L-1 Intracompany Transferee
You were transferred to a US office by your Canadian employer on an L-1A (manager/executive) or L-1B (specialized knowledge) visa. L-1 transferees often face unique complications from employer tax equalization policies and split-year residency.
US Status
Resident alien (passes SPT, often from the transfer date via first-year choice)
Canada Status
Non-resident after severing ties, or dual-resident in the transition year
Typical Forms Required
- Form 1040 (US Individual Income Tax Return)
- Form 1040-NR (for dual-status year, if applicable)
- FinCEN 114 / FBAR
- Form 8938 / FATCA
- Form 8833 (treaty tie-breaker, if dual-resident)
- Form 3520 / 3520-A (if TFSA held)
- Form 8621 (PFIC for Canadian mutual funds)
- T1 General (Canadian departure return)
Key Risks
Complex dual-residency in the transfer year if Canadian ties are not immediately severed
Tax equalization policies creating phantom income or missed deductions
Employer-paid relocation benefits being taxable in the US but not properly grossed-up
FBAR and FATCA non-compliance for Canadian accounts maintained post-transfer
Step-by-Step Filing Guide
- 1
Determine your US residency start date (transfer date if using first-year choice, or January 1 of the following year under SPT).
- 2
Coordinate with your employer's tax equalization provider to understand which returns they prepare and which are your responsibility.
- 3
File a Canadian departure return reporting income up to the date you severed Canadian ties.
- 4
File Form 1040 (or dual-status return) reporting worldwide income from your US residency start date.
- 5
File FBAR for all Canadian financial accounts with combined balances over $10,000.
- 6
Complete Form 8938 if your specified foreign financial assets exceed reporting thresholds.
- 7
If dual-resident for the year, consider filing Form 8833 to claim treaty tie-breaker residence in one country.
Frequently Asked Questions
What is tax equalization and how does it affect my filing?
Tax equalization is an employer policy ensuring you pay no more (or less) tax than you would have in your home country. The employer covers excess taxes. You may still need to file returns in both countries, but your out-of-pocket tax stays hypothetically equal to Canadian-only tax.
Can my L-1 transfer create dual residency?
Yes. If you pass the SPT in the US while maintaining significant Canadian residential ties (home, spouse, dependents still in Canada), both countries may consider you a tax resident for the same period. Use the treaty tie-breaker (Form 8833) to resolve this.
Are my relocation benefits taxable?
In the US, employer-paid relocation benefits (moving expenses, temporary housing, lump-sum payments) are generally taxable income. In Canada, some relocation benefits are non-taxable. This mismatch can create cross-border tax surprises.
What happens to my Canadian pension plan (DCPP or DBPP) after transfer?
Contributions made while working in Canada remain in the plan. US tax treatment of future distributions depends on the treaty. Generally, Article XVIII provides relief, but you must report the plan on FBAR and possibly Form 8938.
Related Guides
TN Visa Professional
You work in the US under a TN visa issued through the USMCA (formerly NAFTA) agreement. As a US tax resident you must report worldwide income to the IRS while managing Canadian departure or deemed-residency obligations.
H-1B Specialty Worker
You hold an H-1B specialty occupation visa. Like TN holders you become a US tax resident upon passing the SPT, but your path often leads toward green card sponsorship, adding complexity around dual-status years.
Green Card Holder
As a US permanent resident you are taxed on worldwide income regardless of where you live. Green card holders face elevated compliance requirements and potential exit tax exposure if they relinquish their status.
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