Community

Tax question - moved in Dec?

Hi - we moved to Toronto in December and will file US taxes. But, do we need to file Canada taxes ? Is there any minimum limit of 30 days or something to determine if taxes need to be filed ? thanks for the help.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html

Per this, you’re a non resident. As a non-resident of Canada, you pay tax on income you receive from sources in Canada. If you didn’t have any income here, I don’t think you’d need to file any return this year.

Thank you for the link. I will read through it. Hopefully as a non-resident for that one month, I won’t have to file.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html#nwc

You become a resident of Canada for income tax purposes when you establish significant residential ties in Canada. You usually establish these ties on the date you arrive in Canada.

And one of them is people who have applied for or received permanent resident status from Immigration, Refugees and Citizenship Canada.

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html#p1.25

You become a factual resident as a PR holder on the date you arrive in Canada. The US Canada tax treaty also has a tiebreaker rule on it. Canada - U.S. Tie breaker rule - HTK Academy.

https://ca.rbcwealthmanagement.com/documents/1435520/1435536/Determining_your_tax_residency_status_in_Canada_05172018_email.pdf/9ff73a9f-af5c-4cb4-8860-070050ac23e0 has a lot of details as well

Do you have to file a return? - Canada.ca can be used to figure out if you have to file a return.

As a resident of Canada, you have other obligations, such as reporting any foreign accounts costing > $100000 CAD. Do You Need to Declare Income Earned From Sources Beyond Canada? | 2021 TurboTax® Canada Tips.

So this becomes a complex topic overall.

For Canadian purposes, if you are a Canadian resident, your tax jurisdiction is deemed to be the location where you were domiciled on December 31st of the year in question. Most likely you will need to file both US and Canadian returns (And state and provincial returns depending on which state/province is involved) and apply for the tax offset credit. This can become quite complex. Suggest you use a good tax specialist who understands US/Canada cross border complications.

Thank you @ragmehos @hslawd. This seems quite complicated. Would you have any suggestions for good tax consultants ?

I’m a Canadian CPA with considerable international tax experience, (Although I don’t specialize in personal income tax), but I wouldn’t dream of doing my own personal return under these circumstances. There are far too many permutations and pitfalls involved … and there are differences depending on which province you reside in. Bite the bullet and give your personal return to a qualified international personal income tax professional. The potential cost of doing it wrong is significant. It can be difficult to evaluate just who is qualified to handle this matter because most tax services will claim to know all about the convoluted regulations governing cross border transactions … but they don’t. Go to one of the big four firms (Deloitte, KPMG, Ernst & Young, PWC), or at least to the next tier, BDO or Grant Thornton for example. It may cost you more, but you may save money in the end, and you’ll dodge the bullet of unintended consequences. It’s unwise attempt this yourself.

It’s definitely a good idea to consult with a professional if you’re in doubt about your tax situation. That said if you don’t have any Canadian income for the year then your tax situation is rather simple.

Here’s the tax treaty between Canada and the USA

  1. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
  • (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both States or in neither State, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
  • (b) if the Contracting State in which he has his centre of vital interests cannot be determined, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
  • © if he has an habitual abode in both States or in neither State, he shall be deemed to be a resident of the Contracting State of which he is a citizen; and
  • (d) if he is a citizen of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

Based on this and the information that you’ve provided it seems that you are a US resident for the year for tax purposes and not a Canadian resident for tax purposes and should file taxes in America for the year and start filing Canadian taxes starting the next year.

1 Like