Tax Advice?

[Pharoh]

Greetings all,

I'm getting married in a couple weeks, and we're filing a week after that. We're doing outland, so I'll be in the States, and her in Canada, until my PPR is approved..

In the States, I'm accustomed to having a single W2 with my earnings, going on to TurboTax, filing, and getting my deposit a week later. No big deal.

When I file in January, I'll have to claim my new Canadian wife, of 2 months? How does that work? Do they only tax me for the income she's earned during that two month period? In Turbotax, I see an option to specify you were married, but nothing about marrying someone from another country, not living with them at the time of filing, etc.

How big of a trainwreck is this going to be for me to file?

Also, how complicated will it be for her? I know the forms are slightly different up there. Will she be taxed for two months of my income that I've earned? How does one income being USD and one income being CAD affect things?

I usually don't stress out about taxes, but now I'm kind of worrying. Will our tax returns be more or less? I hope we don't owe...

Please advise!!

Thanks!

 

[can_usa_97]

The US and Canada have a tax treaty that prevents you from being double taxed, I looked into it and even talked to the IRS here in the states -we were very concerned about being taxed when we moved. Especially at retirement more, I talked to Social Security about it as well.

Anyhow, you as the US citizen will forever have to file taxes here in the states, as will any children you have.
After one year abroad you will qualify for a 'foreign tax credit' - document F1116 when you file your US taxes, which will prevent you from having to pay on the income you earn & your spouse earns as a married couple, in Canada.

This page - http://www.irs.gov/publications/p514/ar02.html#en_US_publink1000224401 - is a great resource.

I am not sure how it will work with your just being married and in the US.
I thought I had read some people talking about married filing separately - and in that case I think you just count your income (I've never done it, honestly - so I'm not certain how it works, hopefully someone else can come along and assist you on that. As well as for how she'll be doing it in Canada. I don't remember how my husband & I did our first year married (we married - tomorrow actually - and so we had 2 1/2 months married, our parents did both our returns for us).

GL!

 

[Pharoh]

Thanks for your input, can_usa_97. If we can both file separate (like we're accustomed to doing), that'll make things a lot easier. We could probably do that anyways, without any risk of getting audited, but I'd prefer to do things the "right" way, if possible.

I'm very miffed by having to file U.S. taxes, even while married, living, and working in Canada, and eventually taking Canadian citizenship. I'll probably renounce my United States citizenship in a few years, just to avoid the continued tax headache. It would seem most countries only tax you if you live there, however, the U.S. taxes you if you're a citizen, which I think is wrong.

 

[can_usa_97]

Thanks for your input, can_usa_97. If we can both file separate (like we're accustomed to doing), that'll make things a lot easier. We could probably do that anyways, without any risk of getting audited, but I'd prefer to do things the "right" way, if possible.

I'm very miffed by having to file U.S. taxes, even while married, living, and working in Canada, and eventually taking Canadian citizenship. I'll probably renounce my United States citizenship in a few years, just to avoid the continued tax headache. It would seem most countries only tax you if you live there, however, the U.S. taxes you if you're a citizen, which I think is wrong.

Yeah I'm not a fan either, about having to do it forever, and my kids as well. When they start working it'll be silly (In 13+ years) to remember oh yeah!?! if you want to 'stay' a citizen - you have to do this. And I'd like to keep the benefits we've paid here (social security (if there is any, haha!) and surviving spouse/children for both my husband & I, so I'll keep filing. It's a pretty significant amount for us that it'll make sense to do the headache.

My Mother-In-Law in effect has ruined her ability to come back because she did not file - she was born here, moved to Canada to be with her husband, became a citizen, and her son did the opposite, haha. Now we are hoping to go back. What a trip.

I don't think there is any 'bad/wrong' - ness to filing separately - at least in the US. I think... again, not sure on Canada. Hope you find your answers.

 

[QCSunshine]

I am American; my husband is Canadian. We got married last October. I lived in the US until September, then moved to Canada for the last four months of 2009. For my 2009 US taxes, I did "married filing separately" and just filed for myself. My husband had only Canadian income and has only ever lived in Canada. I called Revenue Canada to see if I had to pay taxes in Canada, since I was married to a Canadian, and they put me through to some international department. After explaining my situation, the man I spoke with said that I did not have to pay for 2009 because all my income from 2009 was US income and it all came before the date we got married. He said that I would only have to pay taxes on any US income that I received after the date we got married, because it was then that I established "permanent ties" to Canada.

I am a little confused about the US side though after seeing this thread. Is there a need for my Canadian husband who has never had any US income and has never lived in the US to file US taxes?

Turbo Tax: When I filed, I had to put NRA (non-resident alien) in the blank for Turbo Tax where it asked for the social security number of my spouse. It kept showing an error when I did the checks before filing, and according to Turbo Tax community boards, you have to file on paper if you put NRA in that blank because it looks like an error when you try to submit it online.

 

[BeShoo]

If you are married on December 31 of the tax year, you are considered married for that entire tax year under Canadian tax law. I'm not sure if there's such a thing as a joint return, as such, in Canada, but you do need to co-ordinate things between the two returns, because certain deductions can be claimed by either spouse.

 

[YorkFactory]

Yes, you have to file if you otherwise meet the requirements (essentially, you are a U.S. citizen who makes more than the standard deduction); living in Canada doesn't exempt you.

The good news is that if you live full-time outside the United States, your first $90,000 or so (it's indexed to inflation, so it goes up a bit each year) is completely tax-free in the U.S. After that, you get a dollar-for-dollar credit for taxes paid in your home country. Barring something weird, you will probably not owe any U.S. tax on your Canadian income, since Canadian income taxes are slightly higher. Also, if you live outside the U.S., you get an automatic extension to file your tax return.

Your wife will need an Individual Taxpayer Identification Number. You should apply for her ITIN as soon as you're married.

And finally, a word of warning: if you renounce your U.S. citizenship solely to avoid tax liability, the IRS may decide that you still have U.S. tax liability for another decade. That, and you'd no longer be able to move back to the U.S. or sponsor your family to live there.

 

[Pharoh]

Hey all,

It's getting closer to tax season, so I thought I would bump this thread up and see what additional insight may be given.

I plan to use TurboTax, and as someone else did, put 'NRA' where it asks for my Canadian spouse's SSN. We never got around to applying for an ITIN from the IRS, so I have no official number to put in for her, just her name.

In TurboTax 2010, it asks if you're filing separate, and there's also a box asking if you haven't lived together for 1 year or more. I've checked this box, with no noticeable change.

So at this point, I'm just waiting for my W2 from work. I'll attempt to e-file, and if I cannot, I will print it and mail it. She is not filing her Canadian taxes until March, and for that, she plans on seeing a professional to determine what information Canada wants on me.

 

[Love_Young]

I am very confused as for one I am fairly young. I will be 21 in March. I only worked a job for a couple of days when I was 18 and made maybe $70. I didn't file a tax return as I didn't think I needed to since I didn't make over a certain amount (am I correct in thinking this?) so now I am not sure if I should be filing taxes even though I don't have an US income or Canadian income. I have lived in Canada since March 2009 with my husband. In April we filed as common law because we were at the time. We have had trouble ever since getting the GST credit. This coming April I should be expecting to get AIP and a temporary SIN with my OWP. We obviously will be applying as married this coming April.

So I guess my question is, should I have been filing back taxes for the US? Do I just wait to start to file taxes in the US when I file taxes here or earn income? Since I have already lived in Canada for over a year do I qualify for the foreign tax credit document for the IRS? Is it necessary for me to get my husband an ITIN for the US even though he hasn't ever worked there?

I am just so confused by all of this. I never understood taxes from one country let alone now I need to know it for two. Ahhh.... :'(
Thanks Pharoh for starting this thread though. Very informative.

 

[kelKel]

Love you're not required to file taxes in the United States if you had an income under $8900 or something close to that so you're okay. In Canada you file taxes individually but as a married person. Even if you have no income to report or tax to pay, you may be eligible for certain payments or credits. In order to receive the following payments or credits, you must file an income tax return.

 

[Love_Young]

Oh phew thanks kelKel it helps to have that information. I know I should have filed last year for taxes here but I didn't know at the time that I could or that I needed to. I plan to file a tax return this year and also file last years. I am hoping to get a temporary SIN by then but if not then I just need to get an ITN for here.

So do I just wait to file US taxes for when I start earning foreign income? So if I work next year then in 2012 is when I would file a tax return for the US and Canada, correct? This is the only part I get very confused with. You cleared up a lot for me though. Thanks a lot.

 

[kelKel]

Hmm not sure on that front. I don't think you have to file taxes in both countries only Canada once your a resident. Someone correct me if I'm wrong.

 

[YorkFactory]

Hmm not sure on that front. I don't think you have to file taxes in both countries only Canada once your a resident. Someone correct me if I'm wrong.

Sorry to be the one to say it, but...

U.S. citizens, regardless of where they reside, must file tax returns if they make more than the minimum-income threshold (which is, as far as I know, equal to the standard deduction for an individual). Generally, if you live full-time in Canada, you will end up owing no tax in the U.S. because you'll be paying at least as much tax on your Canadian return. However, you still must file a tax return in the U.S. if you're a citizen.

It's generally a good idea to file as soon as you can, because it sets the clock ticking on when you can be audited. You don't want to get a letter a few years down the line saying "Why didn't you file a 2009 tax return? Send us such-and-such information about the 2009 tax year."

 

[Kess]

I am really not looking forward to doing cross-border taxes.

My husband is from the US and we married in May of this year. He stayed living and working in the US until end of November and is here visiting (hopefully our app is processed soon). So far the plan this spring is I file my return and he files his since our income is limited to our home countries. After that, he will have to file 2 returns, one in Canada for the income he'll earn here (all dependant on our application finally being processed) and one for the US to report the money he earned and was taxed on in Canada (but not having to pay anything to the US). My fear is having to pay tax to Canada for his income he earned in the US... which shouldn't happen but I feel perpetually screwed by immigration.

 

[Love_Young]

Sorry to be the one to say it, but...

U.S. citizens, regardless of where they reside, must file tax returns if they make more than the minimum-income threshold (which is, as far as I know, equal to the standard deduction for an individual). Generally, if you live full-time in Canada, you will end up owing no tax in the U.S. because you'll be paying at least as much tax on your Canadian return. However, you still must file a tax return in the U.S. if you're a citizen.

It's generally a good idea to file as soon as you can, because it sets the clock ticking on when you can be audited. You don't want to get a letter a few years down the line saying "Why didn't you file a 2009 tax return? Send us such-and-such information about the 2009 tax year."

Can you please explain this better? Was I supposed to file a tax return in 2009 for my 2008 tax year in the US just because I earned $70... Would be nice to be notified when or if you are supposed to instead of having a chance of owing tons of money when I am already broke. Also since I have not worked since being in Canada in March 2009, do I still need to file a tax return with the US and Canada for that year? Ugh I am so confused so if you would care to explain this a bit better, I would greatly appreciate it.