The IRS/CRA Income Tax Thread

[a-jeanne 2]

Ok - here is my question. The tax guides are soooooo confusing. One says one thing and the next says another. Whew....

I am the US citizen and married a UK citizen in May 2008. He retired January 2008, came here on his K1 in March and receives a monthly portion of a Pension. He still doesn't have adjustment of status - is it beneficial to consider him as an alien or non alien resident? Where the heck do I put the pension income on the 1040 - it's only $3000?

What also has been messing up my 1040 is that in prior years, I as able to take the Earned Income Credit and Child Care Credit for my 2 daughters, but I am running into an issue with him not having income so it says I'm not eligible. HELP!

[zyggy 9]

Ok - here is my question. The tax guides are soooooo confusing. One says one thing and the next says another. Whew....

I am the US citizen and married a UK citizen in May 2008. He retired January 2008, came here on his K1 in March and receives a monthly portion of a Pension. He still doesn't have adjustment of status - is it beneficial to consider him as an alien or non alien resident? Where the heck do I put the pension income on the 1040 - it's only $3000?

What also has been messing up my 1040 is that in prior years, I as able to take the Earned Income Credit and Child Care Credit for my 2 daughters, but I am running into an issue with him not having income so it says I'm not eligible. HELP!

Your situation is somewhat more involved due to your wanting to claim the EIC and Child Care Credit and your husband not yet being a Us permanent resident. I want to look one thing up, but I won't be able to get the resource I want to look at until tomorrow night. I can give a clearer response then.

[melusine 5]

I am checking all the guides and my biggest question so far is....

For the IRS (federal US) part of things....

I will make the choice to be treated as US residents for the entire tax year

I will fill married joint

I "earned" a few months of welfare in Quebec... is it considered as income (even if it's welfare) or taxable income ?? Should I add it or no on my 1040 ?

[zyggy 9]

I am checking all the guides and my biggest question so far is....

For the IRS (federal US) part of things....

I will make the choice to be treated as US residents for the entire tax year

I will fill married joint

I "earned" a few months of welfare in Quebec... is it considered as income (even if it's welfare) or taxable income ?? Should I add it or no on my 1040 ?

Is is considered income and must be reported to the IRS. However, you can exclude the income or take a foreign tax credit for it.

[melusine 5]

Awesome ! Thank you !

And if I took out my REER (retirement thing) and paid taxes on it does it count as income as well ?

[sly_wolf 199]

This is some good information (Publication 519 - U.S. Tax Guide for Aliens) to read for starters:

http://www.irs.gov/publications/p519/index.html

Other useful reading:

The Green Card Test and the Substantial Presence Test

http://www.irs.gov/businesses/small/intern...=129390,00.html

Yearly Reporting of RRSP's:

http://www.irs.gov/pub/irs-pdf/f8891.pdf

Leaving Canada:

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html

Sly

[zyggy 9]

Awesome ! Thank you !

And if I took out my REER (retirement thing) and paid taxes on it does it count as income as well ?

Yes it does. CRA should take out a 25% non-resident tax on it. You take this as a foreign tax credit or if you did it while you were in Canada you can exclude it.

Edited January 22, 2009 by zyggy

[Canadia 0]

Question I was a student in o7 in the us before we got married Feb 14 2008 we filed our paper work and i b/c a permanent resident in july....I have been in the us the whole time since oct 2007....I had my taxes done last year and was considered no longer a resident on canada....so this year would I be considered a resident for the whole year or what do I need to do??

[zyggy 9]

Question I was a student in o7 in the us before we got married Feb 14 2008 we filed our paper work and i b/c a permanent resident in july....I have been in the us the whole time since oct 2007....I had my taxes done last year and was considered no longer a resident on canada....so this year would I be considered a resident for the whole year or what do I need to do??

If you filed a leaving Canada return with the CRA International Services Office in 2007, you need to do nothing further with them in 2008 unless you received Canadian income that did not have the 25% non-resident tax taken out.

You would continue to file a US return with the IRS.

[shawna7 4]

) Your husband must also file a Leaving Canada T1 return with CRA. To do this, you put the date he left Canada on the T1 and you must proporation exclusions by the days he was in Canada. He only has to file using the income he earned in Canada while he was a reisdent there. He does not include any income where the CRA took out the 25% non-resident Tax, unless you opt to file a leaving Canada retirn under Section 217 of the Revenue Code. In this case, one file a T1, but include all of their worldwide income, including the 25% non-resident taxes paid and any foreign income credits one would pay in the US. In almost all cases, it is not beneficial to file under Section 217 unless one had no income in the US other than Canadian EI for the rest of the tax year.

Hi Zyggy!

Please explain this part to me..lol I left Canada on January 12/08 and only recieved EI for the rest of the year..

So going by this i SHOULD file under section 217? and I assume I have to do this in Canada before I can file in the US?

thanks so much

Shawna

[mwinburn 0]

Okay, I'm confused about how EI fits into this. Here is our situation...

I'm the US citizen. My wife is Canadian. She came here on the K-1 in April and we were married in May. She has an SSN and a green card. She had a Canadian job until she came here. After she arrived, she started collecting EI and collected it through the end of the year.

For my US tax purposes, do I just total up her income from her job and the payments from EI or are they treated differently? Also, TurboTax is asking me about "physical presence" versus "bona fide residence". Do I just use "bona fide residence" and list the period as the 12 month period ending the day before she moved to the USA? (Or maybe her birth date until the day before?)

For her Canadian taxes, again, how does her job income compare to her EI income (all EI income happened after she arrived in the USA)

Thanks!

[zyggy 9]

Okay, I'm confused about how EI fits into this. Here is our situation...

I'm the US citizen. My wife is Canadian. She came here on the K-1 in April and we were married in May. She has an SSN and a green card. She had a Canadian job until she came here. After she arrived, she started collecting EI and collected it through the end of the year.

For my US tax purposes, do I just total up her income from her job and the payments from EI or are they treated differently? Also, TurboTax is asking me about "physical presence" versus "bona fide residence". Do I just use "bona fide residence" and list the period as the 12 month period ending the day before she moved to the USA? (Or maybe her birth date until the day before?)

For her Canadian taxes, again, how does her job income compare to her EI income (all EI income happened after she arrived in the USA)

Thanks!

Okay... This will answer both questions above.

1) You must file a leaving Canada return if you ceased being a tax resident of Canada in 2008.

2) In that leaving Canada return, you must report your income earned up to the date that you left Canada. You also proportion your deductions to the amount of time you were a tax resident of Canada.

3) Your EI income that you got AFTER you left Canada and was sent to the US (should have a US address on your EI statements) automatically took out a 25% non-resident tax. This income is NOT included on your leaving Canada return except if you opt to file under Section 217 of the Revenue Code. You DO report this income to the IRS and take the 25% non-resident tax as a foreign tax credit using Form 1116. The EI income CANNOT be excluded using Form 8555.

4) If you opt to file under Section 217, this means that you freely choose do your return based on your worldwide income. This means you can use all of the deductions for the entire tax year. You include all of your income made inside and outside of Canada. You also report the 25% non-resident tax EI automatically took out as a Canadian tax and you can also take a foreign tax credit if you had taxes on additional income made in the US. You should only file as Section 217 if you believe you will get a bigger refund (get a portion of the 25% non-resident tax back) than if you just do a normal leaving Canada return. Doing a Section 217 is not good for most people (your total worldwide income would place you in or over a combined 25% tax bracket (federal and provincial))

It is good for people if they had little Canadian income in 2008 (entered early in the year) and had very little US income or only EI income for the rest of the year. If you do a quick T1 and see that your income would place you over 25% taxes, then Section 217 is not for you.

[zyggy 9]

Okay, I'm confused about how EI fits into this. Here is our situation...

I'm the US citizen. My wife is Canadian. She came here on the K-1 in April and we were married in May. She has an SSN and a green card. She had a Canadian job until she came here. After she arrived, she started collecting EI and collected it through the end of the year.

For my US tax purposes, do I just total up her income from her job and the payments from EI or are they treated differently? Also, TurboTax is asking me about "physical presence" versus "bona fide residence". Do I just use "bona fide residence" and list the period as the 12 month period ending the day before she moved to the USA? (Or maybe her birth date until the day before?)

For her Canadian taxes, again, how does her job income compare to her EI income (all EI income happened after she arrived in the USA)

Thanks!

Bona fide residence would be the correct choice. You must include her EI income and take a foreign tax credit on the 25% non-resident tax. You must convert the funds to US dollars. For 2008, the official exchange is 1.0660. You can exclude the income amount that she made before she became a resident or you can take a foreign tax credit on that as well.

[zyggy 9]

Ok - here is my question. The tax guides are soooooo confusing. One says one thing and the next says another. Whew....

I am the US citizen and married a UK citizen in May 2008. He retired January 2008, came here on his K1 in March and receives a monthly portion of a Pension. He still doesn't have adjustment of status - is it beneficial to consider him as an alien or non alien resident? Where the heck do I put the pension income on the 1040 - it's only $3000?

What also has been messing up my 1040 is that in prior years, I as able to take the Earned Income Credit and Child Care Credit for my 2 daughters, but I am running into an issue with him not having income so it says I'm not eligible. HELP!

Your situation is somewhat more involved due to your wanting to claim the EIC and Child Care Credit and your husband not yet being a Us permanent resident. I want to look one thing up, but I won't be able to get the resource I want to look at until tomorrow night. I can give a clearer response then.

[zyggy 9]

Ok - here is my question. The tax guides are soooooo confusing. One says one thing and the next says another. Whew....

I am the US citizen and married a UK citizen in May 2008. He retired January 2008, came here on his K1 in March and receives a monthly portion of a Pension. He still doesn't have adjustment of status - is it beneficial to consider him as an alien or non alien resident? Where the heck do I put the pension income on the 1040 - it's only $3000?

What also has been messing up my 1040 is that in prior years, I as able to take the Earned Income Credit and Child Care Credit for my 2 daughters, but I am running into an issue with him not having income so it says I'm not eligible. HELP!

Your situation is somewhat more involved due to your wanting to claim the EIC and Child Care Credit and your husband not yet being a Us permanent resident. I want to look one thing up, but I won't be able to get the resource I want to look at until tomorrow night. I can give a clearer response then.

YOu can not get EIC if you are excluding your husband's foreign income using Form 2555. In addition, your spouse must also have a valid Social Security Number. If he entered the US on a K-1, he should have a SSN that qualifies. He definitely is considered a resident alien for tax purposes.

You income is combined, so I don't see how that would apply to you. Are you filing as MFJ. One is not eligible for EIC if you file as MFS. You would put the pension income under the pension line on the 1040 or under other income. Be sure to convert to US dollars. The exchange rate for 2008 is 1.8545. If tax is taken out, be sure to take a foriegn tax credit using form 1116.