Wait, we need to file Form 8621 for TFSAs? I thought those were exempt under the treaty? I have like 6 different funds in mine. Is there a simplified reporting method?

Unfortunately, the US-Canada tax treaty doesn't specifically exempt TFSAs from PFIC reporting. The tax-free status in Canada doesn't translate to US tax law. Each fund in your TFSA that's a mutual fund or ETF would typically require a separate Form 8621. There is a simplified reporting method called Mark-to-Market (MTM) that some people use, but it still requires yearly reporting and paying tax on any appreciation. Another option is the QEF election if the fund provides a PFIC Annual Information Statement, but most Canadian funds don't provide these. The most practical approach for many TN visa holders is to either liquidate these investments before becoming US taxpayers or work with a cross-border specialist to find the most tax-efficient reporting method for your specific situation.

I'm in a similar situation but was told different info about the withholding. Does a TN visa holder really need different withholding than regular employees? My HR insists they're doing it correctly but I'm worried about owing a bunch at tax time.

Thanks for the insight from the retail perspective. Do you think I should just go ahead and sign their paperwork to get my money back, or try to push back on the 1099-MISC part? I'm worried that signing means I'm agreeing to their classification of this as something other than a simple refund.

I would go ahead and sign to get your money back. Fighting them on the 1099 issue will likely just delay your refund further, and you've already waited almost a year. The important thing is how YOU handle it on your tax return, not how they classify it. When you file your taxes, you can properly categorize it as a refund rather than income regardless of what form they send. Just keep good documentation of the original purchase, the return attempt, and all communications about this being a refund for a returned item. That way, if there's ever a question, you have clear evidence this wasn't income.

Good point about the extra compensation. When I had a dispute with an online retailer, they refunded my original $200 purchase but added an extra $50 for my trouble. Only the $50 was considered taxable income.

This is really helpful! How did you calculate the value of housing and food to determine that you provided more than half her support? I'm trying to figure out how to quantify that properly.

For housing, I used the fair rental value of the room she stayed in (looked at comparable rooms for rent in our area) plus a percentage of utilities based on our household size. For food, I tracked grocery expenses for a couple months and calculated her portion based on that. I also included car insurance since we added her to our policy, cell phone costs since she was on our family plan, and medical expenses we covered. For her part of the support equation, I included her earnings from her part-time job, scholarships that covered room and board (not tuition), and any other financial help she received. The IRS has a worksheet in Publication 501 that helps with this calculation. The key is being able to show that your contribution exceeded 50% of her total support from all sources. In our case, the housing value alone was significant enough to clearly demonstrate we provided most of her support.

On TurboTax you should select "Other" when it asks for the relationship. Then when it asks if this person lived with you all year, select "Yes" (assuming they did, or if they were away at college but your home was their main residence). There's also a section where it will ask you to verify that you provided more than half their support.

I think I've already missed that window since it's been about 11 months since her passing, and as you mentioned, I've already completed the rollover into my 401K. I feel like I should have researched this better before making the initial decision, but I was dealing with a lot emotionally and just followed what the HR person at her company suggested.

That's understandable - these decisions often need to be made during difficult emotional times. Since the disclaimer option is no longer available, your best approach now is probably a combination strategy: First, designate her brother as the beneficiary for that portion of your 401K, ensuring he'll receive it if something happens to you. Then, work out a yearly gifting strategy once you're eligible for qualified distributions without penalties. You might also consult with an attorney about creating a simple agreement documenting your intentions, which could help clarify things for your own estate planning. Don't be too hard on yourself - you're trying to do the right thing in a system that doesn't make it easy.

This is actually not great advice. 401K loans become immediately due if you leave your job, and since OP is living overseas, that could be risky. Plus, if you can't repay the loan, it becomes a distribution with all the taxes and penalties. The gift tax concerns would still apply too.

That's a good point about the tax treaty - I didn't even think about that angle. Do you know if these tax treaties typically address dependents specifically, or are they more focused on the student's own tax obligations? Also, I've never heard of Form 8843 before. Is that something she would file separately from her regular tax return?

Tax treaties typically focus more on the student's own tax obligations rather than their status as someone else's dependent. The US-Canada tax treaty (Article XX) has provisions that may exempt certain scholarship or fellowship income from US taxation for Canadian students, but it doesn't directly address dependent status. Form 8843 is filed separately if she doesn't need to file a tax return, or alongside her tax return if she does need to file one. All F-1 students must file this form regardless of whether they earned any income, as it's essentially telling the IRS "don't count my days in the US for the substantial presence test because I'm exempt as a student.

Is the Other Dependent credit different from claiming someone as a dependent? I thought they were the same thing.