I'm about to file my U.S. tax return for 2017. In August of 2017, I moved to Canada from the U.S. for graduate school (I am a U.S. citizen). I was on a vacation during April 15th, 2018 and quickly googled to see that if you live outside of the U.S. on April 15th, 2018 you automatically qualify for a two-month extension of your taxes. I later am reading that I still will need to pay interest on what I owe (I did not expect to owe anything, based on previous returns, see below).
I have not yet filed my Canadian taxes, which are past due, due to the CRA not accepting my netfile, but will do so soon when I have the time to wait on the government phone line during my normal work hours. The CRA owes me about $70 CAD so there is no rush in filing the return.
My big question is as follows. I am filing as a Canadian Resident for tax purposes; however, I still need to report my worldwide income to the IRS. Due to tax treaties, I will not be double-taxed on this earning. However, my income in Canada was largely from an untaxed scholarship and TA earnings that were low enough to not be liable for federal income tax. So my turbotax return in the U.S. is happily claiming I never paid any tax on my Canadian earnings and causing about an additional $1000 of tax liability in the U.S.
This seems bizarre. I do not qualify to exempt the income because I just moved to Canada. Yet, if I had been living there either as a bona fide resident or was physically present for 330 days I would not have the additional $1000 of tax liability. For example, in 2018 I would likely qualify (though this is up for debate as I am currently in the U.S. on a summer internship).
Am I missing something important? This mid-calendar-year move seems to have a pretty bad side effect for me.