🚀 go-pugleaf

Christopher Browne <cbbrowne@acm.org> wrote in message news:<2sb0csF1ikoe9U4@uni-berlin.de>...
> Centuries ago, Nostradamus foresaw when brechmos@gmail.com (Craig) would write:
> > A similar question to this has been asked several years ago, but I
> > wanted to ask this anyway, in case of any changes.
> 
> You're definitely in one of the "edge cases" where it's disputable
> because there are indications both ways on the question.
> 
> It sure seems odd for you to be considered a "nonresident" for tax
> purposes in both countries, but I could see that being the right
> answer.

It is indeed borderline, however CRA would be correct in determining
that you must report your world income to them, for the following
crucial reason:

Unfortunately, to break Cdn tax residency, you MUST establish tax
residency elsewher, and because of your J status in US, you do not
meet the criteria set out in the US-Canada tax treaty (article IV)
which would allow you to claim that because a preponderance of your
life is in US, you can claim US tax residence.

Your j status precludes you from doing this, thus, even the flimsiest
ties in Canada make you resident there. IRS rules are clear that days
in J status cannot be used to satisfy Substantial presence test, and
thus since you are neither US citizen, US permanent resident, nor
substantially present, IRS cannot claim that you are a tax resident,
and thus you don't get to use Article IV to break any supposed
residential tie.

This same situation is often faced by those who move to a country
which has no treaty, and thus Canada never gives up taxation on these
ones until they either shed ALL ties (incl,. RRSPs and bank account)
or become a citizen of said country.

Now, this does not prevent you from filing a 'normal' 1040 in US, as
ALL Cdns, even those who have never set foot in US, are fully allowed
to file a 1040 (by article 25 of treaty), reporting their WORLD income
to IRS and availing themselves of any tax deductions and credits that
all US citizen tax payers can. This may reduce your US tax burden,
especially since you are married, as 1040 usually yields a lower tax
rate than 1040NR.

If you do file a 1040, remember to comply with the RRSP filing
requirements set out in IRS rev proc 2002-23 and Notice 2003-75. There
is an upcoming new form 8891 to deal with RRSPs for IRS.

You would then file a resident tax return in Canada (likely based on
the province where you last lived, and where you maintain your
accounts), as how you CHOOSE to file in US has no bearing on Canada's
tax rights. You would use all taxes paid in US (incl. Medicare and SS)
as a tax credit. You might end up owing very little to Canada
(province actually), perhaps much less than a prolonged
legal/accounting battle to establish yourself a Cdb non-resident.