The IRS/CRA Income Tax Thread

[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?

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.

Thank you!

In 2007 I did file as a Canadian resident. The reason was that ever since I was in the US from 2006 I really thought I would be going back to Canada. Time went on then I was in an 'overstay' position in the USA. I got married in 2008.

I had a feeling I would have to report all my income since 2006 to the IRS to make sure things are right in their eyes. Now for 2008 - what forms or entries do I fill out for my Canadian returns?

Thanks again,

Can we hire your services?

[daisylynn 0]

Zyggy, first of all, thank you SO much for all of your time and help!

I'm so sorry for my continued questions but I'm still confused on a couple of things.

I've done my Canadian taxes by hand. Is it worth it to purchase Ufile just to compare to see if I did them right? Or is that just going to be a waste of money?

On to the US taxes...

So, I know that on my CDN return, I had to count money paid to dh after we left Canada as money paid while we were still there. But on the US return, so I count that money on the 2555, just like with the rest of the money he made while in Canada or do I have to do something differently with it since we received it after we moved. The 25% wasn't taken out, so I'm assuming we just put it on the 2555 with the rest. And the UCCB-is there some place to put that on the US return? I put that on my return in Canada, since I was the one who didn't make any money. Where does that go on the US return?

I've seen mentioned about a letter to be sent in with the US return. Does everyone need to send in a letter or was that for special circumstances?

form 1116-I'm still not clear on what this is for. I think I'm suppose to fill out the 2555. Do I fill out one or the other or both?

There was a link posted awhile back to a site of a man (another tax preparer maybe?) that I had posted a question to. I can't find the site now and I've gone back through this entire thread several times and can't find the link again. Does anyone know what I'm talking about and where I can find that link?

Much much thanks!

[zyggy 9]

Zyggy, first of all, thank you SO much for all of your time and help!

I'm so sorry for my continued questions but I'm still confused on a couple of things.

I've done my Canadian taxes by hand. Is it worth it to purchase Ufile just to compare to see if I did them right? Or is that just going to be a waste of money?

it never hurts to have a little check. See if you can get it free from someone who's used it and load it on your computer. Or better yet, use one of the on-line services that only chanrge you if you file. You won't be e-filing anyways, so it won't matter if you borrow it.

On to the US taxes...

So, I know that on my CDN return, I had to count money paid to dh after we left Canada as money paid while we were still there. But on the US return, so I count that money on the 2555, just like with the rest of the money he made while in Canada or do I have to do something differently with it since we received it after we moved. The 25% wasn't taken out, so I'm assuming we just put it on the 2555 with the rest. And the UCCB-is there some place to put that on the US return? I put that on my return in Canada, since I was the one who didn't make any money. Where does that go on the US return?

Yes, you would put it on the 2555 just like the rest.The UCCB payment would be placed on the 2555. If you received any UCCB after your leaving Canada date, you'll be getting a bill for it back.

I've seen mentioned about a letter to be sent in with the US return. Does everyone need to send in a letter or was that for special circumstances?

if you aren't a tax resident of the US through the significant presence test (in the US for more than 6 months) or the green card test (you received your GC in 2008), you would not be considered a tax resident of the US. However, your spouse can declare their intention to treat you as a resident alien for the entire tax year to be able to file as married filing joint for 2008. You do this by filing a statement of this election with the return.

form 1116-I'm still not clear on what this is for. I think I'm suppose to fill out the 2555. Do I fill out one or the other or both?

You can fill out one, the other or both depending on your circumstances. One (2555) is used to exclude foreign income if one was a tax resident of another country for an aggregate of 12 months, the other (1116) is used to take a credit of foreign taxes paid.

Generally in most of our cases, you use the 2555 to exclude foreign income earned before one entered the US and the 1116 to take a credit of the 25% non-resident tax on things like EI income. I gave a pretty good summary of this topic earlier in this thread.

There was a link posted awhile back to a site of a man (another tax preparer maybe?) that I had posted a question to. I can't find the site now and I've gone back through this entire thread several times and can't find the link again. Does anyone know what I'm talking about and where I can find that link?

Much much thanks!

No idea, but hope this helps.

Zyg

Edited March 5, 2009 by zyggy

[zyggy 9]

If you DCFed, you got your GC on entry, you pass the Green Card test, so not statement is required for you dailylynn.

[zyggy 9]

If you DCFed, you got your GC on entry, you pass the Green Card test, so not statement is required for you dailylynn.

If you DCFed, you got your GC on entry, you pass the Green Card test, so not statement is required for you dailylynn.

[L_n_O 3]

okay, so I"m here.. I don't even know where to begin..

[L_n_O 3]

Moved to USA in Nov 2007.

I live in VA and work at the Canadian Embassy (subject to Canadian Taxes - T4) and also have a PT job with an American Employer -W2..

I'm a Canadian Citizen.

Married in Jan 2008 to a US Citizen who works for a US Employer-W2 (nice and straight forward)

We also bought a house in Nov 2008.

So, Is there anyway possible that I can do our Taxes myself with Tax software for Canada and the US? or do I need to shell out $1000 and get an accountant who can do both US & Canadian Taxes to do it for us?

HELP!

I have an appt with H&R Block on Saturday.. apparently this is the only office in the area that can do Canadian & American....

[SonoranSongbird 3]

Ooh, congratulations on the house, Liz!

I am going to wade through to see if my questions are answered before posting any (in 12 pages, probably at least some have been addressed...). I think my husband is pretty clear on what to do for his Canadian taxes. He moved down here mid July and did not get his GC until January of '09, but I'm sure I will get a MUCH bigger refund if we file jointly. For now I am just posting so I will be able to find the thread again.

Thank you so much for doing this, Zyggy!!

[daisylynn 0]

Thanks Zyggy! That clears up a lot!

Are you serious about having to pay back the UCCB??? I mean, I know you're serious, but that's rediculous! I called as soon as we moved and they still paid us for that month plus one more month...for 3 kids!!! How the heck am I suppose to pay that back? Will they just take it from my taxes? (what little they are giving us?? )

So, all of his income plus the UCCB goes on 2555 and the RRSP (taxed the 25%) goes on 1116? And those are the only two extra forms I need to worry about?

I can't believe I almost have this all understood! Thank you SOOO much!!

[zyggy 9]

Moved to USA in Nov 2007.

I live in VA and work at the Canadian Embassy (subject to Canadian Taxes - T4) and also have a PT job with an American Employer -W2..

I'm a Canadian Citizen.

Married in Jan 2008 to a US Citizen who works for a US Employer-W2 (nice and straight forward)

We also bought a house in Nov 2008.

So, Is there anyway possible that I can do our Taxes myself with Tax software for Canada and the US? or do I need to shell out $1000 and get an accountant who can do both US & Canadian Taxes to do it for us?

HELP!

I have an appt with H&R Block on Saturday.. apparently this is the only office in the area that can do Canadian & American....

I would not go to H&R Block. I've worked there and quite honestly, you're in a very, very special case since you work at an embassy, with a green card. There will likely be tax treaty provisions involved and they are definitely not equipped to handle that. Your Permanent Reisdnecy status could be jeopardized if you don't do things right, the IRS and CIS recently did an amnesty program (2006) for people in your situation because of so many problems and issues. I don't know the details of it, and it would take a lot of research on my part to do so. Better to go to a DC accountant who is familiar with doing returns for embassy employees. You don't want to see yourself get caught up in the same situation.

Ask around the embassy and see where people are doing their taxes. I suggest you make an appointment with one of them and ask very specific questions regarding the taxation situation with GC holders and embassy workers.

Edited March 6, 2009 by zyggy

[zyggy 9]

Thanks Zyggy! That clears up a lot!

Are you serious about having to pay back the UCCB??? I mean, I know you're serious, but that's rediculous! I called as soon as we moved and they still paid us for that month plus one more month...for 3 kids!!! How the heck am I suppose to pay that back? Will they just take it from my taxes? (what little they are giving us?? )

So, all of his income plus the UCCB goes on 2555 and the RRSP (taxed the 25%) goes on 1116? And those are the only two extra forms I need to worry about?

I can't believe I almost have this all understood! Thank you SOOO much!!

Prima fascie, I would say yes... it looks like you've got things under control.

[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.

Thank you!

In 2007 I did file as a Canadian resident. The reason was that ever since I was in the US from 2006 I really thought I would be going back to Canada. Time went on then I was in an 'overstay' position in the USA. I got married in 2008.

I had a feeling I would have to report all my income since 2006 to the IRS to make sure things are right in their eyes. Now for 2008 - what forms or entries do I fill out for my Canadian returns?

Thanks again,

Can we hire your services?

I've been reading up on your situation. It appears there are tax treaty provisions that deal with your business situation. It's a fairly complex tax situation. Essentially, you have your Canadian corporate income, but pay yourself in the US. You will have a US Tax burden in your salary. How you expense things goes a long way toward minimizing your tax situation and filing the proper forms to shelter your Canadian corporate income under the tax treaty is important.

Cross border corporate taxation isn't really my bag.. Let's just say I know enough to be dangerous. I can point you in the right direction and help give you information to ask the right questions, but someone who deals with these situations more than I do is best for dealing with the details. Good Luck.

Edited March 6, 2009 by zyggy

[L_n_O 3]

Moved to USA in Nov 2007.

I live in VA and work at the Canadian Embassy (subject to Canadian Taxes - T4) and also have a PT job with an American Employer -W2..

I'm a Canadian Citizen.

Married in Jan 2008 to a US Citizen who works for a US Employer-W2 (nice and straight forward)

We also bought a house in Nov 2008.

So, Is there anyway possible that I can do our Taxes myself with Tax software for Canada and the US? or do I need to shell out $1000 and get an accountant who can do both US & Canadian Taxes to do it for us?

HELP!

I have an appt with H&R Block on Saturday.. apparently this is the only office in the area that can do Canadian & American....

I would not go to H&R Block. I've worked there and quite honestly, you're in a very, very special case since you work at an embassy, with a green card. There will likely be tax treaty provisions involved and they are definitely not equipped to handle that. Your Permanent Reisdnecy status could be jeopardized if you don't do things right, the IRS and CIS recently did an amnesty program (2006) for people in your situation because of so many problems and issues. I don't know the details of it, and it would take a lot of research on my part to do so. Better to go to a DC accountant who is familiar with doing returns for embassy employees. You don't want to see yourself get caught up in the same situation.

Ask around the embassy and see where people are doing their taxes. I suggest you make an appointment with one of them and ask very specific questions regarding the taxation situation with GC holders and embassy workers.

awww #######.. so no to going to H& R Block? =( My appt is in the morning! what specific questions could I ask the guy to see if he can actually handle this...?

PS. The Leafs beat the Caps last night! =) I'll post pics later

[zyggy 9]

Moved to USA in Nov 2007.

I live in VA and work at the Canadian Embassy (subject to Canadian Taxes - T4) and also have a PT job with an American Employer -W2..

I'm a Canadian Citizen.

Married in Jan 2008 to a US Citizen who works for a US Employer-W2 (nice and straight forward)

We also bought a house in Nov 2008.

So, Is there anyway possible that I can do our Taxes myself with Tax software for Canada and the US? or do I need to shell out $1000 and get an accountant who can do both US & Canadian Taxes to do it for us?

HELP!

I have an appt with H&R Block on Saturday.. apparently this is the only office in the area that can do Canadian & American....

I would not go to H&R Block. I've worked there and quite honestly, you're in a very, very special case since you work at an embassy, with a green card. There will likely be tax treaty provisions involved and they are definitely not equipped to handle that. Your Permanent Reisdnecy status could be jeopardized if you don't do things right, the IRS and CIS recently did an amnesty program (2006) for people in your situation because of so many problems and issues. I don't know the details of it, and it would take a lot of research on my part to do so. Better to go to a DC accountant who is familiar with doing returns for embassy employees. You don't want to see yourself get caught up in the same situation.

Ask around the embassy and see where people are doing their taxes. I suggest you make an appointment with one of them and ask very specific questions regarding the taxation situation with GC holders and embassy workers.

awww #######.. so no to going to H& R Block? =( My appt is in the morning! what specific questions could I ask the guy to see if he can actually handle this...?

PS. The Leafs beat the Caps last night! =) I'll post pics later

Trust me.. Block can't handle this. Don't waste your time.

[daisylynn 0]

This is seriously how I feel right now!

Just when I thought I had it all figured out too!

Ok, so I'm trying to fill out the 1116. I can't even figure out how to fill that thing out! Is it suppose to be hard to fill out?

I can't find the 2555. Is it the -T or -S? I see both in Turbo Tax and click on them but it won't pull up the form. If the 1116 is giving me this much trouble, I don't even know if I want to see the 2555.

I realized when I was starting to do these (or attempt anyway) that I don't have SSN's for our kids! I have no idea how I let that one slip by. How long does it usually take to get them? Will I get them in time to file by the deadline??

It says that we can file for EIC. I haven't seen that mentioned on here and wanted to make sure I wasn't missing something before I file for that.

And is there anything special about the state tax or do we just file that as normal? Are there extra forms for that, do we have to include anything else?

I keep seeing that turbo tax is suggested on here. Will I be able to fill it out completely with this situation and not have to paper file?

More confused than ever!