E-2 Visa Move: Your Canadian Taxes and What You File in Year One

Move to the US on an E-2 part-way through the year and you’ll usually end that year a US tax resident and a Canadian non-resident, holding a bigger filing stack than either country tells you about. Year one normally means a final Canadian return with a departure date, the departure forms if you left property behind, a dual-status US return, an FBAR covering your Canadian accounts, and Form 5471 if you kept your Canadian corporation. Almost all of that work traces back to the business and the corporation you own.

This page is written for a Canadian resident moving to the US on an E-2 to buy a business or build one, alone or with family. If you’re moving as an employee on a TN instead, that version is here.

What happens in year one, in what order?

Six moves, and the order matters because the departure date and the day count feed everything after them.

Step	What happens	Trigger	Form(s)	Where it’s covered
1	Your Canadian departure date gets fixed by the facts: the day your residential ties actually sever	Residential ties sever, usually around the move date	None yet	This page + the leaving-Canada checklist
2	You count US days for the substantial presence test	31 days plus the weighted 183-day math	None	This page
3	Canada deems you to have sold most property at fair market value	Ceasing Canadian residence	Reported on the final T1 package	The departure tax guide
4	You file the final Canadian return with the departure date on it	The year of the move	Final T1, T1161 if reportable property left behind tops $25,000, T1243 for the deemed sales	Same guide
5	You file your first US return, dual-status by default	Meeting the substantial presence test	Form 1040 stack	This page
6	You report your non-US accounts, and the corporation if you kept it	Over $10,000 in accounts; control of the corporation at any time in the year	FinCEN Form 114, Form 8938 if thresholds are met, Form 5471	This page

Does moving on an E-2 visa make me a US tax resident?

If you land in the first half of the year and stay, almost certainly yes, in that same year. The E-2 has no special tax treatment. US tax residency for a non-citizen runs on the substantial presence test: at least 31 days in the US in the current year, and 183 weighted days across three years, counting all of this year’s days, one third of last year’s, and one sixth of the year before that.

The IRS keeps a short list of exempt individuals whose days don’t count, and E-2 investors aren’t on it. Foreign-government staff on A or G visas, teachers on J or Q, students on F, J, M, or Q, and certain athletes get carve-outs. An investor running a business gets none, so every day you’re physically in the US counts toward the test.

Meeting the test tells you that you’re a resident. It doesn’t tell you from when. Your residency starting date is generally the first day you were present in the US during the calendar year you met the test (IRS, residency starting and ending dates), so a February house-hunting trip can pull the start date back months ahead of the actual move and shift where the dual-status line falls.

Land later in the year and the math can go the other way, which flips the whole first-year filing picture. The worked example in the US filing section below runs an October version of the same move. So the move date is a planning lever, and worth choosing on purpose if the business deal gives you any room.

An early landing gives you a clean, nearly-full resident year, and a mid-year one gives you a dual-status year. Land late enough and you can stay a nonresident until January, which pushes the US reporting stack a full year out while you get the business on its feet.

Even the late landing isn’t fixed once you’re here. A nonresident who becomes a US resident under the substantial presence test in the following tax year can make the first-year choice under IRC 7701(b)(4) and be treated as a dual-status resident for the arrival year instead, if certain tests are met (IRS, taxation of dual-status individuals). None of these outcomes is automatically better. They carry different paperwork, and it’s cheaper to know which one you’re buying before you book the flight.

Do I stop being a Canadian tax resident, and what does leaving trigger?

Usually, yes, on the day you move. Canadian tax residency follows your residential ties, so when you, your spouse, and your home all shift to the US, your Canadian residency generally ends on the departure date, and that date goes on your final Canadian return. The full ties analysis, and the trap of leaving too many behind, is walked through in the leaving-Canada tax checklist.

One mismatch shows up over and over in E-2 files: the visa date and the tax departure date are different things. The E-2 stamp in your passport says when you were allowed to move. Your Canadian departure date is about facts on the ground, when your home and your day-to-day life actually shifted south. A family that lands in March while the house sells in August, or an owner who commutes for months before the family follows, can have a departure date nowhere near the visa date, and picking the wrong one distorts both countries’ returns at once.

The expensive part is what the exit triggers. Under section 128.1(4)(b) of the Income Tax Act, the day you cease residence you’re deemed to have disposed of most of your property at fair market value, whether or not you sold anything. The statute carves out Canadian real property, capital property used in a business you carry on through a permanent establishment in Canada, and excluded rights or interests, which is where registered plans like RRSPs, RRIFs, TFSAs, and RESPs sit. Everything else gets marked to market and the paper gain lands on your final return.

One carve-out matters more here than it does on a typical departure. E-2 status runs on treaty-country nationality, so a fair number of E-2 movers arrived in Canada from somewhere else fairly recently. If you weren’t resident in Canada for more than 60 months during the 120 months ending when you leave, section 128.1(4)(b)(iv) takes property you already owned when you last became a Canadian resident out of the deemed disposition entirely.

T1161 lists the reportable property you still own when you leave, required when its total fair market value tops $25,000 (Income Tax Act, section 128.1(9)), and T1243 reports the deemed dispositions themselves. The forms, the penalties for skipping them, and the deferral election are covered in the departure tax guide, so this page won’t rebuild them. For a quick read on your own numbers before you book the move, run the departure tax estimator.

Will Canada and the US both tax the same income?

Usually each dollar ends up taxed on one side of the line. Canada taxes you as a resident up to your departure date, and the US taxes you as a resident from your residency starting date, so most of the year’s income falls cleanly into one window or the other. Where the two do overlap, the relief is the foreign tax credit: Form 1116 claims a credit on your US return for income taxes you paid or accrued to Canada.

The overlap gets real when the ties don’t move on schedule. A house still on the market or a spouse still in Ontario can leave you resident in both countries at once under each country’s own rules. The IRS calls that a dual resident taxpayer and says the treaty between the two countries has to carry a provision resolving the conflicting residence claims. The Canada-US treaty does, and taking that position on a US return is a disclosure item on Form 8833.

How do I file my first US year on an E-2?

For most E-2 movers the first US return is a dual-status return. Land mid-year, meet the substantial presence test, and you don’t elect into that; it’s what the year looks like when residency starts partway through, and arrival and departure years are the common ones (IRS, taxation of dual-status individuals).

For the resident part of the year you’re taxed on income from all sources, worldwide. For the nonresident part, US-source income only. Your Canadian salary from January to June stays off the 1040; the business income after you land goes on it.

Dual-status comes with mechanics that surprise people. You can’t take the standard deduction (itemizing is the fallback), and a joint return is generally off the table, with one exception: an election available when you’re married to a US citizen or resident at year-end. Whether that election beats dual-status depends on how much pre-move Canadian income it would drag onto the US return, and the TN first-year guide works that comparison in detail, so we won’t repeat it here.

What’s different for an E-2 owner is what happens around the return. An employee lands into payroll withholding. You land into a business you own, paying yourself draws or salary out of it, and no one withholds anything until you set it up. Estimated payments and the bookkeeping behind them start the month you take over, and catching that up in April is the expensive way to do it.

Do I owe state tax in the state I move to?

Probably, and it’s a question this page doesn’t answer. States write their own residency rules and their own returns, so an E-2 owner who lands in a state with an income tax usually picks up a part-year individual state return plus state-level filings for the business, in the same year as everything else here. States set those rules independently of the federal day count, so your federal answer can be right while the state answer goes the other way. Where the business sits and where you actually live both drive it, so it gets sorted alongside the rest of the year-one work.

What happens if I keep my Canadian corporation after the move?

Keep it, even dormant, even just holding cash, and once you’re a US tax resident you’ve almost certainly picked up a Form 5471 filing. Form 5471 is the information return for US persons who are officers, directors, or shareholders in certain foreign corporations, and the control category catches anyone who, at any time during their tax year, holds stock with more than 50% of the total voting power or more than 50% of the total value. A sole owner of a Canadian corporation is squarely inside it. The form attaches to your 1040 and files with it, and it’s dense enough that preparing it often costs more than the return it rides on.

Before any of that, the shares themselves go through the Canadian exit. Private company shares aren’t on the section 128.1(4)(b) exception list, so they’re deemed disposed of at fair market value on departure the same way a brokerage account is. For an owner whose corporation holds the retained business or years of retained earnings, that deemed gain can be the largest single number in the move year, and the departure tax guide carries the mechanics.

The corporation also changes character on the way out. A Canadian-controlled private corporation can’t be one that’s controlled, directly or indirectly in any manner whatever, by non-resident persons (Income Tax Act, section 125(7)), so the day its only shareholder becomes a US resident and a Canadian non-resident, it stops being a CCPC. Section 249(3.1) then deems the corporation’s taxation year to end immediately before that moment, with a new taxation year starting at that time and a narrow election available when the change lands close to the normal year end. In filing terms that’s a stub-period T2 in the move year on top of the normal one, and a corporation that no longer gets CCPC-only treatment going forward.

If the 5471 is coming, get ahead of what it asks for. Expect it to want the corporation’s financial statements for its year, your ownership history, and the transactions between you and the company, which means the books have to be current even if the company did nothing but sit on cash. Owners who let a dormant corporation’s bookkeeping lapse in the chaos of the move end up reconstructing it under a US filing deadline, and that reconstruction is one of the more annoying pieces of year one.

The 5471 is the reporting layer. There’s a tax layer under it: a foreign corporation controlled by US shareholders can push part of its own income onto the owner’s US return as current US tax through Subpart F and the GILTI inclusion under section 951A, which gets computed on Form 8992. Whether that bites, and how hard, depends on the facts. It’s the reason the keep-or-wind-up call belongs before the move, and it’s the next guide planned off this page.

If you controlled the corporation at any time during the year, budget for the 5471, even if you wound the company up or sold it in the fall. Skipping it isn’t cheap.

Which accounts do I have to report once I’m a US resident?

More of them than you’d guess, starting with plain chequing accounts. Once you’re a US resident, the FBAR applies if you have a financial interest in, or signature authority over, accounts outside the US whose aggregate value topped $10,000 at any time in the calendar year. That sweeps in your Canadian chequing, savings, investment accounts, RRSPs, and TFSAs together. It’s filed on FinCEN Form 114, separately from your tax return, due April 15 with an automatic extension to October 15.

Form 8938 can stack on top of the FBAR for the same accounts once its thresholds are met; the thresholds and the part-year wrinkle are laid out in the TN first-year guide.

Simplify before you leave. Every dormant account you close before the move is one fewer line on every report, every year, for as long as you’re a US resident. That doesn’t mean liquidating anything blindly, and registered accounts in particular deserve a real decision before anything gets closed. A TFSA that’s tax-free in Canada isn’t tax-free to the IRS, it can drag Form 3520 and 3520-A along with it, and what to do with each registered account before the move is covered in what happens to your RRSP and TFSA when you move.

What does the whole year-one filing stack look like, in order?

This is the core stack for a mid-year E-2 mover who kept a Canadian corporation, which is the densest common version of year one.

Form	Country	What it does	Trigger	When
Final T1 with departure date	Canada	Closes out Canadian residency; reports the year’s income plus deemed gains	Ceasing Canadian residence	Departure year’s normal T1 filing season
T1161	Canada	Lists reportable property owned at departure	Reportable property over $25,000	With the final T1
T1243	Canada	Reports the deemed dispositions	Deemed disposition on exit	With the final T1
T2 corporate returns, including a stub year	Canada	The corporation’s own returns for the move year	Losing CCPC status deems a taxation year end mid-year, so the move year splits into two	The corporation’s own filing deadlines for each period
Form 1040, dual-status	US	First US return; worldwide income from residency start, US-source before it	Meeting the substantial presence test mid-year	The US filing season after the move year
State return(s)	US	Individual and business filings in the state you land in	State residency and business rules, set separately from federal	The state’s own filing season
FinCEN Form 114 (FBAR)	US	Reports non-US accounts	Aggregate over $10,000 at any time in the year	April 15, auto-extended to October 15
Form 8938	US	Reports foreign financial assets on the return	Its own thresholds, if met	With the 1040
Form 5471	US	Information return for the retained Canadian corporation	Control of a foreign corporation at any time in the year, over 50% by vote or value	With the 1040

Every row above traces to the linked guides and sources on this page, and the list isn’t exhaustive. A trust-form TFSA can add Form 3520 and 3520-A, and whatever entity you buy or form on the US side brings its own returns and its own state filings. If you want this stack mapped to your own facts before anything gets filed, that’s exactly what the $249 Cross-Border Assessment is for: a written, CPA-reviewed read on your specific move, corporation, and accounts.

How is this different from moving on a TN?

The residency math is identical. After that the two files diverge, because a TN mover is an employee and an E-2 mover owns the business paying them. That changes the income type and puts getting tax paid during the year on you.

	TN employee	E-2 owner-operator
Year-one US income	Salary from a US employer	Business profit, plus the draws or salary you pay yourself
Residency test	Substantial presence test, days count the same	Substantial presence test, days count the same
Withholding	Payroll from day one	None until you set it up; estimated payments are on you
Entity filings	Usually none	The business’s own returns, plus Form 5471 if a Canadian corporation stays behind
The first-year election question	Often the biggest year-one decision	Usually smaller than the corporation and business-structure decisions
Read	The TN first-year guide	This page

If you’re weighing the two visas themselves, that’s an immigration question for an immigration lawyer. This table is only the tax side.

What does year one honestly cost?

More than a normal year, on both sides, and mostly because of how many separate filings the move creates rather than the tax itself. The Canadian side carries the final T1, the departure forms, and the corporation’s own returns if it’s still alive.

The US side carries a dual-status return, which is more work than a standard 1040, plus the FBAR, possibly Form 8938, and the 5471 if the corporation stayed. Add the business’s own federal and state returns and the whole first year typically runs into the low thousands in professional fees for an owner-operator file. Current published ranges are on the pricing page.

A departure date and a residency start that don’t line up cleanly is one of the reliable cost drivers. So is a corporation nobody made a decision about before the move. Both are cheap to sort out before you land and expensive after.

The $249 Cross-Border Assessment sits at the front of that sequence on purpose. It’s a fixed-price written review of your specific move, done before you commit to the filings, so the departure date and the corporation question each get an answer while they’re still cheap to change.

What’s the order of operations for an E-2 move?

1. Set the move date, and check what it does to your US day count for the year.
2. Run the departure tax estimator on your non-registered holdings and any private company shares.
3. Decide what happens to the Canadian corporation early, and expect a 5471 for any year you controlled it.
4. Move, and document the date your Canadian ties actually ended.
5. File the final Canadian return with the departure date, T1161, and T1243.
6. File the first US return, dual-status for most mid-year movers.
7. File the FBAR, and Form 8938 if you’re over its thresholds.
8. Set up payroll or estimated payments for the business so year two runs clean.
9. Check what the state you landed in wants, because none of the above answers it.

A few E-2 questions are big enough to need their own space, and they’re the next guides off this page: choosing between an LLC and a C-corp for the business, funding the E-2 investment out of your Canadian corporation, tax diligence on the business you’re buying, and what US ownership does to the corporation’s own tax bill.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.