RSUs and Pay After a Canada–US Move

Why did both countries withhold tax when my RSUs vested after the move?

Two payroll systems can withhold on the same award because your current residence and your earlier work location both matter. Withholding is an advance payment; it does not decide which country ultimately taxes the income or how much you owe.

A stock-settled RSU normally creates employment income when shares are transferred, often at vesting. The IRS distinguishes grant, vesting and transfer dates. The Canadian employer or parent may also have reporting and withholding duties. Check the award terms: an actual transfer of restricted shares, a promise to deliver shares later and a cash-settled unit can have different tax dates.

The Canada–US treaty's employment article generally allows the country where employment was exercised to tax the pay for that work. An exception can reserve tax to the residence country if pay for work in the other country is no more than $10,000 in that country's currency for the calendar year. Another applies if presence there is no more than 183 days in any twelve-month period starting or ending in the relevant fiscal year, and the pay is neither paid by or for a resident there nor borne by a permanent establishment there. The payment date alone does not move earlier work to the new country.

Which workdays count when I split an RSU vest between Canada and the US?

Treat each scheduled batch of shares that vests on a different date separately. For each batch, start with the service period that earned it, usually grant through vesting, and count actual days worked in each country. Divide the Canadian or US workdays by all workdays for that batch; do not split solely at the move date or use calendar days without checking the award terms.

For a Canadian nonresident return, also count work done outside Canada while you were still a Canadian resident. A pre-move business trip abroad can therefore be in Canada's taxable share; check the treaty before treating that share as final Canadian tax.

The IRS's multiyear compensation rule uses the period to which pay is attributable and the days services were performed in each place. Its stock award guidance generally uses grant through vesting for RSUs. A grant for past performance, a modified award, leave or continued service after a move can change the period. Make a separate schedule for each tranche, including days worked remotely, while travelling and after the move. If the plan does not show what each tranche rewards, the allocation needs judgment.

Which returns report stock awards that vest after I leave one country?

Report the award on the return for the year the taxable benefit is recognized, applying your tax residence for that period and the source of the earlier work. A nonresident can still owe tax on the former country's share, while a resident generally reports worldwide taxable income.

The Canadian nonresident guide specifically includes benefits for Canadian duties performed in an earlier year. Treaty relief can remove part of a source-country charge, but the income and exemption may still need to appear on that country's return. If US tax residence begins or ends during the move year, dual-status filing rules may require a Form 1040 or 1040-NR return with a statement for the other part of the year. Determining the dates you became resident belongs with moving from Canada to the US or moving from the US to Canada.

How do stock options differ from RSUs in timing and workday allocation?

An option is a right to buy shares later. An ordinary nonstatutory option generally produces employment income at exercise, measured by the share value less what you paid; an RSU commonly produces it when shares or cash are delivered. The option type and employer can change the taxable year. Restricted stock transferred before vesting is another arrangement. For restricted shares, the employee can sign and file a section 83(b) election within 30 days after transfer to move US income to the transfer date; RSUs and options cannot use it. Eligible private-company RSUs and options can instead qualify for a section 83(i) deferral election, signed and filed by the employee within 30 days after the stock first becomes transferable or no longer subject to forfeiture. Check the agreement rather than its label. (IRS; CRA)

After a US-to-Canada move, a US incentive option may therefore produce Canadian employment income when shares are acquired but no US regular-tax income until sale. Match the tax years before considering a credit; a US sale that fails the option's holding rules can turn part of the gain into wages. (IRS; CRA)

For a qualifying employee option, Annex B of the treaty protocol generally uses days when the employee's principal place of employment was in each country from grant to exercise or disposal, limited to days employed. That can differ from the IRS's general grant-to-vesting approach. Do not apply the RSU schedule to an option without checking which rule controls the return and credit.

Where do my last paycheque, bonus, vacation pay or severance go if paid after the move?

Ordinary wages and a bonus for identified work follow where that work was done, even if paid later. For mixed-country work, allocate to the days or other documented period that earned the payment; the employer's location and the bank account receiving it do not set the source. (IRS; CRA)

For US pay earned before Canadian arrival but received afterward, Canadian law generally recognizes employment pay when received, while the CRA newcomer summary says pre-arrival foreign earnings are not taxed. Confirm the Canadian treatment of that pay or vest before filing.

If you still commute or work remotely across the border, see working across the border; the continuing pattern needs its own wage and award allocation.

Is employer withholding my final tax, and how do I recover excess?

For these employment payments, compare withholding with the tax calculated on each required return. A W-2, T4 or pay statement records what payroll withheld; it is not proof that the entire award was sourced to that country.

Reconcile each T4 and W-2 to the award, workday schedule and tax withheld. Claim Canadian withholding on the Canadian return and US withholding on the US return; a foreign tax credit depends separately on eligible final tax. Ask payroll for its sourcing worksheet and a corrected slip if reported income or withholding is wrong. If you are a US nonresident and the employer will not correct a W-2 that includes foreign-work option income, report the US-taxable part and attach a statement reconciling it to the W-2. File the required returns to recover excess withholding from the country that collected it. (IRS; CRA)

For a calendar-year Form 1040-NR, the general filing date is April 15 after the tax year if you had wages subject to US withholding, or June 15 otherwise. Most Canadian personal returns are due April 30 after year-end; a section 217 election has the separate deadline above. A US income-tax refund claim generally must be filed within 3 years after filing the return or 2 years after paying, whichever is later; the amount recoverable can be limited because withholding is treated as paid on the original return due date. Canada can refund an individual's late-filed overpayment if the return is filed within 10 calendar years after the tax year. Extensions and holiday rules can change a filing date.

Social security and Medicare taxes, CPP, QPP and EI are separate from income-tax withholding. Check the Canada–US social security coverage agreement and any coverage certificate. For US social security or Medicare tax withheld in error, request an employer refund first, then use Form 843 if the employer cannot refund it. Canadian CPP or QPP overpayments can be reconciled on the Canadian return. The US does not credit Canadian social security contributions; the income-tax treaty can allow Canada to credit eligible US social security tax on US-source income.

Which country gives relief when the same pay is taxed twice?

First determine the source-country tax that the treaty permits; seek a refund there for any excess. The country taxing you as a resident generally considers a credit for final, eligible tax on the other country's work share, subject to domestic limits and the treaty's double-taxation article.

Refundable excess source-country tax does not become a credit in the other country. A US citizen living in Canada has special treaty credit ordering; see when you need a cross-border accountant to coordinate the returns. For forms and limits, see Canadian foreign tax credits and US foreign tax credits.

Can California still tax an award after I leave, and how do I check another state?

Yes. California taxes a former resident's award income attributable to California services; its RSU guidance allocates a post-departure vest using California workdays from grant to vest. For nonstatutory options earned in and outside California, Publication 1004 calls for a reasonable allocation. One method counts workdays from grant to exercise, or employment end if earlier; the federal or treaty period may differ.

Check the former and new states' tax agency instructions for part-year and nonresident compensation, stock awards, workday allocation and any credit for tax paid to another state. California uses Form 540NR for its sourced portion. State tax and provincial tax require separate review; the federal treaty does not itself settle a state filing.

A new state of residence can tax the whole award when recognized. California's other-state credit excludes foreign-country tax; New York's Form IT-112-C can credit eligible tax paid to a Canadian province on income taxed during New York residence. Check that state's rules before assuming Canadian tax reduces state tax.

What cost basis do I use when I later sell the shares?

Track the share sale separately from the employment benefit. For US tax, a typical share-settled RSU starts with the full share value when delivered. Shares from an ordinary nonstatutory option generally start with the exercise price plus the full compensation spread, even if only part was US-source income. A statutory option can have a different regular-tax and alternative-minimum-tax basis. Calculate Canadian basis separately under Canadian rules. Compare each basis with sale proceeds to find the later gain or loss. (IRS RSU example; IRS stock options; Canadian cost rules)

Keep separate US-dollar and Canadian-dollar calculations, including exchange rates on the relevant dates. Check any broker statement against the payroll benefit and shares sold; IRS guidance warns that some broker-reported option basis excludes compensation already included in income. Shares owned before the move can have a different Canadian basis; Canadian departure tax and moving from the US to Canada cover that boundary.

What records show my grant period, workdays, vest value and tax paid?

Build a separate record for each award tranche and delayed cash payment. The workday schedule explains source; the slips and returns explain timing, withholding and final tax.

The CRA asks for US returns, W-2 information and proof of tax paid when reviewing a Canadian foreign tax credit. Keep the grant-to-vest and, for options, grant-to-exercise workday schedules so either tax agency can follow the allocation.

Example

Illustrative US-dollar amounts only; no tax or credit is calculated. An employee receives an RSU tranche worth US$10,000 when shares are delivered after moving from Canada to the US. The grant-to-vest period falls within one calendar year and has 100 workdays: 60 before the move, all in Canada, and 40 after it, all in the US. The split assigns US$6,000 to Canadian services and US$4,000 to US services. If the employee is a US tax resident when shares are delivered, the US return generally reports the full US$10,000. Convert the Canadian share to Canadian dollars and add other pay for Canadian work in the relevant year before checking the treaty's $10,000 limit and short-presence test. If a treaty exception bars Canadian tax, seek a Canadian refund; otherwise, any US credit depends on final Canadian tax. A different service period changes the split.

Different for you?

• You still commute or work remotely in both countries: see working across the border.
• Your residency start or end date is uncertain: see moving from Canada to the US or moving from the US to Canada.
• You held shares when you left Canada: see leaving Canada for departure tax. Employee security option rights and most unpaid pay rights are generally excluded from the deemed sale.
• You give up US citizenship or a long-held green card: a covered expatriate's unvested awards can face accelerated US tax or later withholding, depending on the award. See US exit tax.
• You need to calculate a credit: see Canadian foreign income or US foreign income.
• You own the company that granted the option: check whether the award paid you for work or came from your position as a shareholder; bring the agreement to cross-border tax.
• You have overlapping credits, an option with different allocation periods, severance or two states taxing the same award: bring the grant terms, workday records and tax slips to cross-border tax. The treaty and credit limits can change the result.