Moved from Canada to the US - Dual Status? File a Joint Return?

[aradwan2]

I wish I get your help! Here is my situation;

From Jan1, 2021 to October 17, 2021:

I was working in the US on H1B but living in Canada (Canada-US Commuter). 

From October 18, 2021 till December 31, 2021:

Still working in the US on H1B but moved to the US and still in the US through 2022. 

Throughout 2021 I have been with my wife who moved with me to the US. 

The household income is my US income only. 

Now, my questions are:

1- Can I apply for extension to satisfy the dual status requirements for both of myself and my wife?

2- Can we then (I and my wife) choose to be treated as residents for the entire 2021 year?? then we can file 1040 jointly. If so, how? 

3- If 2 can happen and we would be treated as a US residents, should I pay taxes back to Canada for 1/1-10/17 period which is now claimed to be a US residence? 

Thank you all for your help!!

[DianeW777 · Accepted solution]

The answers to your questions follow.   First, let's review the Dual Status: 

• You are a dual-status alien when you have been both a U.S. resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident. The most common dual-status tax years are the years of arrival and departure.

1- Can I apply for extension to satisfy the dual status requirements for both of myself and my wife?

• Yes. You can get an automatic extension of time to file until October 15 by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, on or before April 15, 2022. TurboTax will have this form available for paper filing now.

2- Can we then (I and my wife) choose to be treated as residents for the entire 2021 year?? then we can file 1040 jointly. If so, how? 

• Yes, you can make that choice. A dual-status alien who is married to a U.S. citizen or a resident alien may elect to file a joint return with his or her spouse. This means you are eligible to file jointly if you choose.  

If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.

• You were a nonresident alien at the beginning of the year.

• You are a resident alien or U.S. citizen at the end of the year.

• You are married to a U.S. citizen or resident alien at the end of the year.

• Your spouse joins you in making the choice.

  • See IRS Publication 519

3- If 2 can happen and we would be treated as a US residents, should I pay taxes back to Canada for 1/1-10/17 period which is now claimed to be a US residence? 

• Yes, assuming this is a requirement under Canadian tax law.  You could take a foreign tax credit (Form 1116) on the US return for taxes paid to another country on the same income.  Be sure to know the tax liability amount on your Canadian return (not refund or balance due), for your US return, Form 1040.  Attach a copy of your Canadian return to your US Form 1040.

Caution: You and your spouse and each dependent must have either a Social Security Number or an Individual Taxpayer Identification Number to be claimed as a dependent.  If you need to apply for an ITIN for your spouse (and dependent(s) if applicable) you must file Form W-7 with your tax return.  In this situation your tax return must be filed by mail.

Resident at end of year (and you are filing as a part year resident). You must file Form 1040 or 1040-SR if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write “Dual-Status Return” across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040-NR as the statement, but be sure to write “Dual-Status Statement” across the top,

[aradwan2]

Thank you so much for responding back very quickly. I appreciate your help!

Just a follow up question:

If I and my wife will be treated as US residents for the entire 2021 tax year and submit 1040, then I see from TurboTax that I will get tax credit back. Should this tax credit $ be then reported to Canada Revenue? This means that I have actually paid "less" tax for 2021 in the US than what is reported on W-2 and so Canada Revenue might incur an income tax debit on this $ refund (because I was Canadian resident for 10 month in 2021). Is my understanding correct?

Thank you, for the great help!

[ErnieS0]

No. You do not have to report the US tax credit to Canada. Form 1116 allows you to claim a credit for your US tax return (Form 1040) for income tax paid to Canada on the same income.

Since you were a Canadian resident for 10 months, you will still have to file and pay tax to Revenue Canada for the time you were a Canadian resident. This income was double taxed, which is why you can claim a tax credit on the US return.

You can contact TurboTax Canada at Contact Us for help with your Canadian tax questions.

[aradwan2]

Thank you ErnieS0 for your response. 

The point is that I will use W-2 to report my income and paid US tax to Canada Revenue before their due date in April. If I do so, I won't probably pay any income tax to Canada Revenue because of the withheld income tax amounts on W-2 which paid to the US.

Now, if I will do extension and apply to IRS as a resident for the full 2021 year this will be definitely after April (after filing tax to Canada Revenue). Most of the tax withheld amounts on W-2 will be then refunded by IRS because we will be treated as residents filing jointly. 

Then, should I report those refunded credits to Canada Revenue because I would have actually paid less tax to IRS than I have originally reported?

Sorry for asking many questions but I am really confused. I appreciate your help!!

[ErnieS0]

If I understand your question correctly, you will file your Canadian return based upon US tax withholding, but not tax actually paid, since you will file a US extension and therefore not file a Form 1040 until after April.

The actual US tax liability will be less than the amount claimed on the Canadian return. I am not a Canadian tax expert but you would have to amend your Canadian return if the amounts reported change.

[aradwan2]

I agree, yes, that makes sense. Thank you all for your help!!