Do I (US visitor) owe Canadian taxes?

[epmarshall]

Hi all,

I am a US citizen. I have been living with my Canadian boyfriend in Canada for just over 6 months. I arrived in Canada September 2015. Soon we'll be applying for PR either through spousal or common law sponsorship.

I worked an online job for a US company for a few months while I've been up here. Obviously I'll be paying US taxes on this income, but do I owe CRA anything? Do I need to file taxes for Canada even if I don't end up owing CRA?

And one more related question. My boyfriend can't claim me on his taxes, can he? I have only been up for 6 months but he has been supporting us mostly since I've just been making a small amount. I was researching it and from what I can tell in order to claim me on his taxes, we'd have to have been married or common law by Dec. 31, 2015 (we were not). Is this correct?

I'd really appreciate any help. Thanks a lot, everyone!

 

[Rob_TO]

I worked an online job for a US company for a few months while I've been up here. Obviously I'll be paying US taxes on this income, but do I owe CRA anything? Do I need to file taxes for Canada even if I don't end up owing CRA?

You may be a deemed resident of Canada, and would then owe Canadian taxes on your world income earned while in Canada.
http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/dmd-eng.html

However since in 2015 you were only here 4 months, that wouldn't meet the 183-day rule so I don't think you would owe for anything earned in 2015. This can get confusing though so best to check with an accountant experienced with US citizens residing in Canada.

And one more related question. My boyfriend can't claim me on his taxes, can he? I have only been up for 6 months but he has been supporting us mostly since I've just been making a small amount. I was researching it and from what I can tell in order to claim me on his taxes, we'd have to have been married or common law by Dec. 31, 2015 (we were not). Is this correct?

Correct, since you weren't officially common-law as of Dec 31, 2015, he can't claim anything to do with you for his 2015 taxes.

Once you reach 12 months of cohabitation, he should then change his marital status with CRA from single to common-law. For that tax year (so 2016), he can then claim you under the spousal amount. Any tax credit he gets will be dependent on your world income.

 

[Ponga]

You would NOT be double taxed on your Worldwide income. You would pay U.S. tax, or Canadian tax (when you have become a deemed resident), but not both.

 

[nmclean]

You would NOT be double taxed on your Worldwide income. You would pay U.S. tax, or Canadian tax (when you have become a deemed resident), but not both.

Not true for US citizens as they are taxed regardless of residency. Once they are Canadian residents, they WILL be double taxed, but can claim the foreign tax credit on the Canadian side to offset US taxes paid.

 

[Ponga]

Not true for US citizens as they are taxed regardless of residency. Once they are Canadian residents, they WILL be double taxed, but can claim the foreign tax credit on the Canadian side to offset US taxes paid.

Bottom line...the OP will not be paying double tax at the end of the day, correct?

 

[nmclean]

Bottom line...the OP will not be paying double tax at the end of the day, correct?

Bottom line is you don't stop paying US taxes when you become a resident of Canada. The tax credit reimburses you for them, but only up to the lesser amount between US and Canadian taxes. So if your tax rate is lower in Canada, you still end up paying more in US taxes.

 

[Aquakitty]

Bottom line is you don't stop paying US taxes when you become a resident of Canada. The tax credit reimburses you for them, but only up to the lesser amount between US and Canadian taxes. So if your tax rate is lower in Canada, you still end up paying more in US taxes.

This isn't entirely true, as you can exclude foreign income up to about $100,000 US. After that you can be eligible for a tax refund.

Foreign Earned Income Exclusion
If you are a full time resident abroad for a full calendar year, or live there for 330 days out of any consecutive 12-month period, you can exclude up to $100,800 of earned income from U.S. Income Taxation for 2015 ($101,300 for 2016). If you are married, and both of you earn income and reside abroad, you can also exclude up to another $100,800 of your spouse’s income from taxation. These exclusions can only be claimed by filing a tax return and are not automatic if you fail to file your Form 1040 for the applicable year (as well as the appropriate forms claiming this exclusion). Earned income is income you earn for your work or services and does not include rental income, dividend or interest income, or other types of income that are not paid for your own personal efforts. You can also claim an additional exclusion or deduction for your foreign housing expenses exceeding a standard amount established by the Federal Government.

 

[CDNPR2014]

from my experience, i became a pr in late 2014, and worked in canada for 2 months in 2014. i also had some income in the us for 2014. i filed both canadian and us taxes for that year. i received full refunds from both countries. yes, US citizens are required to FILE taxes no matter where they work or live, however they don't necessarily PAY taxes on worldwide income in the US, if taxes were paid in the country of residence.

 

[nmclean]

This isn't entirely true, as you can exclude foreign income up to about $100,000 US. After that you can be eligible for a tax refund.

OP is talking about income earned from working for a US company online while living in Canada. The exclusion won't apply in the US because it's not foreign to the US, and Canada doesn't have this exclusion (it has exempt foreign income but this doesn't qualify)... so it's taxed by both countries.

 

[epmarshall]

Thanks for the help and advice, everyone. However, I'm still pretty confused.

So am I going to be double-taxed? I barely made anything through the job and by the time it's double taxed it'll be even more paltry. At first, I wasn't even going to ask about the possibility of owing CAD taxes because I figured it was ridiculous considering I'm not allowed any Canadian benefits right now. But unfortunately it seems I was mistaken.

Like Ponga and Rob were saying, the 183 rule definitely does not apply to me for 2015. Shouldn't that alone mean I don't owe taxes?

I wonder if my boyfriend's tax prep. person could answer a quick question for us regarding my case without a whole extra session so I could at least know if hiring tax help is necessary.

 

[Rob_TO]

So am I going to be double-taxed?

You will never be "double taxed". You will pay tax only up to the maximum amount owed based on the country with higher tax rate.

i.e. say someone makes income that would be taxed 30% in the US and 40% in Canada. They may end up paying 30% tax to the US, and then would just pay the 10% extra to Canada so the total amount they would pay is 40%. Of course this is super simplified, the actual amount paid to each country will depend on many factors, but you will not ever need to pay full tax to both countries as there is a US/Canada tax treaty that prevents this.

 

[epmarshall]

You will never be "double taxed". You will pay tax only up to the maximum amount owed based on the country with higher tax rate.

i.e. say someone makes income that would be taxed 30% in the US and 40% in Canada. They may end up paying 30% tax to the US, and then would just pay the 10% extra to Canada so the total amount they would pay is 40%. Of course this is super simplified, the actual amount paid to each country will depend on many factors, but you will not ever need to pay full tax to both countries as there is a US/Canada tax treaty that prevents this.

Oh, okay. I get it, now. Thanks for that explanation, Rob_TO!

So if I assume the 183 rule doesn't apply to me and I just pay US taxes for 2015, will it end up causing me issues with my PR if I am wrong? I already told CIC about this past job when I submitted my visitor extension a month ago, so it's not like I'm trying to hide anything from them.

 

[CDNPR2014]

Oh, okay. I get it, now. Thanks for that explanation, Rob_TO!

So if I assume the 183 rule doesn't apply to me and I just pay US taxes for 2015, will it end up causing me issues with my PR if I am wrong? I already told CIC about this past job when I submitted my visitor extension a month ago, so it's not like I'm trying to hide anything from them.

no, CIC and CRA don't and can't share information. CIC is not going to care about your tax situation. they only care about your criminal background and legitimacy of your relationship.

 

[Aquakitty]

OP is talking about income earned from working for a US company online while living in Canada. The exclusion won't apply in the US because it's not foreign to the US, and Canada doesn't have this exclusion (it has exempt foreign income but this doesn't qualify)... so it's taxed by both countries.

Ah ok, this is good to know, it's so bloody confusing. I thought it was based on the person's location.

 

[epmarshall]

no, CIC and CRA don't and can't share information. CIC is not going to care about your tax situation. they only care about your criminal background and legitimacy of your relationship.

Thanks, CDNPR2014!