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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1561
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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This question is tax year. I left Canada to USA when my

Customer Question

This question is for 2013 tax year. I left Canada to USA when my company transferred me there for job. I was working with a work permit in Canada. I did not have any residential ties in Canada or any other ties once I left on 6-Oct-2013.
In USA my salary income from 6-Oct to 31 Dec 2013 was USD 19411.
Since I was in USA for <183 days, I did not pay any taxes there and got full refund.
My question: Can CRA audit/review my tax return and ask me taxes in Canada on US income of USD 19411 since I did not pay any taxes there.
Instead of CRA coming to me should I go back to CRA and pay taxes on that income. The taxes on the US income is appearing as almost $7500 + interest.
My CAD income for 2013 was CAD 51728 and taxes paid were CAD 8532.
I am anxious. What should I do and how can I avoid this tax legally.
Please advise.
Submitted: 1 year ago.
Category: Tax
Expert:  Arthur Rubin replied 1 year ago.

It seems to me that, even if you were not a "US person" in 2013, the income you earned while in the US should be subject to US taxes unless covered by a treaty, and subject to some other country's taxes (probably Canada). In some cases, you would be subject to tax in both countries, with only the foreign tax credit (that is what it is called in the US, but Canadian law is similar) to reduce double-taxation.

However, if you were not a Canadian resident after 6-Oct-2013, you must have been a US resident. The <183 days rule assumes no change of status during the year.

I'm afraid I could not give a "firm opinion" as to your residency without knowing a lot more information than you've given; but you must be resident somewhere.

Your nationality and that of your company might also be of importance, as well as in which countries your company has "permanent facilities".

However, with the information you've provided, even if, for 2013, you were not considered a resident of the US, your $19411 salary would be taxable in the US on form 1040-NR as US-sourced income.

There is no way to prevent the CRA from coming after you, but if you were to pay US taxes for 2013, it would show go faith. It's possible to formally request a ruling as to your residency, but even that is not definitive if they believe you omitted a significant point.

Customer: replied 1 year ago.

Thanks. US tax returns were done by tax preparers and I have to verify what they did, one thing I saw I got full refund, i.e. net tax payable was 0.

Since I am a resident of Canada, I have more ties to Canada than in US.

Hence if I go back to CRA instead of they come back to me, and ask them to consider US income and tax it, Canada tax rates are higher than in US.

Then I can clear off the mess in Canada, at the same time if there is any question from IRS in USA, I can show them I paid taxes in Canada, which was higher than what it would have been in USA, and hence there are no tax payables to US.

Will this approach keep me in safe side for both the countries? Please confirm.

Expert:  Arthur Rubin replied 1 year ago.

You can declare that you were a Canadian resident for 2013 and recompute your tax; I doubt that Canada will object, although there will probably be an underpayment penalty.

However, if the final US determination is that you were not a US resident, and if the $19411 is considered US-sourced income, then the 1040NR (US nonresident tax return) is "primary"; if there were US tax, you would get a credit on your Canadian return. So I cannot say you would be "safe" in the US.