# Canada-usa tax 2014



## seattlehome2014

A)	ONLY I moved to USA in September 2014 for work and MY FAMILY (wife+2kids) stayed in CANADA. I use to drive back to Canada almost every weekend. Work Monday to Friday in USA. Leave Canada early Monday morning and return back Friday or Saturday evening. It is a possibility that after finishing the project in two years company can move me BACK to CANADA.
B)	I have income only from work/job in CANADA (Jan to Sept) and in USA (Sept-Dec). My wife does not work and have NO income except interest in savings account.
C)	I and Wife have RRSP, RESP and TFSA + Regular Stock Trading Accounts in CANADA and I have 401k, roll-over IRA + cash trading account in USA. Do I and wife need to close all my Canadian bank, TFSA and trading accounts.
D)	Please guide which forms I need to file my taxes in USA and Canada. What I can exemptions I should claim in my standard deductions and what would be the best way to avoid any penalties in future. 
E)	How to minimize taxes in both the countries without breaking law.


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## BBCWatcher

seattlehome2014 said:


> C)	I and Wife have RRSP, RESP and TFSA + Regular Stock Trading Accounts in CANADA and I have 401k, roll-over IRA + cash trading account in USA. Do I and wife need to close all my Canadian bank, TFSA and trading accounts.


Of course not.



> D)	Please guide which forms I need to file my taxes in USA and Canada. What I can exemptions I should claim in my standard deductions and what would be the best way to avoid any penalties in future.


I think we'll need a little more information. Are you a U.S. citizen, U.S. national, or U.S. permanent resident (green card holder)? Is your wife?

Regarding your "A" and "B" statements, I don't quite know how to reconcile them. Either you worked in the U.S. or you didn't. It probably doesn't particularly matter where you spent Saturday and Sunday. Did you start working in the U.S. in September, 2014? If not then, when did you start working in the United States?

Did you contribute to U.S. Social Security or Canada Old Age Security? Or some of both? (If both, did the switchover occur from Canada to U.S. in September, 2014?)

What is the _nature_ of your work? (Don't be specific about your employer's name, for example.)


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## Bevdeforges

From what you've told us so far, there's a definite question about your "tax residence" - since your family is living in Canada and you are only working in the US. I would ask your employer first about your tax status, since it will depend on various issues, such as your nationality, what (if any) visa you are working on and other considerations that should be part of your employer's decision to hire/transfer you.
Cheers,
Bev


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## seattlehome2014

Hi All, First THANKS for looking and replying to the questions.

Some of the info you guys were looking I started working in September 2014 in USA but for same employer in CANADA Division in 2006.

(A)Whole of my family we are CANADIAN CITIZEN, and in USA on an intra company transfer work visa L-1B.

(B)I do pay USA Social security, medicare and federal taxes (no state tax in WA) from my paycheck

(C) I do have 401K plan and all my benefits from our USA OFFICE. My employer's CANADIAN division has transferred me to USA division and CANADA UNIT is not providing any benefits to me.

(D)I was reading that USA IRS thinks TFSA Account as TRUST and you need to report in the IRS filling any income and pay USA taxes from the trust.

Yes the question is about tax residence and which forms to fill in Canada and USA, I know that CRA CANADA will ask me to fill tax there as full year resident (as my family still in CANADA). So I have to pay taxes on my 2014 income from Canada + USA. The taxes paid in USA will be foreign tax credit on the Canadian Filling.


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## maz57

I second Bev's suggestion that you should first have a detailed conversation with your employer. After all, they are the ones who put you in your present position and it is likely you aren't the first of their employees to have questions about exactly where you stand taxwise. Some companies even have specialists on staff who can assist you in coping with your tax situation on both sides of the border.


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## BBCWatcher

The "alphabet soup" Canadian tax-advantaged accounts may or may not be trusts from the U.S. point of view, but they aren't reportable as such. Check the instructions for IRS Form 3520/3520-A. Generally you don't have any U.S. tax implications on RRSPs etc. as long as you didn't withdraw from those accounts during the tax year.

The regular stock trading account is a potential complication, but it can be dealt with. Are you holding any non-U.S. mutual funds in that account? What types of stocks?

I agree with your interpretation of how you'd handle the Canadian side. On the U.S. side you were very likely a "dual status alien" in tax year 2014, which means you'd follow the instructions primarily found in IRS Publication 519 and file 1040 and 1040NR tax forms for 2014.

I'm still a bit confused, though. Did you work in the U.S. before September, 2014? For that reason and some others I agree with the other poster's advice. It certainly doesn't hurt to ask your employer for tax preparation assistance. It's in your mutual interest to get these issues correct, otherwise they could have problems sponsoring other employees in the future.


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## jbr439

BBCWatcher said:


> The "alphabet soup" Canadian tax-advantaged accounts may or may not be trusts from the U.S. point of view, but they aren't reportable as such. Check the instructions for IRS Form 3520/3520-A. ...


I'm not sure what you're saying here. Most (all?) cross-border tax professionals will say that RESPs, TFSAs, and RDSPs are indeed "foreign" trusts and need to be reported as such. [Not sure about RRSPs]


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## BBCWatcher

They may say that, but IRS Form 3520 and 3520-A, the trust reporting forms, now (tax year 2014) say Canadian tax-advantaged accounts are exempt from reporting. Quoting from the instructions ("Exceptions to Filing"): "Transfers to, ownership of, and distributions from a Canadian registered retirement savings plan (RRSP), a Canadian registered retirement income fund (RRIF), or any other Canadian retirement plan that is within the meaning of section 3 of Rev. Proc. 2014-55. See Rev. Proc. 2014-55, 2014-44 I.R.B. 753, available at www.irs.gov/irb/2014–44_IRB/ar10.html."

If you then go dig into that section (and then the Convention) the IRS has a definition of "Canadian retirement plan." The IRS definition is broader than the colloquial meaning of "retirement."

Yes, this is perhaps new information.


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## jbr439

BBCWatcher said:


> They may say that, but IRS Form 3520 and 3520-A, the trust reporting forms, now (tax year 2014) say Canadian tax-advantaged accounts are exempt from reporting. Quoting from the instructions ("Exceptions to Filing"): "Transfers to, ownership of, and distributions from a Canadian registered retirement savings plan (RRSP), a Canadian registered retirement income fund (RRIF), or any other Canadian retirement plan that is within the meaning of section 3 of Rev. Proc. 2014-55. See Rev. Proc. 2014-55, 2014-44 I.R.B. 753, available at www.irs.gov/irb/2014–44_IRB/ar10.html."
> 
> If you then go dig into that section (and then the Convention) the IRS has a definition of "Canadian retirement plan." The IRS definition is broader than the colloquial meaning of "retirement."
> 
> Yes, this is perhaps new information.


RESPs and RDSPs just can not be considered retirement plans any more than a 529 plan could be considered one. And while TFSAs are similar to Roth IRAs, the fact that you can withdraw money at any time without penalty would disqualify them as such, no?


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## BBCWatcher

I don't know what those "alphabet soup" accounts are, but they don't actually have to be "retirement." (There, I wrote that again for you. We'll try this one more time.) They only have to be "Canadian retirement accounts" _as the IRS defines them_. Which, in fact, includes more than "retirement."

If the IRS defines "blue" as "red," that's up to the IRS. In this case, they may have.

Go read the references I provided.


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## maz57

They are not even remotely retirement plans but any excuse to avoid 3520/3520a on all Canadian tax-advantaged accounts is OK by me. Even if BBC's interpretation is wrong, it sounds like a reasonable excuse if there is ever a question.

None of these "registered" accounts are reportable under the IGA so perhaps the IRS just lumped them all together as not being worth close scrutiny because there is no risk of abuse. Besides, foreign trusts or not, they all still are reported on 8938. (And FBAR.) How much reporting of benign accounts does the IRS really need?


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## jbr439

If the IRS considers a RESP to be a "Canadian retirement account" then it's little wonder that normal human beings are unable to properly file without professional help.


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## jbr439

OP may want to consider asking for an opinion at Serbinski - Serbinski Accounting Firms :: View Forum - Canada / United States Tax & Accounting.

There's a guy there that does Canada-US taxes for a living.


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## Nononymous

Every time I look at that tax forum I feel so good about non-compliance...


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## seattlehome2014

guys all of you thanks for your really helpful and guiding me.
As all suggested to speak with the employer 

I DID and they will help me to file taxes through a accountant.
I called my Canadian Company where i have TFSA,RESP,RRSP and Cash trading account of mine and wife. There TAX person (NOT CPA) did mention that TFSA and RESP are to be reported to IRS when i am in USA IF they are still active, He adviced that I LIQUIDATE all my assests in TFSA,RESP,and Cash Trading. OR THEY CAN FREEZE The ACCOUNTS so i cannot do anything no buying and no selling, still report to IRS all the above accounts and NO pay any taxes or penalties. His strong recommendation was to close the accounts that way IRS needs to nothing as no reporting to them.

Thanks for all your help and still if anyone has any valid points please please put on this forum this will help others like me. 
Does anyone know a tax expert in filing taxes in USA and CANADA ---in SEATTLE area. let me know.


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## seattlehome2014

Hi, ALL i had a suggestion from my Canadain Brokerage house rep. He suggested to check if instead of liquidation everything TRANSFER all stocks into cash trading account. and then close TFSA and then transfer to USA Brokerage trading account.

My concerns are 

A)Will US consider as income from the TFSA' trust" and still do i need to file all the FBAR forms and report to IRS.
B)One tax expert said to liquidate all and take out money and clsoe the account immdiately. It is not necessary to show IRS and report as i was still dual status citizen for USA so i can do certain things in the Canada.

C) Canadian TFSA account is similar to ROTH IRA and it depends how it is registered by canadian brokerage house. Mine say 'computershare trust company' but the interpretation is that this trust is just to hold the stocks of all the account holders and is NOT indvidual trust.

Please all the experts here share your view.


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## maz57

Re: the TFSA. The simplest thing would be to liquidate that account. This would create no Canadian tax issues and and would leave you with future contribution "room" should you return to Canada down the road. Opinions vary as to IRS' treatment of the TFSA. Only one thing is for sure; an account that doesn't exist doesn't have to be reported.

Re: the RESP. Have you looking into just changing the name on the account to someone who doesn't have a US filing obligation? No point in scrapping the kid's education fund if a workaround can be found. Could even be the wife if you are not filing jointly.

Re: the RRSP. This can probably just be left dormant for as long as you are a US resident. It will still need to be reported on FBAR and possibly 8938 depending on the amounts involved, but no complications beyond that. You won't be able to contribute or trade but hopefully it will appreciate.

Re: the cash trading account. You may be able to find a brokerage house that is licensed to do business on both sides of the border. Otherwise just liquidate it (paying any tax due) and open a new one in the US. Check out TD-Waterhouse; I've heard they are trans-border capable.


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## byline

seattlehome2014 said:


> A)Will US consider as income from the TFSA' trust" and still do i need to file all the FBAR forms and report to IRS.


I ended up closing my TFSA thanks to the reporting nightmare it involved with Forms 3520 and 3520-A (all for a final result of no taxes owed). Life has been much simpler since then, but it's really too bad that because of the complicated IRS paperwork, I am prevented from doing what in Canada is a beneficial financial strategy.


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## BBCWatcher

Are TFSAs still 3520/3520-A reportable (tax year 2014)?

Liquidating an account is a U.S. event if you're already a U.S. person. You cannot unring a bell. So calm down and figure out what the _actual, current_ requirements are.


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## seattlehome2014

Hi all please click the following and read on CRA website, this says about financial information sharing between CRA and IRS. So CRA does not report my TFSA to IRS then why CAnadians in USA should report TFSA and RESP accounts to IRS. If you file then only IRS knows u have this accounts. Read below and advice.

Frequently asked questions

What types of accounts are reported?

Canadian financial institutions have to report most bank accounts, mutual funds, brokerage accounts, custodial accounts, annuity contracts (including segregated fund contracts), and some life insurance policies with a cash value that are held by U.S. persons.

An account is not reportable if it falls within an exempt category such as the following government-registered plans:

registered retirement savings plans
registered retirement income funds
pooled registered pension plans
registered pension plans
tax-free savings accounts
registered disability savings plans
registered education savings plans
deferred profit-sharing plans

Also, your financial institution may not have to identify and report on certain accounts if their value is below certain thresholds.


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## maz57

That's correct. None of the Canadian registered accounts are reportable under the Canadian/US IGA. In other words, the IRS will only know about such accounts if you choose to tell them.

Nevertheless, they remain fully US taxable if you are a US taxpayer and I expect the IRS would not be too happy if they somehow found out you failed to report their existence and any income they generate on your US tax return. Its up to you. Some refer to this as "selective compliance". Personally I wouldn't feel comfortable with a "no" answer to the question "do you have any foreign accounts" on a US return if, in fact, I did have Canadian accounts. Your situation is markedly different from many on this forum because you actually live in the US.


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## seattlehome2014

Hello, ALL

I have discussed my situation with various CPA in USA and all have different views about my residency, TFSA,RRSP etc.

In general the summary is

A)options to file USA -non resident alien filing married seperately, elect to file as full year complete resident file as married jointly, dual status as married seperately. In Canada full year resident since my family still in Canada.

B) TFSA is reportable under the irs interpretation. one cpa had a good point. If TFSA is considered as trust then he suggested NOT to close or liquidate the account as this will be considered as income from the trust and have to pay taxes in USA. It is better that i leave it as is and dont buy or sell any stocks/mutual funds etc in short dont generate any income. If any of the income in the account is only dividends or interest the taxes are minimal. ALL banking accounts are to be reported. Savings and checking,RRSP,TFSA,Spousal RRSP,Cash Trading,Fixed deposits,RESP on the foreign banking information form.

C) can someone guide me what is the best for me. is there anyone in a situation like me. which US status to use to file.
\D)does canada allow deduction for 401K contribution or not. because i contributed 17000 in last year from sept to dec.


Thanks


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## BBCWatcher

Regarding your item B, _in general_ liquidating assets is not something you want to do unless you're darn sure you know what you're doing. You're exactly right that the U.S. taxes _realized_ capital gains. That's what happens when you sell stocks, bonds, and mutual funds, as examples. There's also the fact that there are often transaction costs with selling and moving money. Note that I'm assuming you're already in good, low cost investments that you want to keep.

That said, you'll have to take a look at whether any of the holdings in non-U.S. accounts the IRS would consider PFICs (Passive Foreign Investment Companies). For those holdings that are classified as PFICs (and are not treaty-protected) you'll have some decisions to make. Ordinarily you'll have to take what are called QEF elections, essentially meaning you'll "mark to market" those PFICs each year and treat the unrealized gains as passive income (but also reset the cost basis every year). For example, a Canadian mutual fund is _probably_ a PFIC. A direct bond holding is not. (A bond _fund_ probably is.)

In general the tax advantages to tax-advantaged accounts stop at the national borders. There is no such thing as a truly globally tax-advantaged account. (Though goodness knows corporations and wealthy individuals are trying to create that.) However, the bilateral tax treaty between the U.S. and Canada might have something to say about U.S. 401(k) plans and their tax treatment in Canada. My best guess (and best recollection) is that they're reasonably well respected on the Canadian side.


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## Bevdeforges

That's one of the things about US taxes (in fact, US law in general). There is no single "correct" way to do these things. You always have options - and they pretty much leave you on your own to decide which options you want to go with (and which options have the best result in your particular situation).

A) You certainly would appear to be justified to file as a non-resident, based on the fact that your family (to which you return on a regular basis, i.e. at weekends) is resident there. If you file as a US resident, though, you would be able to file jointly (with your wife being the NRA) and take full exemptions for your family members. You'd also be able to take the standard deduction if you don't have itemized deductions sufficient to total the standard deduction. But then again, that also means you'd have to declare your worldwide income - including all interest and such on your Canadian accounts. There's also the possibility of filing MFS, but you'd need to get ITINs for the wife and kids in order to take their exemptions. (No, they don't make it easy.)

B) I think you want to avoid closing or messing with the TFSA in any event. One way or another it will just create a taxable event - either for US taxes, Canadian taxes or both.

C) Normally the advice is to run all the various scenarios and pick the one with the lowest tax bill. However, despite popular opinion, it's not always about finding a way to pay the least tax. Sometimes you need to consider your long-term goals. Personally, I'd try to maintain the NR status as long as possible - at least if your goal is to return to Canada eventually. That eliminates all the TFSA hassle. If, on the other hand, you're looking to bring your family to live with you more permanently in the US, you may want to go the resident route sooner rather than later. Just be aware that you can't switch back and forth without attracting a bunch of attention.

D) Doubtful at best. While Canada may not tax 401K withdrawals as income, they normally won't allow you to take a deduction for contributions to the plan. However, do check to see if you can take the deduction on a US NR filing.
Cheers,
Bev


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## seattlehome2014

Thanks,

I will NOT be selling any STOCKS i and wife hold in TFSA they are Canadian Company stocks listed on TSE. Selling will 'generate income' in the TFSA (trust for IRS) so will have to pay taxes. I rather leave as is and ANY dividend of the stocks will me very less few dollars a year.

One CPA mentioned that IRS came out with some sort of guidance in 2014 on Canadian TFSA...anyone aware.. could NOT find.

Yes eventually my family will move with me in 2015. and then we may return to canada in mid-2017.

Yes i have to look at all the options and decide which one is least tax bill.


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## maz57

Rereading this entire thread, earlier BBC mentioned he had discovered some significant new information which bears on the IRS reporting of a Canadian TFSA. Look in the 2014 instructions for Form 3520/3520a. Things are a little unclear like many IRS rules but it appears that trust reporting is now not required for Canadian registered retirement accounts and arguably the TFSA is a retirement account.

You have stated your TFSA contains individual stocks so based on this new info it now seems to me just leaving it alone will probably be the best strategy. While it is true that liquidating it is not a Canadian taxable event, it would be a taxable event for US reporting if there are gains involved. It seems to me you can just report the income of the account on your US return, pay the tax, and leave it at that. To state it another way, the TFSA can sit dormant just like your RRSP but unlike the RRSP you will have to declare and pay US tax on any income the account generates every year. This defeats the purpose of a TFSA but if you return to Canada in a few years the effect will not be too crippling. At least you don't have to pay CG tax on unrealised gains. Meanwhile contribution room will accumulate and you have the possibility of "catching up" if and when you return to Canada.

Re: your question about whether you can deduct 401k contributions on your Canadian return, it seems like it now might be possible under the latest treaty protocol but there are some caveats about the timing and the allowable amounts that are not possible to address here. You will have to research both the treaty and the CRA website.


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## byline

seattlehome2014 said:


> ALL banking accounts are to be reported. Savings and *checking*,RRSP,TFSA,Spousal RRSP,Cash Trading,Fixed deposits,RESP on the foreign banking information form.


Hold on, chequing accounts are to be reported on a U.S. income tax return? I am reporting the highest chequing account balance each year on my FBAR, but I have not been reporting it on my tax return.


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## BBCWatcher

Non-U.S. checking (or chequing, or current) accounts are reported on FinCEN Form 114 ("FBAR") and IRS Form 8938 ("FATCA"), as applicable.

The _income_ (i.e. interest), if any, from that account is reportable on IRS Form 1040 Schedule B. As (almost) always, you report the gross interest then, if applicable, use IRS Form 1116 to take the Foreign Tax Credit for non-U.S. income tax paid on that interest.

Bank accounts don't pay a lot of interest these days, and checking/chequing/current accounts even less, so maybe you don't have any interest income to report.


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## Bevdeforges

byline said:


> Hold on, chequing accounts are to be reported on a U.S. income tax return? I am reporting the highest chequing account balance each year on my FBAR, but I have not been reporting it on my tax return.


No, bank accounts are reported on FBAR filings. You only report income on your tax returns. (And frankly, these days, most checking accounts don't pay interest.)
Cheers,
Bev


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## seattlehome2014

Thanks for answering and have great discussion on this forum.
Different CPA' is discussing with me for filing status

Dual Status
Non Resident Alien
File like US Resident on World Wide income claim whole family for deductions and the take Foreign Tax Credit on Canadian Tax Return

Please Vote which one you think i should use?

After reading various forums and discussing with CPA's. I called IRS FBAR hot line to discuss my situation.

Since I have LESS than 183 days in USA in tax year 2014. I am a NON resident alien for tax purpose. Does NOT meet green card or substiantial presence test for tax 2014.

As per IRS REP if I am filing as NOR RESIDENT ALIEN (filing married separately) then I DO NOT fill in FinCEN Form 114 ("FBAR") for 2014, ONLY file 8938. 

I asked the IRS REP what about 2015 tax year she mentioned to fill both forms for me and wife and she could not clarify on TFSA (similar to ROTH IRA here) filling /disclosing requirements.

But all my RRSP,RESP,Checking and Savings, TFSA stock trading accounts for me and wife needs to be filled in the FinCEN Form 114 and 8938. 

I will call IRS Customer Service and try to find if needs to file 3520-A for TFSA Trust. RRSP is exempt NOW.

Please keep sharing all your thoughts here lots of us will help from this.

THANKS


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## Nononymous

You are ASKING random INTERNET strangers to VOTE on something FOR which YOU are RECEIVING professional ADVICE from a CPA?


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## byline

Bevdeforges said:


> No, bank accounts are reported on FBAR filings. You only report income on your tax returns. (And frankly, these days, most checking accounts don't pay interest.)
> Cheers,
> Bev


Whew, that's what I thought. There's no interest paid on my chequing account. I've been reporting the other interest-bearing accounts on my income tax return, and of course all of them on my FBAR ... but when I read that I thought I'd missed yet another detail. Thanks, Bev!


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