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Determining whether a Canadian who obtains a TN Visa to work in the United States should file 1040 or 1040NR tax returns is not always straight forward. There are many factors that must be considered when assessing each situation.

What is a TN Visa?

A TN Visa is a work Visa for certain professionals of Canada and Mexico, under the terms of the North American Free Trade Agreement (NAFTA).  If you fall into one of the professions covered under NAFTA (see list here) and possess the criteria needed by a U.S. employer, you may qualify for a TN Visa. TN Visas are temporary in nature and are generally valid for three years; however they can be extended, if allowed.  Due to the temporary nature, the applicant must demonstrate their intention to return to their home country (Canada or Mexico) upon the expiration of the TN Visa.

Spouses and children of TN Visa holders are often entitled to a derivative status visa, which generally allows them to live, but not to work, in the United States.

How to determine what U.S. tax returns to be filed – 1040 or 1040NR?

To determine what tax returns are required, you need to assess whether or not you are considered a resident alien or a non-resident alien for U.S. purposes. As a resident alien, you would be required to file a 1040 and any other requirements of resident aliens. If you are considered a non-resident alien, you would be required to file a 1040NR and any other requirements of non-resident aliens.

There are two tests that are assessed to determine whether an individual is a resident alien during a calendar year. These are the green card test and the substantial presence test.

The green card test is met if you were a lawful permanent resident of the U.S. under immigration laws. This would be met by individuals with U.S. citizenship or those who hold a green card. Due to the nature of the TN Visa, you would not be considered a resident alien under the green card test.

The substantial presence test involves assessing whether an individual will be considered a resident alien based on the number of days they are physically present in the United States. The calculation of number of days spent includes a formula which factors the number of days spent in the U.S. not only the current year but also the previous 2 years. You can refer to IRS Publication 519 or Topic 851 – Resident and Non-resident Aliens for more information on this calculation. If you meet the substantial presence test, you would be considered a U.S. resident for income tax purposes and therefore may be required to file a 1040 and any other forms required of resident aliens. The key is that, even when you meet the substantial presence test, you may still be considered a non-resident alien under the U.S.-Canada income tax treaty as these terms may overrule the substantial presence test.

Article IV of the Canadian-U.S. Tax Convention (Treaty) discusses the residence of the taxpayer, and must be considered when assessing residency for those Canadian’s working on TN Visas in the U.S.

The treaty provides guidance on situations where a taxpayer would otherwise be considered both a resident of the United States and a resident of Canada for tax purposes. The treaty also provides “tie breaking” rules for these instances to help prevent double taxation and to provide guidance to determine your filing status in each country while on a TN Visa.

To assess how your situation fits within Article IV, there are many factors to consider. These include, but are not limited to, the following:

1)  Is your family moving to the United States with you or will they be staying in Canada? Will any immediate family members or dependants still be in Canada?

2) Is your intention to move back to Canada in the short term, or are you hoping that you can continually renew your TN Visa for an extended length of time, or attempt to attain green card status?

3) What ties (personal/social/economical) will you maintain in Canada while you are in the U.S.? Do you have a home in Canada? Is it available for your personal use or is it rented? How often do you travel back to Canada? What is the main purpose?

Many of these questions are intended to determine, in situations where you may be considered both a resident of the U.S. and Canada, whether you have severed ties with Canada for tax purposes and also determine which country you have closer ties to (i.e. ‘the centre of your vital interests’).

Based on your situation, an experienced cross-border tax accountant will be able to guide you to ensure you are fully tax compliant in both countries.

Still have questions? Drop us a line below or email me at tony@hutcheson.ca.

 

 

3 Responses to “TN VISA – What United States tax forms should I file?”

  1. John says:

    Hi
    Yes. I have a question
    sure, how can I help
    I’m a canadian citizen. Moved to USA last Sept 2018 with a job in Seattle (TN VISA). My wife and kids (on TD VISA). This is my first year for filling tax. So not sure about the next steps on tax filling
    https://www.hutcheson.ca/contact-us/

    is this a permanent to the US?
    Yes the job is permanent
    i used to live here before , so have a social security. But my family don’t have one. I’m not sure if they can even have a SN
    social security that is
    this will be tough to work out on chat, however you’ll need to consider whether you have severed your ties from Canada and file a final return (there are tax consequences to this). You’ll likely need to file from September 2018 in the US
    Are you a US citizen?
    do you mean ITIN
    No
    Canadian Citizen
    likely not a social security number then
    did you have assets when you left Canada?
    I got a house
    rented right now
    but i don’t make anything, rather i pay out of pocket
    was it your principal residence?
    yes
    Right now, i’m renting in Seattle
    did you get any tax advice before making the move?
    Likely not going to be able to solve this over chat. However you’ll need to elect on your Canadian return on the property. It’s deemed to be sold if converted to rental.
    unfortunately a move to the US from Canada is quite complex and would require a proper consultation

  2. Lexy Ho-Tai says:

    Hi Tony,

    Thank you so much for your helpful article.

    I am a Canadian citizen with two TN visas. I am trying to determine what extent of taxes I am supposed to file in America.

    I believe I would be considered a non-resident alien based on the substantial presence test. Do you still file taxes in America if you are a non-resident alien?

    I have had a TN Visa since June 20; since that time, I have spent less than 183 days in USA in 2017 with travels back to Canada. Prior to that, I had an OPT visa and a F1 Visa which, I believe, are exempted.

    Thank you so much. If you have any advice, that would be greatly appreciated. If I do need to file taxes, I would be seeking out an accountant to help me.

    Best,
    – Lexy

  3. Ric says:

    Hi,

    I am an Canadian citizen living in Toronto, Canada with the whole family but I’m working in Michigan, USA. I’ve started working in Michigan on Jan. 3, 2017 under a 3-year TN VISA. My initial contract runs for 3 years. I stay in an apartment in Michigan and I work in Michigan from Mon-Thurs (arriving in Michigan Sun night or Monday morning from Canada).

    Just in 2017 alone, I am in the US for more than 183 days but I still have my personal ties to Canada (family, permanent home). Given these facts, for my 2017 taxes, am I considered Resident or Non-Resident Alien?

    Thanks.

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

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