The IRS/CRA Income Tax Thread

[mwinburn 0]

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.

Okay, that's very helpful. One clarification though. You mentioned the EI incoming goes on 1116. Does the income from her canadian job (before she moved to the USA) go on 2555? Meaning I will have both forms attached to our join USA return?

[lynamon 0]

I have a question about child support. I have been living in the US for over a year and a half and my child support payments are deposited into my Canadian account. Do I have to report and pay taxes on these amounts now that I'm in the US? (these amounts would not have been included on my Canadian tax return as they are tax exempt in Canada)

[zyggy 9]

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.

Okay, that's very helpful. One clarification though. You mentioned the EI incoming goes on 1116. Does the income from her canadian job (before she moved to the USA) go on 2555? Meaning I will have both forms attached to our join USA return?

FOr the income that was earned prior to her residing in the US, you have the choice to exclude it using 2555 or take the foreign tax credit using Form 1116. Take the option that gives you the best tax treatment (state taxes count as well).

I have a question about child support. I have been living in the US for over a year and a half and my child support payments are deposited into my Canadian account. Do I have to report and pay taxes on these amounts now that I'm in the US? (these amounts would not have been included on my Canadian tax return as they are tax exempt in Canada)

Child support is not taxable income in the US. So you would not report it.

Edited January 23, 2009 by zyggy

[Meridien 0]

Another question for you...

I am filing a leaving Canada return this year. After I established my residency in the US, I continued to do some contract work remotely for my employer in Canada. They are a Canadian company with no US presence, I was paid in Canadian dollars, deposited into my Canadian bank account. They paid me as an independent contractor and did not deduct any taxes. I am filing a Schedule C in my US taxes to report these earnings.

I am wondering if I need to report the earnings on my Canadian return as well. My understand is that I do not need to report income earned after my Canadian residence has ended - However the fact that it was a Canadian employer makes me think that maybe I do need to report it. Will I owe the 25% non-resident tax on this money? It is a relatively small amount of money - less than $10,000. Thanks!

[sly_wolf 199]

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, what is the source for the 2008 exchange rate?

Sly

[zyggy 9]

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, what is the source for the 2008 exchange rate?

Sly

Federal Reserve

Another question for you...

I am filing a leaving Canada return this year. After I established my residency in the US, I continued to do some contract work remotely for my employer in Canada. They are a Canadian company with no US presence, I was paid in Canadian dollars, deposited into my Canadian bank account. They paid me as an independent contractor and did not deduct any taxes. I am filing a Schedule C in my US taxes to report these earnings.

I am wondering if I need to report the earnings on my Canadian return as well. My understand is that I do not need to report income earned after my Canadian residence has ended - However the fact that it was a Canadian employer makes me think that maybe I do need to report it. Will I owe the 25% non-resident tax on this money? It is a relatively small amount of money - less than $10,000. Thanks!

As you were not paid as an employee but as a contractor, you are only responsible for paying income taxes to the US as the work was performed in the US. Filing the Schedule C is absolutely appropriate in this case. You do not need to report anything to CRA.

[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??

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.

Can we take the EIC and Child Care Credit then ??? And am I considered a resident for the full year ???

[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.

Can we take the EIC and Child Care Credit then ??? And am I considered a resident for the full year ???

If you elect to treat yourself as a resident for the entire tax year. If that is the case, you must declare all of your foreign income for the entire tax year. You will not be able to exclude your income using Form 2555 but you can take a foreign tax credit and you have a Social Security Card that does not say "Not valid for employment" . And you meet the other criteria, then yes, you would be eligible for EIC. Need to verify child care credit, but EIC is generally more stringent than Child Care.

[Canadia 0]

I have no foreign income since i have no been out of the US since oct 2007 (except to visit my family with the baby during the holidays)...and as far as i can see we meet all the criteria.

Thanks So much

[Meridien 0]

You qualify for the foreign earned income exclusion as the time you were outside the US before you arrived on the K1 meets the bonafied residence test for your time outside of the US.

I just wanted to confirm that this still applies if I elect to treat myself as a U.S. resident for the entire tax year?

[Meridien 0]

Oh yeah...one more thing. Do I need to do anything to make the election to be treated as a resident for the whole tax year? Is there a form that I need to file? Thanks!

[zyggy 9]

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.

Okay, that's very helpful. One clarification though. You mentioned the EI incoming goes on 1116. Does the income from her canadian job (before she moved to the USA) go on 2555? Meaning I will have both forms attached to our join USA return?

You have a choice. YOu can exclude the income that was earned in Canada prior to her arriving in the US, or you can elect to be treated as a tax resident for the entire tax year and keep the income and take a foreign tax credit on it. For the EI income that was earned after she entered the US, you MUST take the foreign tax credit. That income cannot be excluded. So yes, you can have both forms attached to your return.

I have no foreign income since i have no been out of the US since oct 2007 (except to visit my family with the baby during the holidays)...and as far as i can see we meet all the criteria.

Thanks So much

In that case, you are considered a tax resident of the US anyways since you meet the substantial presence test.

You qualify for the foreign earned income exclusion as the time you were outside the US before you arrived on the K1 meets the bonafied residence test for your time outside of the US.

I just wanted to confirm that this still applies if I elect to treat myself as a U.S. resident for the entire tax year?

No, if you elect to treat yourself as a resident for the entire tax year, you may not use the foreign income exclusion. You delcare your election by attaching a statement to your return. You will not be able to efile if you take the election.

Edited January 24, 2009 by zyggy

[Meridien 0]

No, if you elect to treat yourself as a resident for the entire tax year, you may not use the foreign income exclusion. You delcare your election by attaching a statement to your return. You will not be able to efile if you take the election.

Thanks so much for all the advice! It is my understanding that I must make the election (to be treated as a resident for the entire year) if I want to file a joint return with my husband this year. Is that correct?

[zyggy 9]

No, if you elect to treat yourself as a resident for the entire tax year, you may not use the foreign income exclusion. You delcare your election by attaching a statement to your return. You will not be able to efile if you take the election.

Thanks so much for all the advice! It is my understanding that I must make the election (to be treated as a resident for the entire year) if I want to file a joint return with my husband this year. Is that correct?

No... As long as you meet either the substantial presence test (in the US before July) or the green card test (you received your GC at any time in 2008), you are not required to make the election. You already qualify to be a resident alien for tax purposes. If you don't meet either test, then yes, you must make the election.

[LindaB 0]

Hi Ziggy,

I have a few questions (hope it all makes sense!):

I am the Canadian, we got married in June 2007, and came here on my CR1 visa in July 2008. I still commute to work in Canada every day. My husband is the U.S. citizen and is on a non-taxable disability pension.

1. Last year when I was doing my Canadian 2007 taxes, I entered that I was married and put my husbands name and that he was a non-resident of Canada. I was told once that I would not enter his income in and then a tax place and someone at CRA told me I had to put it in and use the percentage to calculate from U.S. to Canadian. (I attached a letter to my income tax saying if I had done it wrong...explaining that is was a non-taxable pension to please correct it but I got back exactly what I had entered). Yesterday, I was talking to someone at a tax place and they said I should enter "zero" as his income as it is non-taxable. Is this right even in Canada? Is so, can I go back and get CRA to adjust my 2007 income tax return? Need to know for this year too.

2. If I will still be working in Canada, do I still have to fill out the "leaving Canada" form you were talking about in other posts? I know I would click on "no" in the "were you living in B.C. on Dec 31, 2008 etc.

3. Is Turbotax fairly easy to use to do your U.S. taxes if you are claiming forgein income etc? If so, I would rather do that than pay big bucks to a tax preparer.

Thanks so much for your help! (I am sure I will think of a "ton" more questions before I am finished...lol)