Moving from USA to Canada: Resident status for tax purpose

1

Hello Everyone,
I move from the USA (California) to Canada (Ontario) in October 2021 on a work permit. I am filling personal tax credit return form for my company.
I am confused about my residency status for the year 2021. Since I moved in early October, I will be spending only three months in Canada for the current financial year. Am I resident or non-resident for tax purposes?

I am assuming that the “personal tax credit return form” is like W4 in the USA and it’s a declaration to compute my tax deductions from my paycheck.
I will consult a CPA while filing tax but, I would like to hear your thoughts on this.
Do I need to file taxes in both the USA and Canada?
What will be my residency status for the current year?

Thanks In Advance!

2

I also moved from the bay area to Ottawa November of last year. I submitted my personal tax credit return forms as a non-resident of Canada. And yes, ideally you need to fill both your US and Canada tax return next year because you would still be adding all your Canadian income in your US tax return, and will have to report already paid taxes in Canada to avoid double taxation.

3

Hi guys, @RohsOttawa @ggsrivas

We are in same boat. We moved in Oct 2021 from US to Canada and after reading and doing my research,

  1. My understanding is we are considered resident of US and non resident for Canada. Hence, we should mention our status as non resident on personal tax form i.e. TD1 to our employer. To add, we are work permit holders in Canada. Please correct if I am wrong.

  2. We must file US taxes as resident and Canada as non resident. Does that mean we have to show Canadian income added to US income? What do we need to do to avoid double taxation.

  3. In this case, we should file Canada taxes first and then US, right?

Kindly advise guys.

Thanks

4

Hi Neha,

You are correct. I also followed the same approach.
If we are filing US tax return as resident, we have to add our Canadian income and any other worldwide income as well as taxes paid already. For that, you can use Form 1116 (Foreign tax credit) to avoid double taxation.

Hope this helps.

Thanks,
Rohit

5

Thanks Guys. Your advice seems correct and helpful.

7

Hi Guys, @RohsOttawa @Nehag1985 @ggsrivas

I’m also on the same bot now. I am moving to Canada next month from the US, and my new job starts on September 18, 2023. I am filling out the TD1 form for my employer and I have doubts about the below section:

For non-resident only (Tick the box that applies to you.)
As a non-resident, will 90% or more of your world income be included in determining your taxable income earned in Canada in 2023?
Yes (Fill out the previous page.)
No (Enter “0” on line 13, and do not fill in lines 2 to 12 as you are not entitled to the personal tax credits.)

  1. I am considered a non-resident for tax purposes as I did not stay in Canada for at least 183 days in the tax year 2023 correct?

I did not fully understand the question: As a non-resident, will 90% or more of your world income be included in determining your taxable income earned in Canada in 2023?

  1. What checkbox do I have to select below?
    Yes (Fill out the previous page.)
    No (Enter “0” on line 13, and do not fill in lines 2 to 12 as you are not entitled to the personal tax
    credits.)

Please suggest.

8

Yes, you are considered as a non-resident in Canada for tax purposes this year.

Ideally speaking, the TD1 form should be filled as ‘No’ to your question. I checked my forms back from 2020 and somehow I have filled it as Yes, and I don’t recall the reason why.

Try calling a couple of CPAs and asking them about the same.

1 Like
9

Thank you. I called the CRA agent and explained my situation and she confirmed that I would still be considered a tax resident for the current year as I am permanently moving to Canada this year.