# Tax questions from returning Canadian citizen, long time US resident



## longAbsentCanadian_ (Jan 24, 2011)

I am looking for information, advice, and any resources to help me figure out taxes for my situation.

My situation: I am a Canadian citizen, but have not lived in Canada since i was very young, and have been a US resident(green card holder) for many years, and have only ever worked/filed tax returns in the US. I married a Canadian last year, and officially filed as a returning Canadian citizen/resident in October, 2010, now living in British Columbia. I continue to work for the same US based company(my job allows me to work remotely). For the first 9 months of last year i was paid with normal US taxes witholding(for which i will soon receive my W2), and for the last 3 months of the year(since i moved to Canada officially) the company has just been mailing me cheques(in US dollars) with no witholding. I still have a US based bank account, and a US brokerage account with a couple of holdings that, once i liquidate, will be a big net Capital Loss.

Having done some searching to try and figure out the tax implications of my situation, most of the information seems tailored for people with a slightly different situation(like US citizens coming to live in Canada). It seems the wise counsel is to find a good accountant with experience in cross border work. I'm not sure how to identify a "good" accountant however, and ideally i'd like to avoid paying thousands of dollars for the service(which it seems likely some of the more reputable ones would run). I can understand if there were lots of financial pieces to deal with(401ks, IRAs, homes/mortgages, etc), but all i have is a regular chequing/savings account, and a couple of equity holdings in a brokerage account that, when sold, will be a capital loss.

So a few specific questions i have:

1) What order would i need to file my tax returns in? I assume it would be Canadian first, then the US return second, as i'm under the impression that i need to note the earnings/taxes paid while in Canada on my US return. Does Canada not care that my US earnings be posted on my Canadian return?

2) How do i determine the canadian dollar value of my earnings, being as my cheques are in US dollars? Is it based on the exchange rate on the day i deposit it? Or the day that the cheque was issued? Or the average exchange rate over the entire course of the time i was working in Canada that year?

3) Any potential laws that i need to be aware of that could cause great financial pain/inconvenience, especially regarding having foreign accounts, etc? I've read some things, like US citizens needing to report their accounts in other countries above a certain $ value. Not being a US citizen(just a resident whose residency will lapse soon), i'm hoping i'm not subject to such things.

Any resources people could suggest, or advice to help me figure out my best course of action would be greatly appreciated.


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## CanadianCapitalist (Mar 31, 2009)

Check out the thread on Moving back to Canada after a long absence.


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## Karen (Jul 24, 2010)

As the widow of an American citizen who moved to Canada in 2005 to marry me, I know that your situation is more complicated than you may realize. I understand that you are not an American citizen, but many of the tax rules also apply to US green card holders now resident in Canada too. If I were you, I would seek an expert to advise you, at least for the first year. It will be well worth the cost as the consequences of not doing things properly can be very costly.

I think I know the answers to most of your questions, but I'm only going to answer those that I'm certain of or at least note when I'm not certain. I don't want to take any chance of misleading you because the consequences of doing things incorrectly can be extremely serious.

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1) What order would i need to file my tax returns in? I assume it would be Canadian first, then the US return second, as i'm under the impression that i need to note the earnings/taxes paid while in Canada on my US return. Does Canada not care that my US earnings be posted on my Canadian return?

Click to expand...

_I can't be certain of the answer to the first part of your question, although I think you would file with the IRS first since the US is the source of your income; also you would need to do your US return before your Canadian so you would know the amount to claim as a foreign tax credit on your Canadian return. My husband always prepared the US return first as all his income was from US pensions and an annuity. But I do know that both the US and Canada require that you report world-wide income on your tax returns so, yes, Canada does care that your US earnings be posted on your Canadian return. You would then claim a foreign tax credit on the amount you paid to the IRS so you will not be subject to double taxation.

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2) How do i determine the canadian dollar value of my earnings, being as my cheques are in US dollars? Is it based on the exchange rate on the day i deposit it? Or the day that the cheque was issued? Or the average exchange rate over the entire course of the time i was working in Canada that year?

Click to expand...

_You have a choice of using the date that the payment was made (sorry - I don't know if it's the date the cheque was issued or the day it was received or deposited) or using an average rate for the year which is set by CRA. I don't know whether that rate has been posted by CRA yet, but I'll try to find it and let you know if I can. We always used the average as we never remembered to keep track of the exchange rates for the individual deposits.



> _3) Any potential laws that i need to be aware of that could cause great financial pain/inconvenience, especially regarding having foreign accounts, etc? I've read some things, like US citizens needing to report their accounts in other countries above a certain $ value. Not being a US citizen(just a resident whose residency will lapse soon), i'm hoping i'm not subject to such things._


Yes, there are and this is the main reason I think you need professional help. The U.S. law requiring reporting of foreign bank accounts applies to green card holders as well as citizens so, unless your green-card is no longer valid, you are subject to filing a Form TD F 90-22.1 annually with the US Department of Treasury. This would apply to you if the total of all your bank accounts exceeds $10,000 (including joint accounts). The penalties for not filing are very severe (a minimum of $10,000 per account rising to a maximum of $100,000 per account and up to ten years in prison). In recent years the US has started enforcing this requirement more strictly; our tax preparer recently had a new client come to him who was 105 years old and had had to pay a $10,000 penalty because she was unaware of this requirement.

I believe there are other requirements too, particularly regarding your investments, but I'm not knowledgable about them because they didn't apply to my husband who had no investments and was retired before he moved to Canada. My husband's tax returns were simple; he just reported his US pensions and his annuity payments on both tax returns and then claimed the foreign tax credit on his Canadian return. 

I understand and sympathize with your reluctance to pay an accountant with expertise in US/Canada tax laws; I know it is ridiculously expensive, but I can't stress strongly enough that it is worthwhile. The problem is that there are very few people who are qualified, even though there are lots who think they are, so you really have to do some research before you choose someone. I could give you the name of the person we used, since you're in B.C., but I don't know whether it is allowed on the forum (can someone let me know, please.) He's a bit of a character, but he is recognized as being extremely knowledgable and I recommend him highly. (MoneyGal indicated in another post that she knows of him and thinks highly of him, so perhaps the powers-that-be on the forum will allow me to mention his name and how to contact him.

At the risk of sounding like a broken record, since I've mentioned this several times before on this forum, I recommend a book called "The American in Canada - Real Life Tax and Financial Insights into Moving to and Living in Canada" by Brian D. Wruk and Terry F. Ritchie.


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## Karen (Jul 24, 2010)

I just checked the Bank of Canada website. They are showing the average 2010 exchange rate for US to Canadian dollars as 1.02993904.


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## MoneyGal (Apr 24, 2009)

Karen is talking about David Ingram (I don't know why we would not be able to identify him!). He is absolutely the first place I'd go in your shoes. Even browsing through his extremely extensive e-mail archives on his web site would be a great start. 

(Note - I just checked that link and it is "down for maintenance." However, I have used it for years.)


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## Karen (Jul 24, 2010)

Thanks MoneyGal. I hope David's okay - I used to receive his e-mailed newsletters frequently, but they only come occasionally now, and he mentioned in a recent one that he had been having cancer treatment. There have been a couple more newsletters since then but no more mention of the cancer. If I hear anything more, I'll let you know.


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