Hi,

I just got a job transfer from the US back up to Canada. I'm a Canadian and I was down in the US on a TN visa. For 2005 I filed a 1040EZ. I moved back to Canada at the end of August so in 2006 I lived there for 8 months. Can I still file a 1040EZ? Do I need to report any of my Canadian earnings on my US tax return for 2006? I also got married on July 1st of 2006. My wife moved down to the US on a TD visa after the wedding. Would I file my US tax return jointly with 1 dependent on a 1040EZ?

Thanks for all your help!

Troy

Troy:

Since you are back in Canada, you are a dual-status alien. You must file a dual-status tax return. This consists of a Form 1040NR with a Form 1040 as an attachment.

A somewhat complicated return, you will not be able to claim the standard deduction, but you will be able to claim your wife as a dependent. You will not have to pay any U.S. income taxes on your Canadian income by filing this way.

Download IRS Pub 519 from www.irs.gov for details.

Atlanta Tax Expert:

Would it be possible for me to file a 1040EZ and include income earned in Canada as well?

Is it possible that this might be a better scenario for me given that I'd be claiming the standard deduction?

I guess I'm a little confused as to why I can't file a 1040EZ... since I'd been living in the US for 8 months out of 2006. I thought one was considered resident if they'd been living in the US for at least half the year...

No, that is NOT the case. The fact that you are an expatriate to Canada makes filing a resident tax return not possible. The dual-status return is your best available option.

Ok.

Does this mean my return will be significantly less than what I could expect if filing a 1040?

Thanks for all your help Atlanta Tax Expert!

Probably. If you had remained in the U.S. your and your wife would have been able to file jointly and thus claim the Married Filing Jointly Standard Deduction of $10,300.

With a dual-status return, you cannot claim any standard deduction, though you can still claim your wife's exemption by claiming her as a dependent.

However, it may not be that bleak. First, you never said where in the U.S, you worked. If it was a high-tax state like New York or Massachusetts, it is likely that your state tax withholding may exceed the standard deduction. You CAN claim itemized deductions (including withheld state and local income taxes, charitable donations and employee business expenses) in lieu of the standard deduction.

You've been very helpful!

One last question: I worked in NJ for the 8 months I lived there. My gross income for those 8 months was 41,000 and I paid about 11,000 in taxes. Are you saying that I'll only be able to get back what I paid in state taxes? Last year when I filed with 6 months of work and claiming the standard deduction on a 1040EZ I ended up getting around 6k back.
You're saying I shouldn't be expecting anything in that neighbourhood again?

I think I have a somewhat simple return in that I don't have any itemized deductions or investment income or anything like that.

No, you can claim the $11,000 in withheld taxes in place of the Standard Deduction on your dual-status return. That is MORE than if you claimed the Standard Deduction.

You can also file a normal NJ tax return and claim your refund from NJ. The dual-status tax return requirement does not apply to state income taxes.

If you had that much money withheld in 2006, you may want to look at amending your return for 2003, 2004 and 2005, because you should have itemized returns for those years to maximize your deductions.

Contact me at [email protected] if you have questions!