Would you like some more tax sir?

June 30, 2008 1:24 PM

Any Canadian graduate students at an American university to help clear this mess up? According to other CDN graduate students and a previous MeFi post we're not to be taxed on our stipends by Canada. However, despite much letter writing and form filling (i.e. form NR73) the Canadian Revenue Agency insists that I file my taxes. So what exactly did you do to get free of them?

I previously appealed to MeFi about being a Canadian Grad student in the USA (Would you like to tax that tax sir?). According to the excellent advice I received, Canadian grad students should not have to file Canadian income tax, or at least need not declare their stipend as income. Speaking a to a fellow gaduate students here, I heard same. I was recommended to fill in form NR73 and send it to the CRA which, in theory, should have written me back to say I was deemed non-resident for tax purposes. Well they did just the opposite! According to them since I am not US citizen, I am still a resident of Canada.

Apparently this whole thing boils down to me declaring on form NR73 that I am not considered a resident of the USA. My understand of US law is that CDN graduate students are not considered residents (hence why we file Non Resident Alien tax forms in the USA). However, this ruling seems patently wrong based on what I was told in the above post.

Do any other Canadian graduate students in the US have experience with this? Did your NR73 go through? Thanks for the help!

posted by Smegoid to law & government (13 comments total)

I'm not a Canadian, but could it be the case that you still have to file, you just don't have to report it as income and, therefore, won't have to pay anything?
posted by rbs at 1:38 PM on June 30, 2008

The advice in the other thread assumed that you would declare as a U.S. resident. For example, "your status under Canadian tax law is likely that of a "deemed non-resident": someone who is considered to be a resident of another country for that country's tax purposes."

Of course they aren't going to like it if you claim to be a non-resident of both countries.
posted by grouse at 1:49 PM on June 30, 2008

Scholarship/stipend/bursary income is no longer taxable as of 2006 regardless of whether you are studying at a Canadian or a foreign university, so long as you are paying tuition. There are however distinct advantages for you to still file your Canadian taxes, even if you are not required to pay any tax. Tuition fees you pay at an overseas school can still be registered for tax credit purposes (you just need to have the appropriate form filled in by your school), and then carried on to future years to bring down your tax burden (presuming you return to Canada and work at some point).

So my advice is to file your taxes, do not declare your stipend, but fill in the necessary tuition credit sections. This is all very easy to do on ufile.ca
posted by modernnomad at 1:50 PM on June 30, 2008

You are still considered a resident of Canada for tax purposes, and you still have to file a tax return. Your stipend should not be taxable, as I recall from my taxes -- you'll need to find the info somewhere in the US-Canada tax treaty. Sometimes the international student office is helpful, in that it's full of international students who have already dealt with this issue. Try to find other Canadians in school in the US and ask them what they did.
posted by jeather at 1:51 PM on June 30, 2008

And once more, to make sure the difference is clear, filing is not the same as owing/paying. Filing means doing all the paperwork to demonstrate what you owe or are owed. You definitely have to file.
posted by randomstriker at 2:44 PM on June 30, 2008 [1 favorite]

As I mentioned in the previous thread, I did have NR73 go through and was declared a deemed non-resident by the CRA (then the CCRA.) There were two main differences between my situation and yours: first, tuition remissions were fully taxable at the time, and second (the big difference) I have citizenship in both countries.

I assume, from what you mentioned in your question, that you answered the following question "no" when you submitted your NR73: "Are you, under a tax treaty with another country, considered resident in the other country and not resident in Canada?" Here, as it currently stands, is the section of the U.S.-Canada Tax Treaty pertaining to residency. I don't want to get into a specific interpretation of your situation here, since that would get way too close to giving legal advice; I'll just note that whether or not you're a resident for the purposes of the tax treaty may not be the same thing as whether you hold the status of Non-Resident Alien for U.S. Immigration purposes. In my case, I was able to say two things that you might not be able to: (a) the U.S. taxed my world income, not just that earned in the U.S., and (b) I had a "permanent home" in the U.S. (your "home" in the States might not be considered permanent, since it's dependent on your student status.)

None of this is legal advice, of course, just a physics student's reading of the tax laws. Given the laws linked to by modernnomad considering tax liability on stipends, I'd probably just stick with filing in both countries. But if you decide that it might still be worth your while to be declared a deemed non-resident of Canada, then you should probably consult a lawyer familiar with international tax law.
posted by Johnny Assay at 2:58 PM on June 30, 2008

Hey guys, thanks for the input.

More specifically:
Grouse, yeah I figured that out when I get the reply. However, as far as I can tell, we can't legally file as a U.S. resident. So, while I'm guessing this is what others did, it's technically shady.

Modernnomad. Thanks for the link. Don't think it will work for my situation as the department covers the tuition and the school doesn't give out forms for us to use on our taxes. I specifically requested one and they refused as they pay for the tuition therefore we can't claim it. I'll have to investigate further.

Jeather and randomstriker, cheers for the info. I'll take a closer look at the treat. The only thing i took from it the first time was that income over 10k made voided the entire treaty.

Our international office avoids international tax questions like the plague. If they help one country they'll have to help them all. I've talked to other Canadians here and the responses range from "ignored it" to "sent them a letter saying I'm a student and they ignore me" to "I have a canadian grant so I don't have to file in US". As grad students we're not the most assiduous lot when it comes to taxes!

It's still looking like I have to file and claim my stipend. It's bizarre because it seems like I'll be the first graduate student in history to do so, but I ain't finding that loophope everyone else is skipping through!
posted by Smegoid at 2:58 PM on June 30, 2008

wow... on preview, I'm clearly having a bad grammar day.
posted by Smegoid at 2:59 PM on June 30, 2008

Gary Gauvin is a dude that specializes in Canada-US tax issues. He did simple Canadian and US returns for people in my office for not a lot of money. Speak to an accountant, maybe?
posted by crazycanuck at 3:01 PM on June 30, 2008

Here we go:

You may be a factual resident if you are:
* teaching or attending school in another country;

Canadian residents abroad

You are not a US resident for tax purposes. I'd search around for other Canadians in grad school that you know anywhere -- friends from undergrad? facebook? I don't have a clue where my returns from those years are, and I think they've changed the rules since. Be careful that you are not being taxed on your tuition remission -- I was almost paying taxes on 25k, including 12k in tuition I never saw.
posted by jeather at 3:37 PM on June 30, 2008

You certainly have to file, it's just a question of whether you'd pay anything. You pay in one country or the other, but generally it's still best to file in your home country regardless of whether that's where you're going to be paying (if you owe at all) since I think both Canada and the states can make you back file once you return.

Again, the tax treaty is about respecting income taxes paid in the other country, not about bypassing filing requirements all together.
posted by tiamat at 8:37 PM on June 30, 2008

Even if you are not technically paying tuition b/c your university is covering it, you can still claim the Education Amount based on the number of months you are enrolled full time by completing form TLL1A (for students at foreign universities). Proving that you were enrolled will meet the requirements I spoke of earlier, and mean that you do not have to declare your stipend as income.
posted by modernnomad at 11:00 PM on June 30, 2008

Many thanks to everyone for the great responses. I think modernnomad's final comment closes the deal. Cheers everyone. Happy Canada Day!
posted by Smegoid at 9:13 PM on July 1, 2008