Taxes for US Citizen Becoming Canadian PR Working for Canadian Company

[letbonist]

Hello,

As the title of this post suggests, I am a citizen of the United States who is currently in the process of becoming a Canadian PR. If my PR endeavors are successful, I will then be living and working in Ontario. I've done quite a bit of research on the topic of taxation on US citizens living as PRs in Canada. Could someone confirm/deny the information that my research has yielded (listed below)?

1. As a US citizen living in Canada as a PR of Canada, although I must file a US 1040 Tax Return, I will not be taxed on the income that I earned in Canada, if I paid taxes to the Canadian Revenue Agency AND I reside in Canada for 330 calendar days in 12 months. Furthermore, if I don't earn any income from/in the USA, I shouldn't have to pay anything to the IRS (ALTHOUGH I DO HAVE TO FILE ON TIME). Is this information correct?

2. As a US citizen living in Canada with US State of residence, I do not have to file or pay a State tax return (only federal). Is this correct?

3. In Canada, unlike many US States were a separate State and Federal form must be filed, citizens and residents of Canada file a single return to the Canadian government. Correct?

4. Like in the US, the Canadian government automatically takes taxes out of each of your paycheque so that I can pay throughout the year instead of a huge amount when I file? Do I have to specify this on a Canadian equivalent of a US W4?

5. Assuming my assumptions for 1-4 are correct, I could expect the following to happen in a hypothetical situation -- If I am married, living in Canada as a PR and I am a US Citizen and I make $75,000 / year in Canada, my wife makes $15,000 / year in Canada, we would expect to file taxes in Canada and in the USA. We should expect that we would pay taxes in Canada but become exempt from having to pay the US IRS because we have no US income and are living in Canada more than 330 days out of the year. Is this how this would occur?

The main purpose of this set of questions is to ensure that I don't arrive in Canada and get slammed with an extreme amount of taxes from the US IRS whilst living and working in Canada, although I don't actually have US income. Please be advised that I am 100% aware that I have to file in both countries.

 

[aptaxgroupotca]

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[keesio]

Hello,

As the title of this post suggests, I am a citizen of the United States who is currently in the process of becoming a Canadian PR. If my PR endeavors are successful, I will then be living and working in Ontario. I've done quite a bit of research on the topic of taxation on US citizens living as PRs in Canada. Could someone confirm/deny the information that my research has yielded (listed below)?

1. As a US citizen living in Canada as a PR of Canada, although I must file a US 1040 Tax Return, I will not be taxed on the income that I earned in Canada, if I paid taxes to the Canadian Revenue Agency AND I reside in Canada for 330 calendar days in 12 months. Furthermore, if I don't earn any income from/in the USA, I shouldn't have to pay anything to the IRS (ALTHOUGH I DO HAVE TO FILE ON TIME). Is this information correct?

2. As a US citizen living in Canada with US State of residence, I do not have to file or pay a State tax return (only federal). Is this correct?

3. In Canada, unlike many US States were a separate State and Federal form must be filed, citizens and residents of Canada file a single return to the Canadian government. Correct?

4. Like in the US, the Canadian government automatically takes taxes out of each of your paycheque so that I can pay throughout the year instead of a huge amount when I file? Do I have to specify this on a Canadian equivalent of a US W4?

5. Assuming my assumptions for 1-4 are correct, I could expect the following to happen in a hypothetical situation -- If I am married, living in Canada as a PR and I am a US Citizen and I make $75,000 / year in Canada, my wife makes $15,000 / year in Canada, we would expect to file taxes in Canada and in the USA. We should expect that we would pay taxes in Canada but become exempt from having to pay the US IRS because we have no US income and are living in Canada more than 330 days out of the year. Is this how this would occur?

The main purpose of this set of questions is to ensure that I don't arrive in Canada and get slammed with an extreme amount of taxes from the US IRS whilst living and working in Canada, although I don't actually have US income. Please be advised that I am 100% aware that I have to file in both countries.

1. This is (mostly) correct if you make sure to file for either the FEIE (2555) or FTC (1116) or both. The FEIE will allow you to exclude up to ~100K of foreign (to the USA) earned income from taxation. The FTC will allow you to claim credit on taxes paid to CRA to use for your US taxes. There are always a few area where it doesn't apply but for the most part you should be able to avoid double taxation. Also you may need to file the FBAR form (if your foreign accounts exceed 10K total) and 8938 form (200K EOY and 400K anytime in the year)

2. Only federal.

3. Yes, your T1 would cover federal and provincial

4. This info will show up on your T4 (Canada's version of W2)

5. Assuming both you and your wife are US citizens, yes it is likely neither of you would have to pay US taxes in most common cases.

 

[jes_ON]

1. As a US citizen living in Canada as a PR of Canada, although I must file a US 1040 Tax Return, I will not be taxed on the income that I earned in Canada, if I paid taxes to the Canadian Revenue Agency AND I reside in Canada for 330 calendar days in 12 months.

Furthermore, if I don't earn any income from/in the USA, I shouldn't have to pay anything to the IRS (ALTHOUGH I DO HAVE TO FILE ON TIME). Is this information correct?

Eh, sort of. Technically, as a US Citizen, you have tax liability on your global income, regardless of where you reside. If you meet the requirements, you are allowed to exclude the first 100K of earned income, the outcome of which for most of us is that we do not have to pay any income taxes to the U.S. Other types of "passive" income (interest/investment income, rental income) are not excluded. The alternative to the Foreign Earned Income Exclusion (FEIE) are tax credits for taxes paid to another country (this may be the better option for very high income individuals and/or those with a lot of investment income).

Yes, you have to file on time, but being outside of the USA means you get an automatic 2 month filing extension - June 15.

2. As a US citizen living in Canada with US State of residence, I do not have to file or pay a State tax return (only federal). Is this correct?

Depends on the state, and sometimes whether you are maintaining a residence there. But I've never had to do more than file the partial year resident return to the state for the year that I moved. https://www.expatistan.com/blog/35-What-Every-American-Expat-Should-Know-About-US-Expat-Taxes

3. In Canada, unlike many US States were a separate State and Federal form must be filed, citizens and residents of Canada file a single return to the Canadian government. Correct?

In Canada, the Federal and Provincial returns are combined.

4. Like in the US, the Canadian government automatically takes taxes out of each of your paycheque so that I can pay throughout the year instead of a huge amount when I file? Do I have to specify this on a Canadian equivalent of a US W4?

Yup, this is pretty much the same.

5. Assuming my assumptions for 1-4 are correct, I could expect the following to happen in a hypothetical situation -- If I am married, living in Canada as a PR and I am a US Citizen and I make $75,000 / year in Canada, my wife makes $15,000 / year in Canada, we would expect to file taxes in Canada and in the USA. We should expect that we would pay taxes in Canada but become exempt from having to pay the US IRS because we have no US income and are living in Canada more than 330 days out of the year. Is this how this would occur?

You can expect not to have to pay the IRS. However, the reason is NOT because you have no US income, but because you qualify for the Foreign Earned Income exemption, by either meeting the physical presence test or the bona fide resident test. Any income over the exclusion threshold IS taxable.

The main purpose of this set of questions is to ensure that I don't arrive in Canada and get slammed with an extreme amount of taxes from the US IRS whilst living and working in Canada, although I don't actually have US income. Please be advised that I am 100% aware that I have to file in both countries.

It shouldn't be a problem, but you will have to educate yourself about the FBAR and FATCA requirements as well.