 

If you are making interest in savings account after your exit date, you will have to end up filing a tax return for that earned interest.  So I would recommend moving that money into chequing, or again giving it someone you trust so they can put it in a savings account under their name.  And if that savings account is TFSA, that can present other problems, so I'd recommend any TFSA be liquidated.

Thank you so much. This is incredibly helpful! I have a TFSA, but have not used it in a few years (only $2 in it) and plan on closing it before leaving. I will be sure to move the money to my chequing so I don't accrue interest and can continue loan payments. 

[Moe428 129]

1 hour ago, klgck said:

Thank you so much. This is incredibly helpful! I have a TFSA, but have not used it in a few years (only $2 in it) and plan on closing it before leaving. I will be sure to move the money to my chequing so I don't accrue interest and can continue loan payments. 

Depending on how your loan is setup, since the money will just be sitting in a chequing account, you might be better off paying whatever you are planning on paying over several months/years in one lump sum to reduce the interest you will accrue on the student loan. 

 

Some loans will reduce your future minimum monthly payments based on the amount of lump sum you pay.  Others will not require you to pay monthly payments up to certain number of months in the future based on the amount you pay. It all depends on your loan.    If the loan is of the latter type especially, you would be better off paying in bulk to reduce future interest.

Edited December 3, 2019 by Moe428

[klgck 153]

3 hours ago, Moe428 said:

Depending on how your loan is setup, since the money will just be sitting in a chequing account, you might be better off paying whatever you are planning on paying over several months/years in one lump sum to reduce the interest you will accrue on the student loan. 

 

Some loans will reduce your future minimum monthly payments based on the amount of lump sum you pay.  Others will not require you to pay monthly payments up to certain number of months in the future based on the amount you pay. It all depends on your loan.    If the loan is of the latter type especially, you would be better off paying in bulk to reduce future interest.

It's an OSAP loan paid through the NSLSC. I have been paying it off aggressively for the last year-ish and have 13k left. My minimum is currently set at $350~, but I pay about $1000 a month. I was going to contact them to see what my options may be considering the situation. Ideally, what you have described would be great for my case and I hope that is an option for me. 

[Moe428 129]

8 hours ago, klgck said:

It's an OSAP loan paid through the NSLSC. I have been paying it off aggressively for the last year-ish and have 13k left. My minimum is currently set at $350~, but I pay about $1000 a month. I was going to contact them to see what my options may be considering the situation. Ideally, what you have described would be great for my case and I hope that is an option for me. 

I had OSAP ~5 years ago too, and I am not sure if it works the same way still, but paying off extra resulted in all future payments being reduced by extra amount paid divided by number of remaining payments.  In that case, you'd continue to have monthly payments (at a slightly smaller amount) even if you made bulk payments.  

 

What I'd recommend is if you have enough money to pay it off entirely and will still have enough money to take you through a year or so (assuming by the end of the year you can start working again), then you should pay it off entirely.  And then you won't have to pay any interest on that balance.

Edited December 4, 2019 by Moe428

[klgck 153]

15 hours ago, Moe428 said:

I had OSAP ~5 years ago too, and I am not sure if it works the same way still, but paying off extra resulted in all future payments being reduced by extra amount paid divided by number of remaining payments.  In that case, you'd continue to have monthly payments (at a slightly smaller amount) even if you made bulk payments.  

 

What I'd recommend is if you have enough money to pay it off entirely and will still have enough money to take you through a year or so (assuming by the en of the year you can start working again), then you should pay it off entirely.  And then you won't have to pay any interest on that balance.

I don't think it is like that anymore considering I pay more than twice my minimum monthly and it still shows I have to pay $350 the next month. I will definitely be giving them a call and ask about that, though. I have 10k saved right now, but don't quite want to put that all towards my loan yet. I was also worried about bringing over more than 10k in foreign money and having the claim it (not really sure what that is all about so I was trying to avoid it). But I will consider paying it off in a lump sum sooner than later considering I will be working hopefully in the next 6 months. 

[Moe428 129]

@klgck  I discovered some new information that would be important for you.  If you are filing taxes jointly with your spouse, then you also have to report the Canadian income for that year.  You can claim a foreign tax credit on your tax filing with the IRS, so you should effectively not pay any more tax then you would otherwise.