I have an elderly relative who’s been living on a pension in Canada. They recently got approved for a green card after their interview, and they’ll be moving to the US once they get the stamped passport from the US consulate in Montreal.
If they enter the US on their new immigrant visa just a week before the end of December (2024), do they need to file taxes with the IRS for their Canadian pension income in 2024? They haven’t had any US income or lived in the US this year or in the past.
Or is it better for them to wait until January 1st, 2025 to arrive in the US so they don’t have to worry about filing taxes for 2024? They’ll be filing taxes in Canada for 2024 as usual since that’s where they’ve lived for most of the year and earned their pension income.
Any advice would be super helpful! Thanks so much!
Definitely wait until after December 31st! It will save a lot of trouble, even though they won’t owe any US taxes for 2024.
If they come earlier, they’ll have to file as Married Filing Separately (MFS), report all their 2024 income, and declare Dual-Status filing. They’ll also need to leave out their pre-immigration income from Form 1040. A mix-up with the IRS could lead to confusion, and you don’t want that to happen!
This happened to a family member of mine once. They ended up paying $30k in taxes and penalties before the issue was resolved… three stressful years later.
Coming to the US after January 1st and waiting for the next pension payday would avoid all this confusion.
In the meantime, your relative can study up on pre-immigration tax planning.
P.S. If they are single, they’ll file as Single, not MFS.
I don’t think this is necessary. I don’t see any rule requiring non-residents to report foreign income for the part of the year they were a non-resident. Usually, you don’t report income unless specifically told to.
The confusion likely happened because it was reported, and it could have been avoided if it hadn’t been.
You must file Form 1040 if you are a dual-status taxpayer who becomes a U.S. resident during the year and are a resident of the U.S. on the last day of the year. Mark ‘Dual-Status Return’ on your return. You must attach a statement showing your income for the part of the year you were a nonresident. You can use Form 1040NR as the statement but mark ‘Dual-Status Statement’ at the top."
@Micah
If the IRS really only wanted US-sourced pre-immigration income to be declared, they would have said that clearly. But they didn’t.
Still, I get your point, especially since they let you use Form 1040NR as the ‘statement.’ I think we need a clearer ruling before taking that interpretation to the bank. A lot of money could be at stake, especially if there are large pre-immigration gains.
“For the part of the year you’re a resident, you are taxed on all income. Foreign income is taxable if you’re a resident alien. But if you’re a nonresident alien, income from non-US sources is not taxable unless it’s connected to US business.”
The real question is what needs to be disclosed on the dual-status 1040 return, not what’s taxable. If it’s not taxable, why disclose it? Shouldn’t even US-sourced income before immigration be left off the dual-status return? Seems like we’re looking at a contradiction in IRS guidelines.
@Oak
Thank you for the advice and response! That’s exactly what I was thinking – it’s not worth the hassle just to get there a week early. They’re elderly, and minimizing stress is key.
Sorry your family had to go through all that trouble because of a misunderstanding by the IRS! Thanks again for your help!
I think it’s easiest to just arrive on January 1, 2025.
The problem with arriving in 2024 is that the person is considered a dual-status alien for 2024. If no US income is earned after arrival, they might not need to file a return, but they could still need to file FBAR and other forms.
Arriving later in 2025 could complicate things, as the person might be a dual-status alien for 2025, which means they lose out on things like the federal standard deduction.
@Micah
Thanks for the response! I also lean toward having them fly to the US on January 1st, 2025 to avoid tax complications. The Green Card test means they’re considered a resident for tax purposes if they’re in the US even one day. That would mean they’d have to file taxes for 2024 even if they don’t earn any income in the US. It’s better to be safe and avoid the headache.
