Discussion:W-2 FROM CANADA & US

THANKS

Usually, we file these types of taxpayers as part-year (dual status in the U.S.) residents of each country. She would report world income to Canada until AUgust 1, 2007 and world income to U.S. for the rest of the year. In New York, she would also file as a part year resident. If she does not have 183 days in the U.S. during the year, or meet the closer connection test, she may file as a nonresident in the U.S. for 2007.

Usually, we file these types of taxpayers as part-year (dual status in the U.S.) residents of each country. She would report world income to Canada until AUgust 1, 2007 and world income to U.S. for the rest of the year. In New York, she would also file as a part year resident. If she does not have 183 days in the U.S. during the year, or meet the closer connection test, she may file as a nonresident in the U.S. for 2007.

income was 15,000 for last five months, then I would file Canadian return (part-year) on 35,000 of income and file nonresident US form on 35,000 for part-year remaining 5 months

Does she have an RRSP?

Have you reviewed if she could file as a NYC nonpresident?

Have you reviewed if a 7701(b)(4) election would save money?

NY defines a resident as a person who is either domiciled in NY, or domiciled elsewhere but who maintains a permanent place of abode and spends more than 183 days of the taxable year in NY. A place of abode, whether owned or rented, is not "permanent" if it is maintained only "during a temporary stay for the accomplishment of a particular purpose." So, if she remains in NY through all of 2008, she will continue to be a nonresident if her presence is temporary and for the purpose of accomplishing a particular purpose, such as fulfilling a contract. If her teaching job is not temporary, but open-ended, even though she is on a temporary visa she may be considered a NY resident. There are a number of cases in NY where individuals on H-1B visas were held to be residents for tax purposes.

A resident is taxed on all, worldwide, income, which would include interest or dividends from Canadian accounts or payers. A nonresident is taxed only on income from NY sources. Income from intangible assets generally is considered to have its source at the residence of the owner, so interest income from a NY bank, for example, would not be NY source income to a nonresident. Also, you didn't say whether she was working in New York City, but the city income tax is not applicable to nonresidents. NYC's definition of a resident is exactly the same as the state's.

Note that residence for NY tax purposes is unrelated to the definition of residence for U.S. income tax purposes.

These replies are all assuming you made a mistake when you said "she received w-2 from Canadian employer".

Not to put too fine a point of order on it, but that Canadian form probably doesn't say "W-2" anywhere on it. If it isn't a W2 with the words "W2" on it, then it's NOT a W2. It's probably a T4, which is what Canadians get instead of a W2.

If she DID get a W2 from a foreign entity, that's a whole nother kettle of fish and there's a good chance that the replies you've been reading here will be incorrect.

Also, you should NOT prepare a Canadian return. Have her go back to the place she used last year (probably some Canadian H&R Block place) and get it done right. People pay you to be an expert in US tax. What makes you think you'll suddenly be an expert in Canadian tax in a single day? The time you spend investing in checking everything out won't add up to the amount you could earn in the same amount of time doing things you are well versed in. Plus, if you make a booboo, your E&O insurance won't cover you to prepare returns from other countries. If you screw up big time, and she sues you, you eat it.

THANK YOU FOR THE APPROPRIATE ADVICE WHICH I WILL CERTAINLY FOLLOW AT ONCE. ENJOY TAX SEASON