The IRS/CRA Income Tax Thread

[zyggy 9]

Ontario Information

Newcomers to Canada and emigrants

If you prorated any of the amounts you claimed on

lines 300 to 306, 315, 316, 318, 324, and 326 of your federal

Schedule 1, you have to prorate the corresponding Ontario

amounts at lines 5804 to 5820, 5840, 5844, 5848, 5860, and

5864

For the OHIP premium the "end of year" is defined as December 31st or the date you left Canada, so you have to pay what you owe based on your income that year, even if you leave Canada early in the year. Of course, if that amount is less than $20,000, you owe nothing.

[zyggy 9]

FOr my reply above see the following correction...

The personal exemption must be reduced by the days in Canada vs. days not resident. I do not see anywhere in the booklet where it states that the personal exemption can be taken in full with the 90% canada source income anount. I only see that it applys for the circumstances outlined above.

Add "or if you elect to file under Section 217."

[zyggy 9]

Ok I'm back.

So, after spending TOO much time trying to figure out our Canadian taxes last night, I'm so frustrated! It shows we are getting back a HUGE amount less then we were expecting. It's about 1/6 of what we would normally have gotten back (bases on the last several years). I knew it would be less, but that much less seems like a lot. Is that normal?

After doing them, I've come up with yet another question. I prorated the federal as well as the provincial. The number of days I used was the time we were actually in Canada. We physically left on May 31, so that's what I counted to. But then I realized that dh's work was still paying him for 9 weeks after we left. We were already in the US but it was still getting deposited into our Canadian bank account. They weren't taking off the 25% NR tax, just taxing it as normal. So, should I (or can I even) use the number of days up until we stopped receiving checks from them? Or do I have to use the time until we actually left Canada? Is this why it seems all messed up or would it even make a difference?

Is there something I'm missing?

Daisylynn...

Of course, if you were paid a large severance and you are limited to the deductions you can take on it based on your time in Canada (including getting popped for a full OHIP premium), I would absolutely anticipate a much less advantageous tax situation. Don't feel bad, my wife got the good bye tax shaft as well. All you can do is may sure you dotted all your eyes and crossed your t's, shrug it off, and move on.

Edited February 26, 2009 by zyggy

[daisylynn 0]

Thanks Zyggy! I was really hoping I did something wrong or wasn't understanding something right. I seriously couldn't believe how low it was when I did it. Oh well, like you said, I'll shrug it off and move on. I just hope the US taxes don't go the same way. I'm almost afraid to even do those! (not to mention the fact that I'm having a hard time understanding how to!)

[jhunjhun 7]

I don't know which one to write down.

In tax form it asks that I need to enter my province or territory of residence on Dec 31, 2008? Can I write saskatchewan even I left Canada on July 2008? OR I put Arizona?

[jhunjhun 7]

Do I need to prorate the total CPP contributions deducted based on the # of days I spent in Canada?

[zyggy 9]

Do I need to prorate the total CPP contributions deducted based on the # of days I spent in Canada?

Please read above.

[EED 0]

Hi Zyggy.

Just found out we also have couple of T5s to report, 1 for a savings acct interest and the other for a non-registered GIC that will not mature until 2010. Can we report these as a US income i.e. 1099? Or do I have to do report this as foreign income? I am also assuming that both T5s are reported in the same manner.

Thanks again for your help.

[zyggy 9]

Hi Zyggy.

Just found out we also have couple of T5s to report, 1 for a savings acct interest and the other for a non-registered GIC that will not mature until 2010. Can we report these as a US income i.e. 1099? Or do I have to do report this as foreign income? I am also assuming that both T5s are reported in the same manner.

Thanks again for your help.

You would report it as regular interest income on a Schedule B after you convert it to US Dollars.

[JillA 2]

Hi Zyggy,

US Tax Question

My husband (USC) and I (nonresident alien) are using TurboTax but won't file electronically, because I know we have to submit a letter stating that I choose to be treated as a resident alien for tax purposes. So my question is, do I also have to fill out form 2555 along with the 1040 and my letter? Also how do I convert my $$ earned in Canada in 2008, is there a specific website to use for conversion purposes? Also I cashed in my company pension but got taxed in Canada on this already when I left my job, must I include this amount under "foreign earned"? Or can I just enter the amount from my T4 and T4E (Canadian EI).

Thanks very much,

Jill

[canuckle 0]

Hello ZYGGY -

Thank you very much for you time on this thread.

My situation is this.

I entered USA in Jan 06 and have been in the USA since then.

All my income is from my Canadian consulting company ( approx $50k per yr)

I have filed a 06 and 07 tax return in Canada and nothing ever in the USA.

- I got married to a US citizen May 08 and I now just got my Green Card in Feb 09

I have to do my 2008 taxes and I will claim all in the USA to the IRS.

Questions:

What forms do I fill out for CRA?

Should I go back and try to straighten out my 06, 07 returns and advise the IRS?

I guess my real question is 'how do I make this right with the IRS and CRA?

Edited March 1, 2009 by canuckle

[zyggy 9]

Hi Zyggy,

US Tax Question

My husband (USC) and I (nonresident alien) are using TurboTax but won't file electronically, because I know we have to submit a letter stating that I choose to be treated as a resident alien for tax purposes. So my question is, do I also have to fill out form 2555 along with the 1040 and my letter? Also how do I convert my $$ earned in Canada in 2008, is there a specific website to use for conversion purposes? Also I cashed in my company pension but got taxed in Canada on this already when I left my job, must I include this amount under "foreign earned"? Or can I just enter the amount from my T4 and T4E (Canadian EI).

Thanks very much,

Jill

Based on your very limited info, I submit the following:

1) Yes - Use Form 2555, the letter and the 1040

2) The answer has been address in this thread already. Please read further for the answer

3) All foreign income to be excluded must be reported on the 2555. As long as this was done before you left Canada, it would be included on the 2555.

Are you still in Canada, or have you immigrated to the US yet? Very important.

[zyggy 9]

Hello ZYGGY -

Thank you very much for you time on this thread.

My situation is this.

I entered USA in Jan 06 and have been in the USA since then.

All my income is from my Canadian consulting company ( approx $50k per yr)

I have filed a 06 and 07 tax return in Canada and nothing ever in the USA.

- I got married to a US citizen May 08 and I now just got my Green Card in Feb 09

I have to do my 2008 taxes and I will claim all in the USA to the IRS.

Questions:

What forms do I fill out for CRA?

Should I go back and try to straighten out my 06, 07 returns and advise the IRS?

I guess my real question is 'how do I make this right with the IRS and CRA?

Based on your info, you were a tax resident of the US in 2006 and 2007. You must report your income from your consulting company to the IRS for these years. (In reality it really wasn't a Canadian consulting company in the eyes of US tax law, unless you had Canadian income taxes witheld from your receipts. I doubt if that was the case, but if it was that would make it an important distinction. I am assuming that Canadian income taxes were not withheld for my answers) You would report the income on Schedule C if you are treating yourself as self-employed.

1)In 2007, did you file as a Canadian resident? You shouldn't have, but if you did that could also be important.

2) Depending on the answer to 1) you may need to file your 2006, 2007 and 2008 taxes with the IRS. Hire an accountant to help you with this. Be prepared to pay significant penalties and interest for the self employment taxes that you're going to owe. You're going to need the expert help to minimize the amount of possible penalties and interest you could owe.

To get the best help, you need to speak with a professional that you can open the books to, preferably one who is familiar with cross border taxation. But your treatment should have been as self-employed in the US as soon as you came here permanently. Based on what you have written, filing as a Canadian resident in 2007 was likely in error. You may need some help to undo what you have already done, or strategize how to expalin your tax residency if it should come up with the IRS if necessary.

Your situation could be a slightly difficult one. Expert advice is essential.

Edited March 1, 2009 by zyggy

[JillA 2]

Hi Zyggy,

US Tax Question

My husband (USC) and I (nonresident alien) are using TurboTax but won't file electronically, because I know we have to submit a letter stating that I choose to be treated as a resident alien for tax purposes. So my question is, do I also have to fill out form 2555 along with the 1040 and my letter? Also how do I convert my $$ earned in Canada in 2008, is there a specific website to use for conversion purposes? Also I cashed in my company pension but got taxed in Canada on this already when I left my job, must I include this amount under "foreign earned"? Or can I just enter the amount from my T4 and T4E (Canadian EI).

Thanks very much,

Jill

Based on your very limited info, I submit the following:

1) Yes - Use Form 2555, the letter and the 1040

2) The answer has been address in this thread already. Please read further for the answer

3) All foreign income to be excluded must be reported on the 2555. As long as this was done before you left Canada, it would be included on the 2555.

Are you still in Canada, or have you immigrated to the US yet? Very important.

Hi Zyggy,

Thanks, I found the conversion info. I immigrated to the US on Nov. 15, 2008.

[zyggy 9]

Hi Zyggy,

US Tax Question

My husband (USC) and I (nonresident alien) are using TurboTax but won't file electronically, because I know we have to submit a letter stating that I choose to be treated as a resident alien for tax purposes. So my question is, do I also have to fill out form 2555 along with the 1040 and my letter? Also how do I convert my $$ earned in Canada in 2008, is there a specific website to use for conversion purposes? Also I cashed in my company pension but got taxed in Canada on this already when I left my job, must I include this amount under "foreign earned"? Or can I just enter the amount from my T4 and T4E (Canadian EI).

Thanks very much,

Jill

Based on your very limited info, I submit the following:

1) Yes - Use Form 2555, the letter and the 1040

2) The answer has been address in this thread already. Please read further for the answer

3) All foreign income to be excluded must be reported on the 2555. As long as this was done before you left Canada, it would be included on the 2555.

Are you still in Canada, or have you immigrated to the US yet? Very important.

Hi Zyggy,

Thanks, I found the conversion info. I immigrated to the US on Nov. 15, 2008.

Okay.. then yes... do as above.

EI income with 25% non-resident tax would be converted to US and taken as regular income. Non-resident tax would be taken as foreign tax credit using Form 1116. Also, you should consider filing your leaving Canada return under Section 217 if you earned no other US income. If your Canada source income would put you over the 25% tax bracket for your Federal +provincial, then Section 217 would not be in your best interest.

Edited March 1, 2009 by zyggy