Income Tax Return for Year 2005. (People continue to work in US)..
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Hi,
Those who landed in Canada in Year 2005 and returned back to US immediately after Landing (and continue working in US), Please gather here, we can discuss the details related to filing our Canadian Tax returns for year 2005.
I am hearing various comments that
- We need to file Tax Return.
- We don't need to file a tax return.
- Tax Treaty exists between US and Canada, so no double taxation.
- Despite Tax treaty, you have file tax return in Canada and Pay the Balance.
We may collect our questions and seek some professional advice collectively.
Warmly,
J.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Location: Western Hemisphere
Posted on: 21-12-05 11:45:57
Here is my view from my personal experience few years ago:
Let's say you landed on Jan 1 2005 and left Canada after the landing process. You "enter" Canada and become a resident (by buying a house or renting an apt, etc, etc) on April 1, 2005.
For the 2005 tax year, you are a non resident of Canada from Jan 1 through March 31, 2005. and you are a resident of Canada from Apr 1 through Dec 31, 2005.
You will have to file taxes for the 2005 tax year. In that filing, you will pay taxes for the time period that you were a resident. There is a section in the tax form where you can enter your residency period.
For simplicity sakes, let's say you earned $50,000 for the entire tax year, you will pay taxes to Canada for the 9 months of residency, - 9/12 x 50000 will be your earned wages for Canada. Remember, your taxable income is 9/12x50000 minus any exemptions minus any deductions.
Few different scenarios:
1. From Jan 1 to Mar 31 - if you earned in US (USD) and then quit your job and earned in Canada from Apr 1 to Dec 31, you probably have a simpler situation. You file US taxes for 2005 year and pay taxes for the first 3 months of earnings and file a separate Cdn taxes and pay for the remainder of 9 month income.
2. If you live in Canada and commute to work in the US and earned US wages, then you file US taxes for the entire year and pay the taxes. Meanwhile, you file Cdn taxes (with USD wages converted to Cdn $ based on Bank of Canada conversion rates for the tax year), determine what your taxes are for the time period of Apr 1 to Dec 31. However, since you already have paid US taxes for the same period Apr 1 to Dec 31, you indicate in your Cdn taxes, the amount of tax paid to US and claim that amount as a credit, thereby preventing double taxation.
Here are few things to note:
1. If you have contributed to 401k in US, you US earned wages are your salary minus 401k and hence your taxable income will be lower. However, in Canada, your taxes will be on your original earned wages. That might cause a significant hit on your taxes and may end up paying to Canada.
2. Your first year of taxation as a Cdn resident will be the worst since you will not have any RSP deductions that will save you on Cdn taxes. It will get better in the subsequent years, provided, you adjust your 401k (if you are still working in US and living in Canada), maximize your RSP and maybe adjust your withholding-at-source amount.
3. In general, adjusting the amount withheld at source and maximizing RSP contribution (if you live and work in Canada) should help minimize out of pocket tax payment.
3. You neither file nor pay any Cdn taxes if you do not live in Canada for the entire year.
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Dimple2001
Quote:
Orginally posted by dimple2001
Here is my view from my personal experience few years ago:
I think that your experience is not entirely right and if you have followed what you have written, you might be in trouble if ever this is disclosed. Effectively, you have hidden your US income.
Quote:
For the 2005 tax year, you are a non resident of Canada from Jan 1 through March 31, 2005. and you are a resident of Canada from Apr 1 through Dec 31, 2005.
PLEASE REMEMBER, tax residency is entirely different from immigration residence or physical presence. Therefore the above might not be correct. It would be correct IF AND ONLY IF you can prove you had no ties with Canada except a PR card in your possession.
Quote:
You will have to file taxes for the 2005 tax year. In that filing, you will pay taxes for the time period that you were a resident. There is a section in the tax form where you can enter your residency period.
Correct.............but if your definition and interpretation of residence is wrong ab initio, your tax filing is not correct.
Quote:
For simplicity sakes, let's say you earned $50,000 for the entire tax year, you will pay taxes to Canada for the 9 months of residency, - 9/12 x 50000 will be your earned wages for Canada. Remember, your taxable income is 9/12x50000 minus any exemptions minus any deductions.
Wrong.
Quote:
3. You neither file nor pay any Cdn taxes if you do not live in Canada for the entire year.
Entirely wrong as per reasons given above (difference in tax residence and immigration residence)
Chandresh
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Chandresh
Advice is free – lessons I charge for!!
Location: Western Hemisphere
Posted on: 22-12-05 13:22:35
I went through HR Block that has specific locations and individuals that do US-Cdn returns and have been doing so for several years, since I own properties and investments in the US. You are right about residency. There are two things, residency for tax purposes and physical residency for immigration purposes.
In my case, I landed in Jan of certain year and entered Canada to live, starting April of that year. For about 3 months, I lived outside Canada and I proved it in my filings as was required by HR Block. Based on that residency status, the HR Block guys filed the taxes which pretty much follows what I had said in my previous post.
If someone interprets residency definitions incorrectly, yes, then you are right, everything I said could be all screwed up.
Some can and have complicated their situation by filing taxes to claim tax residency but not living in Canada, hoping to get credit towards citizenship time accrual. In my case, my physical presence in Canada was exactly same as the resident time period reported for taxation purposes.
Another side note to illustrate your point on residency. If you have a US green card, you are a resident for tax purposes irrespective of whether you live in the US or not.
I don't know where you are coming from about me hiding my US income. I know I paid a s**t load of taxes during the first tax year by reporting all of my US income in a very appropriate manner. This was when the exchange rate was at about 55%. I have since managed to reduce the burden - as I said in my previous post - by adjusting deductible investments.
Bottomline, readers should consider the view points and verify it carefully with a tax professional. Hope this helps.
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Dimple2001
Pals, thanks for sharing your insight on this issue.
In my case, I work in US and I am continuing to work in US.
I entered Canada to complete my Landing on Oct 2005 and stayed there for just 2 days, applied my SIN Card and returned back.
I believe I should be conisdered as a Non-resident (Not lived there, No Canadian Bank #, No Canadian Income).
Should I file the Tax returns in Canada? What ever is legally required, I want to comply at any cost. Be at US and Canada.
- JRF.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.pdf" target="_blank">http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.pdf</a>
The above link might help you.
Chandresh
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Chandresh
Advice is free – lessons I charge for!!
Hi Guys,
So one was working in U.S till Oct05 and moved to Canada permanently in Nov05 and has no income in Canada till end of 2005 [i.e from Nov05 - Dec05], what is the scenario?
1] person would still file for U.S taxes for all income earned in U.S till end of 2005[though work income may have ended in Oct05, bank interest still accrues until end of 2005]
2] Now for the 2 months of residency in Canada, where there was no Canadian income but only that bank interest income from Nov05-Dec05 earned in U.S banks, how would the tax filing work out?
It does not make sense to report world wide income for the whole year 2005 in Canada while filing taxes and have to pay twice[since u would have already paid in U.S for that income]. Plus there is no income the whole year in canada especially the 2 months u were residing in Canada.
Any advise?
