Income Tax Question

[GregBu 1]

Hey guys, just hoping to get some advice.

My wife is a Canadian citizen, living in Vancouver. She's a full time student, but has had a few jobs this year, so she has some income.

I am a US citizen, living in the US, working full time with a full income.

I've read a bit about the process for filing a joint income tax return, treating her as a resident alien, even though she's a non-resident.

Essentially though, I'm trying to figure out what the financial implications are of filing jointly this way.

If I file separately, even though I have a daughter, my income tax return will be almost negligible because of my income.

It seems we'd be better off filing jointly, but I'm not sure how it treats her income when it comes to the taxes she has to pay in Canada vs. what we both owe in the U.S.

Is she going to get double taxed?

Thanks for any help or advice!

[Rustbelt 0]

The short answer is no. You will be able to offset any US taxes due from her income with the Canadian tax she's paid on that income. She is a Canadian resident for tax purposes and won't owe tax to the US.

[Lenie7 0]

Hey guys, just hoping to get some advice.

My wife is a Canadian citizen, living in Vancouver. She's a full time student, but has had a few jobs this year, so she has some income.

I am a US citizen, living in the US, working full time with a full income.

I've read a bit about the process for filing a joint income tax return, treating her as a resident alien, even though she's a non-resident.

Essentially though, I'm trying to figure out what the financial implications are of filing jointly this way.

If I file separately, even though I have a daughter, my income tax return will be almost negligible because of my income.

It seems we'd be better off filing jointly, but I'm not sure how it treats her income when it comes to the taxes she has to pay in Canada vs. what we both owe in the U.S.

Is she going to get double taxed?

Thanks for any help or advice!

I assume your wife does not hold a permanent resident card for the U.S.? If not, I would probably file a married, filing separately for your tax return because it's the easiest. My husband works in Canada (not a U.S. citizen or permanent resident yet) and that's how I filed last year. It definitely gets more complicated if she has a permanent resident card as all permanent residents and citizens of the U.S. are required to file taxes in the U.S. I guess it depends on your situation. Good luck!

[Malrothien 6]

USC living in Canada. I file "married, separate". My husband does have an ITIN, though.

[GregBu 1]

Hmm, now the other thing I'm trying to figure out is...

If I file 'married - filing jointly' in the U.S., how does she file in Canada? Does she have to file jointly? Does it even matter how she files?

[Malrothien 6]

There is no such thing as a joint filing in Canada. She will just file as married. Yes, it does matter what she files as - you do not want to misrepresent yourself with CRA.

[GregBu 1]

There is no such thing as a joint filing in Canada. She will just file as married. Yes, it does matter what she files as - you do not want to misrepresent yourself with CRA.

The most important thing to us is not misrepresenting ourselves at all, thank you.

It seems, based on some reading I've done, that she'll file married, but since I'm a non-resident with no Canadian income, she'll have to note my income, but we won't owe taxes on it in Canada.

While I could file 'married - filing separately' in the U.S., if I can file jointly and we don't owe a bunch of money on her income (which I don't think we should), the difference in my tax return is a few thousand dollars.

[PK and PK 13]

There is no such thing as a joint filing in Canada. She will just file as married. Yes, it does matter what she files as - you do not want to misrepresent yourself with CRA.

The most important thing to us is not misrepresenting ourselves at all, thank you.

It seems, based on some reading I've done, that she'll file married, but since I'm a non-resident with no Canadian income, she'll have to note my income, but we won't owe taxes on it in Canada.

While I could file 'married - filing separately' in the U.S., if I can file jointly and we don't owe a bunch of money on her income (which I don't think we should), the difference in my tax return is a few thousand dollars.

There are multiple ways to file but which is best all depends on the income and where taxes are higher. Look into form 2555 or 2555EZ. If you go by the foreign income exclusion then you can basically ignore a certain amount of the combined income and pay taxes on the rest. The other way is to use the combined income but cancel out the taxes paid in foreign country. A third option is to file as married separate return. I suggest you talk to IRS agent on their helpline. They have specialists there that will go over the details because there are specific requirements for the first method.

Edited September 15, 2009 by PK and PK

[S & J 0]

I would run the numbers on taxact.com.

We were originally going to adjust my husbands return to married filed jointly when I was in Canada but found out that you have to do use an alternative method when calculating the tax (see page 37 of the 1040 instructions). So for us, it meant owing more than him filing married filing seperately.

[Rustbelt 0]

Hi Everyone,

I wanted to add another post to this thread with respect to filing the US 1040. After reading some of the posts, it would appear that there may be some confusion as to which is the best way to file. I've had this conversation with the IRS twice since I'm the one who has been doing our taxes, both US 1040, Canadian T1s, and Canadian T2 for our corporation. When filing the US 1040, you basically have two options: Filing jointly (married) or filing separately (married). What the IRS said: You have a choice. If your spouse is a non-resident and has no legal status in the US, you can make the election to file jointly as though your spouse had legal status OR you can file separately and have your spouse file a 1040NR. It seems kind of silly to have a non-resident spouse file a 1040NR for someone who has no legal status.

We have always chosen to file jointly and use Form 2555 to exclude the foreign income. This has always proven to be a much better option rather than filing Form 1116 which basically gives you a dollar for dollar credit for foreign taxes paid - it depends on ones' situation I suppose. Once you elect a particular option, you are pretty much stuck with that election in future years. The IRS does point this out if you call them on this. This is another conversation I've had with them on about three occasions during various tax seasons as well.

While I'm not an expert, finding someone with reasonable rates to do taxes on both sides of the border was harder than doing it myself since we didn't want to pay an arm and a leg, so to speak. Basically all the help is there: The IRS helpline, CRA's callcenter, Bank of Canada and Federal Reserve / US Teasury / Oanda.com for exchange rate information, and the software (personally I use TaxAct for the US side and Genutax for the Canadian side).

Hope this helps.

Steve