Tax filing when moving to Canada

[azadnaik]

I was working in the US on Stem opt (F1 Visa) and moved to Canada (for work in same company) after my visa expired in October 2019. I also have a wife who is on dependent visa (F2) and a kid who is US citizen. My question is what all forms do I need to file. Last year I was in US throughout the year and I filed 1040 form with “married filing jointly” and adding kid as a dependent. But I’m not sure how tax filing would work this year since I’m resident alien till October 2019 and then no longer staying in US from November to December.

[mesquitebean]

@pk Are you able to assist here when you are next in the forum?   Thanks!

[pk]

@azadnaik , first a few questions -- (a) when did you enter the USA  under F-1  ( from your post it appears that you have already completed five calendar years  -- is that so ? );   ( b) should I assume that you and your wife are both  from the same country ?    (c) your child , I assume was born in the USA -- is (s)he  on US passport;  (d) which country are you  and your wife from;  (e) your OPT employer  is a US entity or a Canadian entity;  (f) your OPT employer gave you a W-2 for 2018 and  is that what you expect for 2019; (g) are you becoming a resident of Canada or just being temporarily transferred to Canada by the  OPT employer;  (h) when you moved to Canada, did you terminate  your F-1  ( extension ? )  or asked for an extension ?   Please answer these questions  so I can answer your query--please 

[azadnaik]

@pk Here are the answers:

a) yes I already completed 5 yrs. I entered US on F1 in August 2011.

b) yes, we are both from same country.

c) yes, she is on USA passport

d) India

e) Its a US entity

f) yes

g) temporarily transferred to canada by US employer

h) I’ve used up all my OPT (1+2year extension) so basically its completed. And I no longer have F1 status.

Let me know if you need any further details.

[pk]

@azadnaik  thank you for your answers to my questions.

What I understand from your response is that you are  either 

 (a)   on  H-1B , employed by US employer and temporarily  ( short and with definite ending) working in Canada for the same employer.   In such a case  generally you will file your US tax return  as usual i.e. world income ( including any income paid in Canada, perhaps taxed by Canada ), Married Filing Joint, child as dependent, foreign tax credit eligible for any taxes paid to Canada  -- form 1666.  You probably also have to file Canadian income tax -- both of these filings are supported by TurboTax

 or 

(b) awaiting H-1 B  allocation / adjustment till early 2020 and staying / working in Canada for the same employer. In this  case , above suggestions ( under para (a)  ) should apply.

If the above scenarios  do not apply to you , then when you leave USA soil  you may be treated as a Non-Resident Alien  and there may be no requirement to report any foreign income on your 2019 return  { since your US sourced income stopped once you left the US soil}.   Perhaps I am misunderstanding your situation -- please elucidate

Salam aliqum, Naik ji 

[azadnaik]

Neither of the scenario that you mentioned is true for me. I was working on F1 after I graduated and I left the country after I used up my STEM OPT (1 yr) + Extension (additional 2 yrs) and moved to Canada. In b/w I applied for H1B but it was not selected in the lottery so I've no option but to leave the country when my F1 status ends since I'm out of status now. So I was in F1 status (working) till October 2019 and then moved to Canada For November and December 2019 since I'm out of status to stay in US.

Let me know if you need any additional details.   

[pk]

For US tax purposes your immigration status in Canada is not important ( except for US-Canada  tax treaty conditions-- which I suspect does not apply here ).  So , you have moved to Canada, continuing to work for US entity ( remotely ? ), your v=US visa has expired as of end of October 2019.   On this basis , you will need to file  as a dual status  tax payer --- resident alien for tax purposes  ( Jan 1st. thru Oct. 31st -- the day your visa expired and/or you left the country ) and Non-Resident Alien for the last two months of the year.  Note that if the work is physically done in Canada even though the US entity is paying for it , it generally would not be US sourced earning i.e. US cannot tax it ( active  income generally is taxable only in the country where the work is being done).  So as I see it your 1040 covering the US presence period  can be prepared  using TurboTax while  the Non-Resident Alien period ( Nov and Dec 2019) needs to be reported to Canadian authorities--- assuming here that you are a Canadian resident for the period.  1040-NR ( not supported by  TurboTax) may be required  if ,and only if, you have US income during this period.

I am not clear  and really not qualified to comment on how Canada would treat these two months of income, for work completed in Canada by a visitor ( ??)  -- for a resident or citizen clearly Canada will tax this income.  Need more information on your Canadian immigration / visa status.  Perhaps you should consult a local tax professional.  Are you a visitor in Canada or with work permit in Canada ?

In such a situation , you also would not come under the ambit of US-India tax treaty ( because you a resident of Canada at the time ). 

[azadnaik]

Thanks @pk  To answer your question: I've work permit in Canada and I will consult some tax professionals for taking care of taxes on Canada side.

Only things that I'm not sure about is when I fill 1040 for period (Jan-Oct) Do I need to file as married filing separately? or should I file as usual married filing jointly? Also, How would this work for 1040NR for period Nov-Dec?

[pk]

@azadnaik  for US purposes  and covering the period Jan - Oct 2019, both you and  your wife were in the  USA with legal visa status, therefore  you file as Married Filing Joint and with a dependent child ( US citizen),  using form 1040  ( supported by TurboTax).  Since becomes a short year , you have two options on filing---  (a) Prepare the 1040 as described above - covering  world earnings for the period  Jan thru Oct, print, sign ( both you and your wife ), write across the top of first page  " Dual Status Filer", then go to the IRS download  form 1040-NR and any schedules needed-- it is  .pdf -- fill it out sign, date ;  attach the  two filings together and mail this in.  This is true even if you did not have any US sourced  income during the period  Nov-Dec.   OR  (b)   prepare  and file only the form 1040 covering income Jan thru Oct and efile -- this is true  if ,and only if , you had no US sourced income  ( wages  from US while working in the USA, interest , divided income attributable to the period).

For a purist option (a) is the way to go, however option (b) results in faster processing, less paperwork and generally meets the legal requirements.  If in doubt , please follow option (a)

Hope this clarifies your situation.  Please welcome to ask for more if you need help.

Namaste ji 

[azadnaik]

It looks like I may have mistaken something but link here (https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens) tells me that you cannot file married filing jointly. Did I miss something?

[pk]

No,  that rule is  true for all Non-Resident Alien filers ( for 1040-NR ) -- allowing ONLY Married  or Single  status.   But in your case , and if you plan to file as Dual Status filer, then your  1040 still needs to show Married Filing Joint or Married Filing Separate while the 1040-NR shows only Married.   Did you have income from US sources while being a resident of Canada?   Just to be sure , your wages from the US entity while  residing in Canada is not US sourced income  for purposes of US federal or State tax  -- this is  because  (a) most tax authorities are based on residency while US is citizenship based; (b) Tax treaties generally allow only the resident country to tax the income and (c) IRS recognizes  this   and exercises the citizenship  based world income ONLY for US citizen/Residents ( GreenCard )/Resident for tax purposes.  Your Nov-Dec earnings therefore cannot be taxed by the USA.   Thus, absent any other information, I am assuming that the 1040-NR would be blank and filed just for completeness.  Yes ?

Note however, if you receive wages/payments from the US entity for earlier work performed  ( delayed payment ) i.e. earlier to your departure from the USA, that amount would still be taxable ONLY in the USA -- don't know how India would treat this , though.

What am I missing here ?