Moved to US in May - What to include on 1040

I looked at the foreign tax threads, but most deal with US citizens living abroad, and not people coming here.

Canadian citizen moved to US on May 21st, 2017. She says she got her temporary GREEN CARD at the border. She married a US citizen on June 6, 2017, and received her permanent GREEN CARD on Sept 21, 2017. She began working in the US in November 2017. So from what I read, she became a RESIDENT ALIEN/Green card holder on May 21st. Correct me if I am wrong.

She filed a Canadian tax return for the January to May period as she was a full time employee before she moved and Canadian tax laws look at residency and not citizenship. So she was a resident of Canada thru her move date.

My initial thought was she needs to include the Canadian income on her 1040 (filing joint with hubby) because she is a considered a Resident of the US for the entire year, but we can take a credit for the taxes she paid to Canada.

But, I have read pub 519 and I am confused on the "Dual-Status first year of residency" part....."f you meet both the substantial presence test and the green card test, your residency starting date is the earlier of the first day during
the year you are present in the United States under the substantial presence test or as a lawful permanent resident.

So for her, those two dates are essentially the same, May 2st. Now I am wondering if she DOES NOT have to include the Canadian income on her 1040 because it was earned BEFORE she became a resident of the US.

Thanks in advance for the clarificiation.

If she makes the joint return election, then she will not be taxed as a dual status alien - she will be taxed as a full year resident. If she wishes to file separately, she will be a dual status alien.

Ooh....good point. I am gong to have to look at whether it makes sense to file as a DUAl status alien. Did some readind and it seems if we do that, then her Canadian income does not come into play at all....correct?? She made very little here in the US between Nov and Dec. I realize the rules for DSA are different.....no standard deduction, etc.


That may simply things and get them to a better spot. I am sure I will have more questions., Thanks!

Also, I did not realize that the FTC is limited to a ratio between foreign source income and overall income. Hubby made over 50K, and she made 24K in foreign source. So they don't get credit for everything they paid to Canada. First time with this situation. Learning alot!

Most folks would make the elections to file as a full year resident and jointly. If these are made they need to be validly signed.

Any required FBAR, 8938 or PFIC reporting will now be late. Is the client aware that the FBAR penalty is US$10,000 per violation and the 8938 penalty US$10,000 per form? If there are RRSPs, TFSAs, PFICs and other unfriendly things to address, you'll also want to discuss US reporting for these with the client - and thinking about QEF or M2M elections.

Most folks would make the elections to file as a full year resident and jointly. If these are made they need to be validly signed.

Any required FBAR, 8938 or PFIC reporting will now be late. Is the client aware that the FBAR penalty is US$10,000 per violation and the 8938 penalty US$10,000 per form? If there are RRSPs, TFSAs, PFICs and other unfriendly things to address, you'll also want to discuss US reporting for these with the client - and thinking about QEF or M2M elections.

Yes we are leaning towards joint filing as it works out best anyway. Yes there was an RRSP...cashed out before leaving Canada. I am waiting to hear if there are any other assets at all but will be sure to specifically ask about the TAX free savings account and any passive income sources. She is young so likely there is nothing but I will triple check.

Thanks Guya!

Oops, she is not as young as I thought. The only thing she has in Canada is a "mutual fund RSP - locked-in". She cannot touch it until she is 55. Worth about 74000 now.

In my reading, company pensions funds get put into a LIRA when an employee leaves a company. (locked in retirement account). Some provinces call them a LIRA-RSP or LIRA-RRSP, but they do not have the same rules as an RRSP normally would. It is a pension that does not allow her to do anything with it....can't transfer it , can't draw on it, can't change it in any way until she is 55.

Since she has no control over the account, and cannot access the funds, would it be subject to FBAR reporting?? I am not seeing an exclusion on the IRS webpage, but they are not specific. I did find a few websites who deal in foreign assets and they are not 100% either. A few state the general rule is if the person has no control over it and can't get to the money, then NO reporting requirement, then they ay it depends. UGH.

here is a site on these LIRA accounts https://www.nestwealth.com/what-is-a-lira/

Delinquent FBAR Submission Procedures https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures

And a good article that is recent. https://www.goldinglawyers.com/delinquent-fbar-submission-procedures-2018-irs-fundamentals/