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I moved to the USA with a Green Card a couple months ago. My employer awarded me with RSUs a couple years ago, and some have vested after I moved to the USA. I am filing as Dual-Status Alien, so technically I believe I do not have to report my Canadian income until the date I crossed the border to the IRS. I originally thought the RSUs vested in the US would be considered US income.

But, I realized that my employer actually pro-rated the tax withholding for both US and Canada based on how much time I spent in each country between the award date and the vest date of the stocks. So, does that mean I have to report the part my employer treated as Canadian income as foreign income in my US tax return, or is that considered to be income while I was a Non-resident Alien?

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  • This is a highly complex question - quite likely at the point in time you were deemed to have ceased your residency in Canada, you should have been deemed to have disposed of your assets for Canadian tax purposes. It seems this was not on your radar, so I assume there are a lot of other considerations at play, all of which might benefit from professional help. Highly recommend you seek a tax advisor specifically trained in Canada-US tax. Nov 9, 2023 at 14:20

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So, does that mean I have to report the part my employer treated as Canadian income as foreign income in my US tax return, or is that considered to be income while I was a Non-resident Alien?

No to both.

From the US perspective it is US income since the US taxes worldwide income. The US considers RSUs as current income for Federal tax purposes and doesn't prorate them.

From the Canadian perspective, the part attributed to Canada is sourced to Canada and is taxed as income earned in Canada even though you're no longer there. So you'll need to work with a Canadian tax adviser on how to report this, and reconcile the taxes.

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  • The US taxes worldwide income for citizens - that does not mean that it considers all income to be 'US-sourced'. Treaties between most countries provides what are effectively tie-breaker rules to determine who has the first opportunity to tax an income stream, often with the other country getting more or less a chance to 'top-up tax' if the amount paid is in that primary-source country. Note - I am making no comment on source of this income stream, which is a very complex issue. Nov 9, 2023 at 14:18
  • @Grade'Eh'Bacon the thing is that the US considers RSU current income and doesn't prorate it, while Canada (and some US States) do.
    – littleadv
    Nov 9, 2023 at 17:49
  • Are you sure about that, given the residency change part way through the holding period? My suspicion is that if done with foresight at the time of changing residency, the OP may have been required by Canada to report a deemed disposition, which I believe would allow for the US cost-basis to be listed at the value at the time of immigration. The fact that it wasn't done at the time of immigration makes things murkier; backfiling changes requiring foreign tax treaty leniency can be more complicated. Nov 9, 2023 at 18:15
  • @Grade'Eh'Bacon pretty sure. Yes, if you have a deemed disposition event, it may help establishing basis, but otherwise if is still US sourced
    – littleadv
    Nov 9, 2023 at 18:17

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