RRSPs, Healthcare and Dual Status Tax Return for 2016

[dkunkle 2]

I'm U.S. citizen and my husband is Canadian. He got his green card earlier this year in May, made his first trip across the border as a green card holder in June. We have been in the process of moving him for the last 6 months, including 2 trips down with vehicles and belongings. He still works in Canada because we have been unable to find him work here yet, and beginning this month, his employer is letting him work 7 days on/7days off so that he can be in the U.S. half of the time. We got him a Texas drivers license this past summer and he surrendered his Canadian drivers license, so he is now considered a permanent resident even though he is commuting back and forth to Canada to work. However, we just sold his house in Canada here in 2017 and that sale will close on January 20th.

 

My questions would be:

1) What would be his immigration date? The date on his green card? His first day across the border where he gave them his new papers? Or would it be in 2017 because he just finally sold his Canadian home?

2) i understand that he can defer his RRSPs and therefore does not pay U.S. tax until he starts taking distributions. However, does he have to stop contributing into them? Technically he is a U.S. resident now, but his employer is still Canadian and he contributes via payroll deduction.

3) His health insurance is through his employer in Alberta. Does that provide coverage in the U.S. or should i add him to my health insurance? Not sure if Canadian health insurance qualifies as creditable coverage under the Affordable Care Act.

4) Has anyone used a cross-border tax accountant that they would recommend to help us?

 

Thanks in advance for any help,

Danielle

[Udella&Wiz 325]

Can only comment on #3 - when he ceases to be a resident of the province he is no longer eligible for provincial healthcare and likely . the health ins through his Employer Supplemental Health insurance normally doesn't cover living outside Canada permanently(...remember that Canadian supplementary health coverage only covers or upgrades what provincial doesn't cover...so it's not 'real, full' health coverage in the sense that we have in the US)

 

I don't know what you're referring to by 'creditable coverage' but if you're asking if moving to the country to be with your spouse is an acceptable;e life event to be able to add him to your own coverage, yes it should be...your HR department can confirm that for you.

Edited January 8, 2017 by Udella&Wiz

[dkunkle 2]

24 minutes ago, Udella&Wiz said:

Can only comment on #3 - when he ceases to be a resident of the province he is no longer eligible for provincial healthcare and likely . the health ins through his Employer Supplemental Health insurance normally doesn't cover living outside Canada permanently(...remember that Canadian supplementary health coverage only covers or upgrades what provincial doesn't cover...so it's not 'real, full' health coverage in the sense that we have in the US)

 

I don't know what you're referring to by 'creditable coverage' but if you're asking if moving to the country to be with your spouse is an acceptable;e life event to be able to add him to your own coverage, yes it should be...your HR department can confirm that for you.

Thanks for your comment on the healthcare. I am actually in my open enrollment period at work, so I will add him to my U.S. health insurance as of 2/1/17.

[NikLR 13,220]

1 hour ago, dkunkle said:

I'm U.S. citizen and my husband is Canadian. He got his green card earlier this year in May, made his first trip across the border as a green card holder in June. We have been in the process of moving him for the last 6 months, including 2 trips down with vehicles and belongings. He still works in Canada because we have been unable to find him work here yet, and beginning this month, his employer is letting him work 7 days on/7days off so that he can be in the U.S. half of the time. We got him a Texas drivers license this past summer and he surrendered his Canadian drivers license, so he is now considered a permanent resident even though he is commuting back and forth to Canada to work. However, we just sold his house in Canada here in 2017 and that sale will close on January 20th.

 

My questions would be:

1) What would be his immigration date? The date on his green card? His first day across the border where he gave them his new papers? Or would it be in 2017 because he just finally sold his Canadian home?

2) i understand that he can defer his RRSPs and therefore does not pay U.S. tax until he starts taking distributions. However, does he have to stop contributing into them? Technically he is a U.S. resident now, but his employer is still Canadian and he contributes via payroll deduction.

3) His health insurance is through his employer in Alberta. Does that provide coverage in the U.S. or should i add him to my health insurance? Not sure if Canadian health insurance qualifies as creditable coverage under the Affordable Care Act.

4) Has anyone used a cross-border tax accountant that they would recommend to help us?

 

Thanks in advance for any help,

Danielle

1) he became a US LPR when he activated his visa. At that point in time he was no longer a Canadian resident. 

2) im not exactly sure how the rrsps etc work because I didnt have them, sorry. Others who have will hopefully chime in. 

3) as I noted when he activated his visa he became an LPR so he was no longer eligible for Alberta health care. It would be good to pay for private insurance in Canada to cover any emergencies while he is up there working. 

4) on here we tend to recommend serbinski forums for tax help. They are also a cross border accounting agency. I did my own taxes the year I moved but I also quit my job so it had a clean split compared to your situation. 

Edited January 8, 2017 by NikLR
Spellcheck

[bantam88 1]

As his residence started when he crossed, he needs to file US tax return declaring income earned from June 2016 (including his wages from Canada earned between June 2016 to end of year).  He will also file a 2016 Canadian tax return since he has not declared himself a non-resident Canadian for tax purposes as he is working there still.

 

From your explanation, he had no Obamacare compliant health insurance coverage in 2016 so most likely have to pay whatever penalty is applicable.

 

RRSP contributions is not tax deductible for Uncle Sam like 401k/IRA but treaty between the countries means the any growth in the RRSP is deferred as you stated.  You also cease to be able to contribute when one declares non-residency for tax purposes with Revenue Canada (although the RRSP can be maintained just that no additional contributions can be made).  He should do that when he has closed Canadian financial ties (property, large financial accounts etc, Canadian based business etc).  Else, he will have to continue filing Canadian tax returns.

 

As a resident of Texas, at least he doesn't need to deal with state income tax.

[aaron2020 11,651]

1.  He immigrated as soon as he used his immigrant visa to enter the US.  

2.  Sorry, not familiar with RRSPs.  There is no "technically, he's a US resident now."  He legally became a US resident when he used his immigrant visa.  Claiming a Canadian residence after he activated his visa is grounds to revoke his status.  You need to look up the requirements for him to maintain his LPR status.  Claiming a foreign residence while holding LPR status puts the LPR status at risk.  Google "maintaining legal permanent residency."

3.  Canadian insurance is not going to cover a US green card holder.  He will need US insurance.

4.  Best of luck in finding an accountant.

 

Your husband must report the sale of his Canadian residence on his 2017 tax return.  If there is a profit, he may need to pay US taxes.  It would be wise if he did not claim the residency exemption for the period where he was a US LPR who should have been living in the US.

 

Not only should you find an accountant versed with transborder income issues, you need one that understands the requirements of being a US LPR.  The worse case scenario is a good tax deal which neglects the immigration implications that leads to declaring your spouse as a non-resident while being an LPR.

Edited January 12, 2017 by aaron2020

[dburnt 59]

Here is my experience

1.  You need to do the math.  I entered the US August 29, 2014; my GC came January 29, 2015.  Because of a screw up with my employer, I also was paid out vacation pay etc. in 2015, so with employment (albeit passive) income in 2015.  Canadian and US tax laws differ, in that non-resident for Canada is based on your ties and you can be a "deemed" resident even though you aren't physically in Canada...US requires you to have status, and/or have been present in the US for a specific number of days in the year.  For me, because I didn't actually have permanent resident status until I had my green card, I didn't have enough days in 2015 to file a US return.  So, for 2015 I filed a Canadian non-resident tax return as a "deemed" resident.  I reported my income on my husband's return, but we did not file jointly, as I had no US income.  In 2016 (for 2015 year), we filed a joint return in the US, and I filed a non-resident return in Canada using my GC date of Jan 29 as my end date (having part of the year as Canadian allowed me to claim deductions that US doesn't have, like RRSP contributions).  CRA ended up calling me to clarify my dates, but had no problem using my GC date.  In your case, I would be say that even though he has a GC dated June, he should read up on the rules for deemed residency for tax purposes.  I assume that his employer has his US address, and is properly taxing his earnings (i.e. non-resident tax rate is 25%)...this should also have precluded him from certain deductions.  If you file as a Canadian non-resident, you will not be able to use certain deductions on the portion of income after the GC date (i.e. RRSP contributions, education, etc.). If non-resident tax is being withheld, the only way to get any of that refunded is through a US tax return.

2.  I was unable to contribute to my RRSPs once I had an actual US address - my bank refused to accept them (non-residents cannot "invest" directly, and RRSP is an investment).  I cannot speak to employer contributions, but none of them would be tax deductible unless you are filing as a deemed resident.

3.As stated above, you need the US coverage - but be aware that the US coverage will not cover him during his periods in Canada, nor will Alberta cover him (beyond a transition period) with a US address.  I definitely can't comment on this part...for myself, because I didn't have US status until 2015, I didn't switch my driver's licence, car registration and insurance until 2015 - keeping my Canadian car insurance was a pain! 

4.  Good luck with this as well.  I looked high and low for this and found no one...even the "expert" we tried at H&R Block knew nothing...he'd never seen a T-slip in his life.  I ended up filing my own, and fortunately got back all my withheld tax.  What I discovered is that most "cross-border" accountants are those that deal with investments...I couldn't find one that had any knowledge at all of CRA.  Fortunately, I have a friend who retired from CRA and is great at interpreting the actual Tax Act, so that helped.

 

Separate note...when you receive a Canadian pension and file US returns, it gets even worse, since the tax rules on pensions are very complex...and none of the software packages talks about how to report foreign pensions.