What are we for tax purposes
 

Hi good people
If you have any comments, please can you advise

2014
Jan3rd through Sep30 we were in US on L1b visas, that expired due to max out and moved to Canada

Oct 2014 through Sep 2015, in Canada
Back to US Oct2nd 2015, having acquired new US work visa

As such
2013 US days would be very close to 360
2014 US days are 270 days
2015 US days are 91

Just in case this closer connection rule may apply
We only rented a home in Canada
Our mortgaged home was in US, rented briefly

Are we resident, non resident or is there even a dual status
Want to make sure our tax return is correct, I believe CPA has us as non resident and that got me confused with
current days
1/3 previous
1/6 before that

yours in all hopefullness

Re: What are we for tax purposes
 

I would make a guess for 2015 you were:

(1) Deemed resident or resident for CRA as you were 183 days+ in Canada and income taxable on the 365 minus 91 days not present;
(2) Only resident for US tax purposes for any worldwide income earned during the 91 days, and if you're not a US PR/Citizen you probably would have needed/need to file as dual status for 2015 as you 'left' the US for tax purposes in this year.

These are my thoughts, your absolute best thing is to talk to a tax accountant or read through the IRS/CRA websites yourself.

Re: What are we for tax purposes
 

I would add that with respect to the CRA, it's OK to 'guess' your residency status and if they find it wrong, do a tax adjustment later as needed for the differing residency tax obligation. (This information came straight from the International Tax office in Ottawa).

You should also file an NR-74, to which there is currently a 39 week processing time.

Re: What are we for tax purposes
 

No experience with Canada, but I had a situation where I was living in the US and commuting to UK and was resident in both places due to respective rules / Tests. Definitely gets messy if you are subject to state / city tax, although I remember seeing you can offset Canadian tax at a local level in the US in some cases.

Re: What are we for tax purposes
 

Everyone on here is so helpful and thank you for taking the time to respond
Have a great weekend

In the end my CPA, clarified he did do US Tax return as resident and not a non resident...

Re: What are we for tax purposes
 

Yes, I don't think you would have qualified for the IRS non-resident tax status because of the 'substantial presence test'.

- 31 days current year, plus
- 183 days current and previous years, where
-- all days counted for current year
-- 1/3 days counted for previous year
-- 1/6 days counted for year prior to previous year

In your situation, the calculation would be:

90 days (2015) + 90 days (2014) (270 / 3) + 60 days (2013) (360 / 6) = 240.

Re: What are we for tax purposes
 

You're dual status for both 2014 and 2015. For the period you were in Canada, you were a non-resident alien.

So both your US tax returns for 2014 and 2015 should have been dual status returns.

If you file as a US resident for the whole of 2015, then the US can tax any income you had while in Canada. Normally this isn't a particularly big issue because the IRS doesn't really know what income you had while not in the US, but the US and Canada share pretty much everything and it's very easy for them to check under the tax treaty.

The CRA is also famous for declaring people resident in Canada for tax purposes for the most trivial of reasons. And they absolutely do check your US tax records, I know this from personal experience. This is for example why they started asking for your foreign tax ID on W-8BEN.

Sounds to me as though your accountant doesn't have a clue what a dual-status return is.

You should read IRS publication 519, the bit about dual-status returns. Essentially it's two tax returns, a pro-rated 1040 and a 1040NR for each tax year. Also, your T1 would need to be pro-rated for both 2014 and 2015, this is explained in CRA publication T4055. On page 21 and 22: http://www.cra-arc.gc.ca/E/pub/tg/t4055/t4055-15e.pdf

The 2011 edition of IRS publication 519 has a step-by-step example of how to do a dual-status return.

So in summary, you have to file effectively three tax returns for 2014 and 2015, one for Canada and two for the US.

Re: What are we for tax purposes
 

You should never file NR74 or NR73 unless they actually ask you to. If you voluntarily file it, you're asking the CRA to go poking around.

It's fairly obvious he is resident in Canada for part of 2014 and 2015.

I suppose if he had zero income for the part of 2014 he was in Canada, he could just file as resident in the US for 2014 and then only do a dual-status return for 2015 but the IRS is going to wonder how that came about.

Also, is this an intra-company transfer? Under the tax treaty you have a grace period of 183 days but I doubt that helps in any way because he was in Canada for a whole year.