Can I use 1040 instead of 1040NR in this situation?

Question

I'm a Canadian who was working in the USA in for a few years.

I moved back to Canada in March 2003. I've been very late filing my taxes and now I need to file for 2002, 2003, 2004, 2005. Since I was owed a large refund I always figured that I could just file at a later date. I realize now that I'll have lost any claim to my refund and I simply want to get this done and get my file clean. Going through the process of filling the I realize that I've really complicated things.

In March 2003 I moved back to Canada. I simply forwarded my mail to a friend in California, since the USPS mail forward didn't forward abroad.

Later in 2003 I did a full withdrawal from one of my 401K's (about 8000). Both State and Federal Taxes were withheld.

In 2004, I did a full withdrawal from my remaining two 401K's. In one withdrawal of about 2000 both State and Federal Taxes were withheld. For a second withdrawal (about 8000) only Federal was withheld.

In 2005, I sold all remaining stocks in my brokerage account. They were all purchased during the boom of the dot.com era and I was holding in the faint hope that some would rebound. So when I sold, they were all sold at a loss, ie net proceeds of about 2000, purchase price of over 10,000.

After reading I see all the things I "should" have done, and should not have done.

The correct way, as I understand, to handle this filing is a both a 1040 and

1040NR pro-rated for the number of days before/after departure in 2003. Furthermore, having held stocks after I left, I think, means that I need to calculate as though they were sold and re-acquired the day I left, in order to compute capital gains/losses while resident and while non-resident.

In light of the fact that I'm giving up any claim to about $6000 in refunds, and also the fact that I did all my withdrawals and share sales to a California address, I'm tempted just to enter all the numbers I've got into Turbo-tax (I've still got working turbotax for all years) and submit the regular 1040 and state forms for all 4 years. I figured that it simply shouldn't matter since I'm giving up about 6000 in refunds and just want to put this behind me.

Would they likely accept that, or would they likely send it back asking that I re-submit on 1040NR and pro-rate the the departure year and recalculate the capital losses with deemed dispositions on the date of departure? Meaning that I'd need to look up what several stocks were trading for in

2003, and most of them aren't even listed anymore. I also figure that the
1040NR might not be the best to use since my checks and tax forms were sent a US address.

In short, would I be able to just fill in the standard turbo tax forms (1040 and state) and submit those?

Thanks for any help.

Jon

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parrisbraeside · Accepted Answer

You will need to file a Dual-Status Tax Return for the year that you emigrated from the US. Due to particularities with this return, you will be overriding a number of calculations. It is as if you file two tax returns but they are not pro-rated by days unlike a Canadian tax return for a taxpayer who emigrates. For returns after that, you file

1040NR returns. Note that, if you have a greencard, you are deemed resident in the US until you give up the greencard - which means not dual-status nor 1040NR returns.

I will point out that I do these returns professionally as do others on this forum. I would recommend professional assistance but your decision.

Alan · Answer

..in addition....You would benefit by reading IRS Pub 519, Tax Guide for Aliens. It explains how you file a dual-status return, how aliens are taxed and what is effectively connected income. E.g., your pension distributions are effectively connected income. Your capital losses are not US source or effectively connected "income" as an NRA. You would not report those losses on a US return unless you were physically present in the US in that year of sale for at least 183 days.Whether or not you are subject to tax by a US state depends upon whether you were a resident, part-year resident or nonresident in any year in which you had income. It appears from your post, that you were probably a part-year resident of some state in 2003 and probably not a resident of any state after that year. This assumes you changed your domicile from the US state to some province in Canada. So unless you had source income after 2003 from a US state (e.g., you had rental property in that state) you would not...

Can I use 1040 instead of 1040NR in this situation?

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