Zyggy .. I need your advice before I loose my mind!!

[lynamon 0]

Hi Zyggy ... I feel badly to ask you questions as I know you get bombarded at this time of year but my tax return is driving me right 'round the bend!!!!

I should have a fairly simple return ... I lived and worked in Canada up until July 26, 2007 and then I collected employment insurance until the end of the year. I always claimed my son as an eligible dependant and I also had daycare expenses while in Canada ... I cashed in a very small amount of RRSP's before I left and I was renting (so no sale of a house).

I'm not fully grasping the whole Section 217 thing ... I'm not sure if I put anything on line 256 of my return and when I called the Interstate office they told me that I would have to complete a T2203 for provincial taxes which they have not updated from 2006 and appears to be more for business than personal. The lady today told me that the tax withholding amount for Employment Insurance is 25% when I complete Schedule C Part 2 as there is nothing in regards to that Canadian Source Income in the Tax treaty between Canada and the US (quite frankly I got the impression that they really have no idea from the two people that I have spoke with and are just reading from cues). I'm so confused!!! What exactly is a Foreign tax credit? and does it apply to me? Arrrgggg!!!

I'm leery about taking my return to a tax person in fear that they will do it wrong ... is there tax software that you would recommend?

Your response would be deeply and sincerely appreciated

[lynamon 0]

Anyone's advice would be greatly appreciated for that matter

[zyggy 9]

Hi Zyggy ... I feel badly to ask you questions as I know you get bombarded at this time of year but my tax return is driving me right 'round the bend!!!!

I should have a fairly simple return ... I lived and worked in Canada up until July 26, 2007 and then I collected employment insurance until the end of the year. I always claimed my son as an eligible dependant and I also had daycare expenses while in Canada ... I cashed in a very small amount of RRSP's before I left and I was renting (so no sale of a house).

I'm not fully grasping the whole Section 217 thing ... I'm not sure if I put anything on line 256 of my return and when I called the Interstate office they told me that I would have to complete a T2203 for provincial taxes which they have not updated from 2006 and appears to be more for business than personal. The lady today told me that the tax withholding amount for Employment Insurance is 25% when I complete Schedule C Part 2 as there is nothing in regards to that Canadian Source Income in the Tax treaty between Canada and the US (quite frankly I got the impression that they really have no idea from the two people that I have spoke with and are just reading from cues). I'm so confused!!! What exactly is a Foreign tax credit? and does it apply to me? Arrrgggg!!!

I'm leery about taking my return to a tax person in fear that they will do it wrong ... is there tax software that you would recommend?

Your response would be deeply and sincerely appreciated

Okay...

Take a deep breath.. it'll be okay... You should do your tax return two ways and pick the way that benefits you the most. Not Section 217 (Actually Section 216)... and Section 217.

First - Do the Non Section 217 Leaving Canada return.

1) You do not have to report your EI payments on your T1 that were earned after you left the US and had the 25% tax taken on it.

2) The T2203 does relate to business income, so I'm not sure why you would need that either... Did you call the International Tax Services Office directly?It seems like you did and they're responses surprise me because they're usually really good... at least they were in the past.

3) A foreign tax credit would not apply to you for a Leaving Canada return that is NOT done under Section 217. Unless of course you had foreign income of some source that had taxes taken out of it before you left. But it doesn't seem like that is the case.

4) If you cashed in your RRSP's before you left, that will need to be counted as income and in some cases may have actually worked against you. Water under the bridge for you, but something others should consider before doing it. I had to keep my wife from cashing her's in before she left because it would have resulted in a bigger tax bite.

5) Don't forget to include the Ontario health premium... it has to be paid December 31 or the date you left Canada... so they get you either way.

Do it the non Section 217 first... then we'll tackle if Section 217 is right for you.

[lynamon 0]

So then when my husband and I do our taxes here I add the amounts received from Employment insurance as income ?

[lynamon 0]

So then when my husband and I do our taxes here I add the amounts received from Employment insurance as income ?

(on our US tax return) ..

and am I to prorate the non-refundable tax credits by the percentage of time in Canada (207 days in)?

[zyggy 9]

So then when my husband and I do our taxes here I add the amounts received from Employment insurance as income ?

(on our US tax return) ..

and am I to prorate the non-refundable tax credits by the percentage of time in Canada (207 days in)?

Yes and Yes...

But you can cliam the 25% tax on it as a forign tax credit.

Edited February 22, 2008 by zyggy