Unsure whether mistake has been made on my tax return

[JohnBhoy]

Hi there, just looking for some advice on my 2011 tax refund.

I was resident in Canada from August 2009 until August 2011. When I completed my tax return for 2011, I only included what I earned worldwide up until my departure in August. The tax software I used indicated a refund of approximately $1300. After filing I was contacted by the CRA, who advised I had to complete a form detailing my worldwide income for all of 2011. I filled out this form advising that I had been paid about $5000 since I had returned to the UK (and no other worldwide income for the period I was resident in Canada). I explained in a letter that I did not feel that this could be taxed as I was deemed a non-resident when I left in August. I have now received my rebate, which if for just under $500.
Using an online tax calculator, my rebate would be about right had all the money been earned whilst I was a resident of Canada. I was just wondering if the CRA have the right to tax my income for the months of September-December 2011, when I was no longer a resident of Canada.

Any advice would be greatly appreciated.

John

 

[seton]

Technically yes - if you are deemed a Canadian resident, then you're a resident for the entire year. Your entire worldwide income for 2011 must be declared on your Canadian return and subject to Canadian taxation. However, did you have any tax withheld on your UK income? If so, you can claim foreign tax credits for these amount to reduce the taxes you owed to the CRA.

 

[JohnBhoy]

Many thanks for the quick reply Seton. I feel much better now knowing that.

 

[Jonboy]

Technically yes - if you are deemed a Canadian resident, then you're a resident for the entire year. Your entire worldwide income for 2011 must be declared on your Canadian return and subject to Canadian taxation. However, did you have any tax withheld on your UK income? If so, you can claim foreign tax credits for these amount to reduce the taxes you owed to the CRA.

I don't agree. From the information provided the OP was a factual resident up to August 2011 therefore he cannot be a deemed resident for the year. The question is did he cease to be a factual resident in August 2011. If so, then he is only taxed on world-wide earnings up to August 2011. If he did not cease to be a tax resident in August 2011 then the CRA have correctly assessed his foreign earnings.

If the OP has permanently left Canada he should complete and file a NR73 http://www.cra-arc.gc.ca/E/pbg/tf/nr73/README.html and a T1 Adjustment form.

 

[seton]

I don't agree. From the information provided the OP was a factual resident up to August 2011 therefore he cannot be a deemed resident for the year. The question is did he cease to be a factual resident in August 2011. If so, then he is only taxed on world-wide earnings up to August 2011. If he did not cease to be a tax resident in August 2011 then the CRA have correctly assessed his foreign earnings.

I agree this is technically true, but to pass the CRA test for a mid-year non-residency determination is a different matter. To become a non-resident midyear, the CRA often looks for things like asset disposals. This has known to be very difficult, with sometimes a 6-24 month period thereafter where the CRA can still deem you a resident. It should be noted though that with the tax treaties between the UK and Canada, either way your net tax burden is unlikely to be significantly differenT.