Moved from US to Canada (H1B to PR)

[joeskc]

Hi All,

My situation is somewhat similar to what is mentioned in https://www.canadavisa.com/canada-immigration-discussion-board/threads/tax-help-for-us-h1b-to-canada-pr-individual.758560
Tax filing year in question is 2021.

1. I was working in US on H1B since 2017 and my wife joined me on H4.
2. On 31st March 2021, we moved to Canada as PRs and I joined a different company. So, from 1st Jan to 31st March I had ONLY US income and from 5th April to 31st Dec I had ONLY Canadian income.
3. Since I was in US for 90 days in current calendar year (2021), I checked the Substantial Presence Test and based on that filed as a Resident Alien. I got my refunds as well from IRS. I did not declare my Canadian income in US tax filing and I assume same should apply for Canadian tax filing.
4. But for Canada tax filings, I went to H&R Block and they said - We need to add the US income as well so now you OWE 13K !!!!!!

Isn't that double taxation? I have already paid taxes on my US income. Shouldn't this be straightforward - I file my US taxes and Canada taxes separately without including the income from either countries on each other's filings?

Any help is really appreciated.

 

[scylla]

Hi All,

My situation is somewhat similar to what is mentioned in https://www.canadavisa.com/canada-immigration-discussion-board/threads/tax-help-for-us-h1b-to-canada-pr-individual.758560
Tax filing year in question is 2021.

1. I was working in US on H1B since 2017 and my wife joined me on H4.
2. On 31st March 2021, we moved to Canada as PRs and I joined a different company. So, from 1st Jan to 31st March I had ONLY US income and from 5th April to 31st Dec I had ONLY Canadian income.
3. Since I was in US for 90 days in current calendar year (2021), I checked the Substantial Presence Test and based on that filed as a Resident Alien. I got my refunds as well from IRS. I did not declare my Canadian income in US tax filing and I assume same should apply for Canadian tax filing.
4. But for Canada tax filings, I went to H&R Block and they said - We need to add the US income as well so now you OWE 13K !!!!!!

Isn't that double taxation? I have already paid taxes on my US income. Shouldn't this be straightforward - I file my US taxes and Canada taxes separately without including the income from either countries on each other's filings?

Any help is really appreciated.

H&R Block is correct. You have to file your Canadian tax return based on your worldwide income for the year (not just your Canadian income).

Canada and the US have a tax treaty that prevents double taxation. If you paid tax in the US, then you declare this tax in your Canadian tax return and you'll get credit for that.

EDIT: Just to add, I thought you had to file on worldwide income in the US as well if you are a resident alient. But I'm not 100% sure of that.

 

[canuck78]

Hi All,

My situation is somewhat similar to what is mentioned in https://www.canadavisa.com/canada-immigration-discussion-board/threads/tax-help-for-us-h1b-to-canada-pr-individual.758560
Tax filing year in question is 2021.

1. I was working in US on H1B since 2017 and my wife joined me on H4.
2. On 31st March 2021, we moved to Canada as PRs and I joined a different company. So, from 1st Jan to 31st March I had ONLY US income and from 5th April to 31st Dec I had ONLY Canadian income.
3. Since I was in US for 90 days in current calendar year (2021), I checked the Substantial Presence Test and based on that filed as a Resident Alien. I got my refunds as well from IRS. I did not declare my Canadian income in US tax filing and I assume same should apply for Canadian tax filing.
4. But for Canada tax filings, I went to H&R Block and they said - We need to add the US income as well so now you OWE 13K !!!!!!

Isn't that double taxation? I have already paid taxes on my US income. Shouldn't this be straightforward - I file my US taxes and Canada taxes separately without including the income from either countries on each other's filings?

Any help is really appreciated.

Would add that H&R block is only for really basic filings.

 

[joeskc]

Thanks @scylla and @canuck78 for your inputs... i was just continuing my research and found this: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html

What income do you have to report?
For the part of the tax year that you were not a resident of Canada
You have to report the following amounts:

• income from employment in Canada or from a business carried on in Canada
• taxable capital gains from disposing of taxable Canadian property
• taxable part of scholarships, bursaries, fellowships, and research grants you received from Canadian sources

For the part of the tax year that you were considered a resident of Canada
You have to report your world income. World income is income from all sources inside and outside Canada.

In some cases, pension income from outside Canada may be exempt from tax in Canada due to a tax treaty, but you must still report the income on your return. You can deduct the exempt part on line 25600 of your return.

If you are a protected person (including a refugee) and you received funds from a charitable organization such as a church group or from an individual, you generally do not have to report the amounts on your tax return. However, if a charitable organization hired you as an employee, the employment income you received is taxable.


This was actually my understanding as well. When I was earning salary in USA I had not ties/income whatsoever from Canada and when I established residency in Canada I had not ties/income from USA. So what I understand is - from 1st April to 31st Dec 2021, if I had any income from USA then I have to report only that, not the US salary I earned when I was non-resident of Canada.
Please let me know if I am reading this wrong.

Thanks in advance!!

 

[matteosc]

H&R Block is correct. You have to file your Canadian tax return based on your worldwide income for the year (not just your Canadian income).

Canada and the US have a tax treaty that prevents double taxation. If you paid tax in the US, then you declare this tax in your Canadian tax return and you'll get credit for that.

EDIT: Just to add, I thought you had to file on worldwide income in the US as well if you are a resident alient. But I'm not 100% sure of that.

You have to file worldwide income in US only if you are Green Card holder or US Citizen.