US and Canada Dual taxation in Restricted Stock Units

[rammy]

I used to Live in the USA till June 2021 before moving to Canada. I am not a USA citizen but have SSN. I was on an H-1B visa in the USA (Seattle, WA) and also on a visa in Canada(Vancouver, BC). I got employer granted Restricted Stock Units (RSUs in USD) in the USA as part of my compensation, some of which got vested in October 2021 after I relocated to Canada. I selected "Sell to Cover taxes" for my vests with the broker. I noticed both the USA(Federal tax) and Canadian(Federal + Provincial) Governments withdrew taxes from my vest. My brokerage farm has my W-9 attached.
I believe Canada and US have tax treaties to avoid dual taxation. This year I need to file taxes in both USA and Canada. 
1. Does your product support my situation and help me file my taxes in both countries?
2. Can I expect to get back some money from dual taxation? 

3. Should I file W8-BEN instead of W-8 with the brokerage firm? Will that help from next time onwards?

[DaveF1006]

To clarify, how long did you live in the US and at the time you were on H1B visa, were you an exempt individual? Also, please give the dates you were in the US.

[rammy]

I was in the USA from 01/11/2017 till 06/15/2021, I was not tax-exempt during my time in the USA as H1-B.

[DaveF1006]

@rammy  According to Irs.gov, you are a dual status taxpayer when when you have been both a U.S. resident alien and a nonresident alien in the same tax year. For the part of the year you are a U.S. resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien. For the part of the year you are a nonresident alien, you are taxed on income from U.S. sources only.

For your question, the RSU are taxed when they are vested on October 2021. This is when you are a non-resident and Canadian Citizen. Not during the time you spent as a resident alien, which ended in June of 2021. So here is how you will file.

1. You will report all income earned from 01/01/2021 thru 06/21 as a resident alien. This can be done in the Turbo Tax program.
2. From, 06/21 forward, you will file as a nonresident alien that cannot be reported in the Turbo Tax program. We have an affiliate called sprintax that accomplishes this feat. You will need to file a nonresident return because of the RSU vesting that occurred in Oct, 2021, from a US source. If you pay taxes in both countries on this, you may be expected to receive a foreign tax credit for the taxes paid to Canada, since we do have a treaty.  Contact sprint tax for further details.
3. For you Canadian return, we do have Turbo Tax Canada that you can file with but it is separate from our program since the tax codes between countries are much different. 
4. Yes, I would suggest you file a W8-BEN with the brokerage firm because according to this IRS link, you are a foreign person and you are the beneficial owner of an amount subject to withholding.

[DaveF1006]

@rammy  According to Irs.gov, you are a dual status taxpayer when when you have been both a U.S. resident alien and a nonresident alien in the same tax year. For the part of the year you are a U.S. resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien. For the part of the year you are a nonresident alien, you are taxed on income from U.S. sources only.

For your question, the RSU are taxed when they are vested on October 2021. This is when you are a non-resident and Canadian Citizen. Not during the time you spent as a resident alien, which ended in June of 2021. So here is how you will file.

1. You will report all income earned from 01/01/2021 thru 06/21 as a resident alien. This can be done in the Turbo Tax program.
2. From, 06/21 forward, you will file as a nonresident alien that cannot be reported in the Turbo Tax program. We have an affiliate called sprintax that accomplishes this feat. You will need to file a nonresident return because of the RSU vesting that occurred in Oct, 2021, from a US source. If you pay taxes in both countries on this, you may be expected to receive a foreign tax credit for the taxes paid to Canada, since we do have a treaty.  Contact sprint tax for further details.
3. For you Canadian return, we do have Turbo Tax Canada that you can file with but it is separate from our program since the tax codes between countries are much different. 
4. Yes, I would suggest you file a W8-BEN with the brokerage firm because according to this IRS link, you are a foreign person and you are the beneficial owner of an amount subject to withholding.

[ustoca]

A year too late, but what did you end up doing for figuring this out?

Regarding #2 and #3 ...

I am not an expert and cannot give formal advice, but my understanding is this:

1. The amount of income realized from RSU grants is the market value on the date of vest
2. The portion of that income is split between countries based on the number of days between grant and vest spent in each country
3. Some foreign payroll systems (e.g. tech companies like Microsoft and Google) do not support or decline to implement reduced withholding in Canada to account for claiming of foreign tax credits
4. As this is a payroll function, filing forms with a brokerage probably won't help
5. RSU income is reported as full wage income in both the US and Canada and is later claimed back using foreign tax credits
6. Canadian and US returns require numbers from each other for computing foreign tax credits to avoid double taxation
7. The US allows claiming "accrued" taxes (owed but perhaps not yet paid), and this allows bootstrapping the process between Canadian and US returns
8. Any provincial foreign tax credit appears to be 0 if the full amount of foreign taxes paid is deductible on federal taxes (my understanding of CRA form T2036) [1]

Because of #8, the extra withholding for provincial taxes--which appear to be double-tax foreign-sourced RSU income--helps keep you "on the right side" of tax liability, paying too much tax rather than too little.

It's also worth noting that truing-up actual taxes paid after any negotiating, adjustments, and actual filings needs to be done for any "substantial" difference from original numbers.  For the US I believe this is amending your return to match up actual Canadian taxes paid relative to the estimate used during initial filing for Canadian taxes estimated to have "accrued" up until that filing.

[1] from CRA form T2036: "If the amount of the federal foreign non-business income tax credit you are entitled to deduct is equal to the foreign non-business tax you paid, your provincial or territorial foreign tax credit would be zero."