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Saturday, April 11, 2015

Obamacare Effect on Canadians Working in the U.S.

Healthcare Act's Effect on Canadians in U.S.

Obamacare effects many different people in and out of the U.S. and many people may be surprised to find out that they need to be covered by it. Many Canadians work in the U.S. and file taxes there. Some are on a short term business VISA such as a TN, L-1, or B-1. Others are working towards a green card or citizenship.
Here's what you need to know in order to dodge the Obamacare bullet as a Canadian.

Are you a resident of U.S.A for income tax purposes?

Non-resident Aliens (those who qualify to file a 1040NR) living in the United States are not subject to the Obamacare Affordable Healthcare Act. As a Canadian Citizen working in United States, are you a U.S. Citizen or a greencard holder? If yes, you MUST file a form 1040.
If no, do you meet the substantial presence test? If the total days adds up to less than 183, you are not a resident for tax purposes and may file a form 1040NR.
If you do meet the 183 day test, you may still file a form 8840 Closer Connection form to prove that you have closer connections to Canada. If the closer connection to a foreign country is determined (Canada), you may file a 1040NR.

Canadian Healthcare Coverage Does not Exempt you from Obamacare

Any foreign healthcare coverage does not exempt a taxpayer from paying the amount due for not being covered under a qualified healthcare plan. Plans must be Qualified U.S. healthcare plans, meaning Canadian healthcare does not exempt you if you do file a 1040. A qualified plan must be issued in the U.S. to a resident of the U.S.
Remember as a Canadian Citizen, if you do file as a resident of the U.S., you will have to file as a non-resident of Canada under of the NAFTA free trade agreement. Canada requires all residents to pay tax on worldwide income (file a T1 General). Unlike the United States, you may file as a non-resident in Canada even if you are a citizen but you must be leaving the country for at least 2 years without plans to return. You will have to file an exit return and may have to pay exit taxes if you have savings accounts, assets, etc., but you would no longer have to file income tax returns to Canada based on worldwide income.
Not so in the U.S.A. If you are a Citizen or greencard holder, you MUST file a form 1040 even if you are an expat living and working in a different country. The only way out of filing a 1040 each year if you are a U.S. citizen or greencard holder is to recind your citizenship or greencard.
Regardless of your situation, give us a call.
Borders Bookkeeping
(760) 895-3516