The IRS/CRA Income Tax Thread

[Inky 1,110]

Im so confused, i went to H&R block and they had no idea how to help me. Ive read through so many threads my head is spinning.

Here is my situation, and if anyone has gone through the same and can message me with what I need to do it would be life saving.

I am a US citizen. FIance came to USA on K1 in August. Married in October and has SSN number. No USA income in 2011, only canadian income.

What form do i need to file as married jointly? do I report her income or not? Can i Efile? does she have to do her canadian taxes before we do our USA taxes?

Yes you have to report her income on the US taxes. You can file a sched D i think it is to get tax credit for foreign income because it cannot be taxed twice. You can file before she files in Canada.

We file with H&R you just need to find a specialist that works with foreign income forms otherwise they wont know how to help you as you found out. We used their website to locate someone who knew how to file properly with foreign income and were lucky the office was really close to us.

[jeremiah2911 0]

I POE'd in August because I didn't know I could've waited until later and just crossed the border as a visitor and POE'd when ready. I hadn't severed my ties with Canada until end of 2011. I called CRA International tax office and am getting conflicting information about whether or not I should file as resident or non resident for 2011. I will have to file with CRA for 2012 also. I have no US income. Should I do my exit return for 2012 tax year or will that affect the IRS tax filing? I wouldn't claim GST or any other Canadian tax benefits when filing for 2011.

Also, I would assume it's best to not claim a dependant in Canada to avoid the confusion around receiving child tax benefits and just claim on my joint filing with my husband in USA?

Thanks!

[canuckbos 10]

Hi Ziggy, hope you can help us with thse questions, we are trying to figure out our tax returns for 2011.

I POE'd last summer and have Cdn employment income, Cdn E.I. and Cdn C.P.P. to report. No USA income

On the US for 1040:

1) Is Cdn wage reporterd on line 7 or line 21?

2) Is Cdn E.I. reported on Line 19 or Line 21?

3) Is CPP reported on Line 20A or Line 21?

If you could help with these questions it would be appreciated.

Thank you!

[Rayoflight 10]

CRA

Where do I mail the leaving canada tax return? Non resident addy or is that next year? I exited 12/18/2011 and had no income after that date from any sources.

[Gypsyangel 11]

An interesting article on tax facts for Canadians. I can't vouch for how accurate this article is ...

http://ca.finance.ya...-085935791.html

6 must-know tax facts for Canadians earning abroad

CBCNews.ca

Canadians can travel far and wide, but never quite far enough to avoid paying taxes. Whether you're working in a bar in Paris, or on a global trek, you may still be on the hook for paying tax on income earned.

Here are some things to keep in mind to make sure you don't run afoul of the Canada Revenue Agency on your return to Canada if you've earned money in another country:

1. Canada can tax you based on money earned here and abroad

"Residents of Canada have to pay tax on their worldwide income to Canada no matter where they earn it," says Georgina Tollstam, an accountant and Partner with KPMG.

This simply means that if you are living, working or travelling abroad but you're still considered to be a resident of Canada, you'll have to pay taxes to the federal government. So, when determining whether you are going to have a Canadian tax bill for money earned elsewhere, the first thing to figure out is if you're still considered a "factual resident" or not.

The Canada Revenue Agency defines someone as a "factual resident" if they maintain "significant residential ties" to Canada. This means you may be temporarily working outside of Canada, vacationing but still have a home in Canada, have a family living in Canada and have a Canadian drivers licence.

To cease residency in Canada, and cease paying taxes to Canada, you have to go about the process of severing residential ties. This means you must no longer have a place to live in Canada, that you have set up a place to live somewhere else, set up financial accounts in a new place, and, if married, have taken your family with you.

Tollstam said that the CRA used to use a 24-month time period to determine non residency, but that has since been eliminated from its guide. She said that basically a minimum of 18 to 24 months away from Canada is now required to be a non-resident.

2.The place where you make your income has first right to tax

But Canada will give you a credit for the tax you have to pay to the country where you earned the income.

For example, let's say you are working in the U.S. but are still considered a resident of Canada, and you earn $50,000 in the United States. If the U.S. tax on that amount was $7,000 and the Canadian tax on that amount was $10,000, Canada would give you credit on the $7,000 you paid to the U.S.

This means you would have to pay an extra $3,000 to Canada.

"You will pay double tax occasionally, but you generally should not pay double tax," Tollstam said.

3. It's still possible to get double taxed

That said, while Canada has tax treaties with different countries that override the domestic law of Canada and laws of the other countries, some non-treaty countries won't give you full credit for all the taxes paid.

4. You still have to file a return to Canada even if the tax rate is higher in the foreign country

If the tax rate is higher in the foreign country than Canada, you won't pay anything to Canada on that income.

"But you would still have to file a return and disclose that you had that income, and show [officials] that you paid the tax to the country. [Canada] wants some proof that your paid it," Tollstam said.

5. Non-residents of Canada are still taxed if they make money in Canada

Sorry, but there's no exemption from tax just because you're a non-resident.

"Let's say you live in the Netherlands but you do come to Canada to do work here for three months," Tollstam said. "Just because you live in the Netherlands doesn't mean you're not taxed on those three months of earnings."

Once you're a non-resident, generally speaking you'd cease filing regular returns. But Canadian citizens who are now non-residents may still have periodic income and investments that generate dividends that would also be subject to taxes. This income is generally taxed at a flat rate.

6. The U.S. resident formula

Unlike the factual test in Canada that determines residency, the U.S. taxes non-U.S. citizens based on a very mechanical formula. The calculation is thus: You take all the days you have lived in the United States during the current year, a third of the days you stayed in the U.S. in previous year, and one sixth of the number of days from the year before that. If the sum of those days exceeds 183, you are deemed a U.S. resident.

But it is possible to challenge that. A person can file a "closer connection" statement.

"You basically assert that you have a closer connection to another country and this is why you won't file a U.S. return," Tollstam said.

[jharries 0]

Yes you have to report her income on the US taxes. You can file a sched D i think it is to get tax credit for foreign income because it cannot be taxed twice. You can file before she files in Canada.

We file with H&R you just need to find a specialist that works with foreign income forms otherwise they wont know how to help you as you found out. We used their website to locate someone who knew how to file properly with foreign income and were lucky the office was really close to us.

What about on her canada taxes, do I have to file even though i never lived a single day in canada? im seeing conflicting answers on this topic

[jharries 0]

Hi Zyggy,

You've been so helpful. I would hate for you to have to repeat yourself, so I'll go ahead and tell you what I'm planning on doing and if you could point out any errors I'd be very grateful.

Moved to US on CR-1 visa on March 12, 2011 (wed in June 10.)

Collected EI from April to mid-June 2011 and was taxed 25%

Hubby (US citizen) lost his job in August and has been collecting EI since

I'm going to file my leaving Canada return and put my (small) income earned up until that point and pro-rate any deductions. I will file as married and list my husband but put no SIN and say that he is a US resident. I understand that I need to do a separate return for QC and I'm assuming it will be similarly done.

We're going to file here in the US as married filing jointly, where I'll take a foreign tax credit for my EI collected (converted into US funds) with form 1116. Do I pro rate any deductions based on the time that I've been in the US? My husband has been having tax withheld from his EI payments. Would we put that under our income as well?

Thanks so so so much.

when you did this did you put husbands US income on your Canada return?

[aemann 0]

Hi Ziggy,

I am in a bit of messy situation. I am a dual citizen who has been living in Canada all my life. I received my USA passport in 2010 and have not filed any taxes to the IRS. I know I do not owe any money but am confused by the whole process. I am in good standing with CRA and always use online H&R block to file my taxes.

I have a few questions to ask you.

1) Do I have to file up to 7 years of returns?

2) I have been Common Law in Canada since 2006. I reported my income as commonlaw (the equivalent to married in Canada) Would I file as married to the IRS?

3) I started owning a rental property in Canada in 2009. How does this affect my return?

4) How do I file the actual return? Is there a cheap savy online program that you would recommend for people who are unfamiliar with the forms.

5) I only have made t4 and T4rsp income. What box numbers from my T4 do I need to file to the IRS?

Any advice would be helpful.

Ad

[deltav 0]

Hi! I am a US resident for tax purposes. My wife who is a Canadian citizen lives in the US with me but commutes daily to work in Canada. She works as an independent contractor there. When filing jointly for US taxes, should I be using her Canadian Total Income or the Net Income? I ask because her net income is less than half the total income after deducting employment expenses. In the past, I just played it safe and used her total income, but this year that increased considerably and using net income versus total income is the difference between a refund and a substantial tax payment. On her CRA return, the taxable income is her net income.

Your insight would be much appreciated! I've read through a bunch of IRS publications - 519, 54, 514, 597 but it isn't clear at all to me whether I should be using total income or net income... :-(

[Canerican 242]

Hi there,

I am trying to figure out what to do for my taxes in 2014 which would be for tax year 2013. I worked for 3 months in Canada (January-March). I entered on a K-1. What do I do for my Canadian taxes and what happens with the USA taxes. My wife and I are going to file jointly. Thank you for your help.

[Canerican 242]

What forms will I need to fill out for the CRA and the IRS? As stated previously worked in Canada 3 months and have worked in the USA from end of September to December.

Edited December 11, 2013 by CDN(ON)-USA(VT)

[77happyfeet 0]

By popular demand, I am beginning a thread to share everyone's eventual cross border tax issues so it can be kept in one central place and can be continually used as a resource in this and coming years. So feel free to post and share the love and information.

Zyg

I am trying to get back to the US and I have to back file taxes. I believe it's the 1040 and not sure if it's the 2555 or 2555ez, when I figure this out how do I send them back (years 2011, 2012 & 2013)...do 2011/2012 need some sort of letter explaining why not submitted back then. thank you

[NikLR 13,227]

I just went on the serbinski website and they said you use the 2555 for excluding foreign income.

[toyboxgang 1]

I'm sure that somewhere in this thread my question has been answered, but i haven't been able to find it by search topic.

How does it work if you have income from a pension in Canada, as well as RRSP income when you immigrate to the US?

Do I continue to submit a annual CRA income tax form?

Do I only submit a IRS form indicating that I have a income from foreign sources?

I believe that I can only be taxed on this income once, is this true?

What about foreign assets? If I own a condo that I wish to keep as a vacation home but have no intentions of receiving any rental income from it do I have to declare it anywhere to the IRS?

Thanks in advance for the answers.

Steve

[ricnally 258]

By popular demand, I am beginning a thread to share everyone's eventual cross border tax issues so it can be kept in one central place and can be continually used as a resource in this and coming years. So feel free to post and share the love and information.

Zyg

I have been an LPR through K1 since Sept of 2013. I receive spousal support from my Canadaian ex-husband and paid taxes on this for 2014 to CRA. I just received a cheque for the entire amount I paid from CRA. Apparently, I don't have to pay taxes on this income in Canada since i'm not a resident. OTOH, for US taxes I filed jointly with my USC husband and our return was prepared by an accountant. I did not have to pay any taxes to the IRS for my spousal support either. Could this be right?