I’m having some trouble setting up a file for a part year residency. Clients (parents plus kids) emigrated to the US late in the year. Both parents worked in Canada until they moved, and they had a rental property in the US while living here. He moved 1.5 months before her and the kids. Husband worked in the US after moving there. Wife did not work in the US after moving there.
Therefore, both have to report their employment income in Canada on part year return.
Both report their share of the rental income to date of departure.
After moving to the US, their only income from Canada was bank interest, which would be exempt under treaty.
Because less than 90% of husband’s income was from Canada, his personal amounts should be prorated based on time.
Because 100% (more than 90%) of wife’s income is from Canada, she’s entitled to full personal amounts.
I’m confused as to how to properly set up the residency section of the personal info screen. It seems to work properly with respect to personal amounts if I choose “Resident” under “Residency status” and the province as “Province / territory of residence on December 31, 2018”. However, the latter response doesn’t seem to be correct. As of Dec 31, they were actually non-residents. Am I setting it up correctly? Intuitively, I would choose “Non-Resident” as of December 31st, and have some other place to indicate province of residence prior to emigration.
Both have to report 100% of WORLD WIDE income from 01 January until tax emigration date. (bearing in mind treaty provisions). From your presented facts, they were tax RESIDENT for that period.
You don’t mention the day the IRS has the family recorded as the first day of Tax residency in the USA. Do you have a draft copy of their USA tax return to verify? (which they must have done already, since due date is 15 April).
This confuses my junior assistants as well. You set them up as resident as of whatever province they were in before they left. Enter a date of departure - the return is for a resident as of the period covered in the return which is January 1 to date of departure not Dec 31st. Note that the date of departure for both of them is the later date of when everybody was down in the US not two different dates for the two people 1.5 months apart. My junior assistants intuitively want to put non-resident also since they are at Dec 31st but if you do that some of the calculations don’t work. You only put non-resident if they are non-resident for the period covered by the return i.e a non-resident rental or sale of real estate or pension income if can claim personal tax credits as no other world wide income as a non-resident (S115, S216 or S217 returns)
It would be very good to have a form or workflow component for residency with particular emphasis on citizenship, dates of departure from and reentry to Canada with a multi-year continuity or history.
This could be addressed more fully next tax season and notionally on this tax season with a notes area for Citizenship (dual/triple), date and country of departure, date and country of entry, type of entry - visitor, student, temporary work, immigrant, sponsored.
Needs to be fleshed out more outside of this tax season.
The subject of dates is an important and relevant topic not only for Canadian Residency but for USA tax filing requirements in addition to residency rule for students, snowbirds, vacation property owners, and dual citizens.
The number of days have to be tracked over a number of years for the USA.
I have a bunch of slides and notes on this topic which I can unearth in May.
Thanks for all the comments. A few follow up notes.
They’re US citizens, so all worldwide income for the entire year taxed in the US as well (we just filed that today - I do those too).
Their only income after emigration was his employment income in the US, a small bit of interest (<$20) in Canadian bank accounts, and one month of net rental income (maybe $200).
I did use the different emigration dates. Although in the past, I’ve always taken the position that they have to be one or the other as a family, but after talking with a senior agent at CRA this year, I’ve changed my position with respect to the actual immigration / emigration date. He explained that they frequently see different dates for each spouse and have no issues with it. Although rare, they can have different dates. Applying the residency paragraph in the treaty doesn’t provide a clear cut solution when home and family members in both countries. During the 1.5 months they owned a home in both countries, had bank accounts in both countries, family members in both countries, etc…
p.s. US deadline is June 15 for citizens living and working outside US. Their deadline was today since they live in the US now. The rest of my US clients shall wait until May.
Oh … and I did figure out to use the province as the Province of Residency and Resident as the status, with the respective emigration dates. All calculations were done correctly.
