It is my understanding, that if i am resident in US for Tax purpose, and because of Tax treaty, i would be non-resident in Canada.
Please let me know if i am incorrect.
Thanks.
Hi
1. You can be a tax resident in both countries. If you still have attachments to Canada, while living in the US. You file a US tax return and file a Canadian tax return, under the tax treaty, some of the amounts you pay in the US are a credit on your Canadian return
The operative word here is "can." BUT NOT USUALLY, not even if the individual has extensive ties in both countries. Not even if the individual otherwise has ties in Canada which, but for being a resident of the U.S. for tax purposes, would deem them a resident of Canada.
That is, HOWEVER,
usually (not always), if a person is a resident for tax purposes of the U.S., that person GENERALLY is NOT a resident for tax purposes of Canada (under the U.S./Canada tax treaty AND respective tax rules for both countries), notwithstanding ties that might otherwise mean they were.
Since this is not universally true, as in there may be circumstances otherwise, it is correct to say that a person "can" be a tax resident in both countries, but again that is NOT usually so.
The exceptions are complicated.
This is
separate and apart from requirements to file a return. This is separate and apart from what income needs to be reported in the respective tax returns, or how to report it, assuming the individual needs to or otherwise is filing a non-resident return in Canada. And this is separate and apart from what credits are available in the respective tax returns. And especially separate and apart from what taxes must be paid on what sources of income.
Even though ultimately all those things are controlled by the tax treaty, one needs to follow the respective country's rules. (Note, no need to know what the tax treaty provides; the policies, practices, and tax filing rules, and tax paying rules, for each respective country fully implement the treaty's provisions; so one mostly needs to follow the information provided by the respective agencies, the IRS and CRA. But it can be complicated.)
It can get more complicated when the taxpayer has sources of income in both countries, particularly if there is self-employment, corporate, or investment income. (Been there. Done that. Pain in the shadows.)
And it gets more complicated when dealing with taxes other than income tax, like FICA for the U.S. or CPP for Canada. Special rules cover these. Special forms need to be obtained and filed.
Also keep in mind if you are a tax resident in the US, you will continue being a tax resident in the US where ever you live in the future. You need to take steps to withdraw your US residence if you ever move to Canada or another country to stop being a tax resident of the US or you have to continue to report annually.
It is not clear what you mean. It is NOT generally true that "if you are a tax resident in the US, you will continue being a tax resident in the US where ever you live in the future."
The U.S. has more extensive and strict rules for who must file a U.S. tax return even if they do not live in the U.S. And the U.S. does not distinguish who is a resident for tax purposes in the same way that Canada does. So here too this can get complicated.
Here too, been there, done that, many decades of employment, partnerships, self-employment in the U.S., long enough to be fully vested in the U.S. Social Security system (even though I left the U.S. two decades ago . . . as noted before, I am an OLD man) . . . but of course notwithstanding very few residential ties in the U.S. for nearly two decades, I still must file a U.S. return. Every fffng year. FBAR as well.
But I am NOT considered a resident of the U.S. for tax purposes. U.S. citizens, for example, can be a NON-resident of the U.S. for tax purposes even if they are NOT a bona fide resident of another country. (A de facto expat, based on lack of both ties and presence in the U.S. . . . last I recall, it required being outside the U.S. for at least 335 days of the tax year. Been there, done that as well. Before I became a Canadian.)
Much easier to qualify as a non-resident of the U.S. for tax purposes if one is a bona fide resident of another country, and even more so a country with a tax treaty with the U.S., like Canada.
One big difference, for example, is that an American ex-pat who is not a bona fide resident of another country will still have to pay U.S. FICA and related taxes (for self-employment income for example), but is otherwise entitled to the credit against income taxes, nearly a hundred grand or so,
for being a NON-resident of the U.S. for tax purposes. The ex-pat who is a bona fide resident of Canada can get additional credits and also the form effectively releasing them from paying U.S. FICA and related taxes.
All the above is offered with a huge caveat: tax filing, reporting, and payment obligations can be very complicated. The details matter. And there are many, many details to consider. Even the experts are often no where near expert enough, especially when it comes to dealing with obligations for multiple countries. This is NOT an appropriate venue for obtaining advice about filing tax returns, not even as to who must file a return, let alone what kind of return, what forms or schedules must be submitted, let alone what information is required, let alone what taxes must be paid or what credits are available.
Nonetheless, Overall:
Generally a person who is a bona fide resident for tax purposes of the U.S. or Canada is a NON-resident of the other country for tax purposes. Separate rules govern who must nonetheless file a tax return in the respective countries.
Persons who were tax residents in the U.S. in the past, even citizens, will NOT continue to be a resident of the U.S. for tax purposes if they are in fact a bona fide resident, for tax purposes, of Canada. This extends beyond this, even for expats who are not a bona fide resident of any other country (meeting the criteria), but it is clear cut in the case of a former U.S. resident who is a bona fide resident, for tax purposes, of Canada (what constitutes "bona fide" includes the requirement to actually file a Canadian tax return).
