Need some advice for an American in Canada
Moderator: Mark T Serbinski CA CPA
nelsona, I have a question about a few things I came across:
I was looking through a few of my wife's previous CRA returns and specifically the T1 and how it correlates to the 1040 and this is what I noticed:
On the T1 - line 101 shows employment income from T4
line 117 shows the UCCB from RC62
line 119 shows EI benefits from T4e
line 121 shows interest from savings account, something like $100...from
T5
line 150 shows the total of all the above and this shows on the notice of
assessment line 150
On the 1040 the CPA basically transferred the total income from line 150 of the notice of assessment to line 7 of the 1040, so her total income from Canada WAS reported and no taxes were required to be paid to the IRS because she was well under the exclusion amount, but I'm wondering if the 1040 was filled out correctly?
Should line 119 of the T1 be shown on line 19 of the 1040, line 121 of the T1 shown on line 8a of the 1040, not sure where line 117 of the T1 would go...etc etc. Basically line 150 of NoA shows up in line 7 and 21 of the 1040 and then the foreign income exclusion applied...
The reason I ask is that I have to file 8891's, schedule B's and 1040x for 2008,09,10 and originally I was only going to fill out part III of the 1040x with the explanation that I am back filing the 8891 to be in compliance and no taxes due....Do I need to also correct the above info?
I'm thinking that as long as the total income from Canada was reported and no taxes due to IRS then the original 1040's should be ok or is that not correct??
I was looking through a few of my wife's previous CRA returns and specifically the T1 and how it correlates to the 1040 and this is what I noticed:
On the T1 - line 101 shows employment income from T4
line 117 shows the UCCB from RC62
line 119 shows EI benefits from T4e
line 121 shows interest from savings account, something like $100...from
T5
line 150 shows the total of all the above and this shows on the notice of
assessment line 150
On the 1040 the CPA basically transferred the total income from line 150 of the notice of assessment to line 7 of the 1040, so her total income from Canada WAS reported and no taxes were required to be paid to the IRS because she was well under the exclusion amount, but I'm wondering if the 1040 was filled out correctly?
Should line 119 of the T1 be shown on line 19 of the 1040, line 121 of the T1 shown on line 8a of the 1040, not sure where line 117 of the T1 would go...etc etc. Basically line 150 of NoA shows up in line 7 and 21 of the 1040 and then the foreign income exclusion applied...
The reason I ask is that I have to file 8891's, schedule B's and 1040x for 2008,09,10 and originally I was only going to fill out part III of the 1040x with the explanation that I am back filing the 8891 to be in compliance and no taxes due....Do I need to also correct the above info?
I'm thinking that as long as the total income from Canada was reported and no taxes due to IRS then the original 1040's should be ok or is that not correct??
Each item of income must be reported on the correct line on 1040 by type.
Underreporting on any line is underreporting. I would fix this.
Also, and this is more important that most realize. Interet etc must be reported on schedule b , even if it is below some thresshold, because one MUST answer the 3 questions at the bottom of the sched.
Underreporting on any line is underreporting. I would fix this.
Also, and this is more important that most realize. Interet etc must be reported on schedule b , even if it is below some thresshold, because one MUST answer the 3 questions at the bottom of the sched.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
TDF90-22.1's are done for 2007 to 2010!
Now I'm moving on to the 8891's, schedule B and 1040x for 2008 to 2010...
I noticed that the Schedule B is year specific at the top and the questions in part III are also year specific, and the format of the questions are slightly different prior to 2011. Is there any issue in using the 2011 schedule B for each of the years 2008,2009,2010 or should each year have it's own specific year form? I was able to find the sched. B for 2008 and 2009 but not 2010....
Now I'm moving on to the 8891's, schedule B and 1040x for 2008 to 2010...
I noticed that the Schedule B is year specific at the top and the questions in part III are also year specific, and the format of the questions are slightly different prior to 2011. Is there any issue in using the 2011 schedule B for each of the years 2008,2009,2010 or should each year have it's own specific year form? I was able to find the sched. B for 2008 and 2009 but not 2010....
The FBARS and 3 years of 1040x with sched. B and 8891 have been sent off, what a relief!!
I'm gathering everything for my wifes 2011 return, up to this point she has been filing MFS using 2555, her income has been much lower than the FEIE amount. We also have a 2 1/2 year old daughter and another one on the way. Our daughter is a dual citizen with a US SSN and has been on my wifes 1040 since 2009 as an exemption. Our 2nd child will have the same status.
Couple of questions:
1. We just recently found out about the $1000 additional child tax credit and my understanding is that she would have to use form 1116 to claim this. However, is this credit generally something that she can get based on filing MFS or would it be beneficial for her to file MFJ? This would require me to obtain an ITIN via form W-7 - I am a Canadian Citizen only.
2. would this child tax credit be based on her income? I'm going to print off the necessary forms and instructions and work my way through them, but I'm guessing income is a factor...
3. Any other benefits to her filing MFJ? Specifically, we are thinking about her parents estate when that time comes....they are both US citizens living in the US and I wonder if there would be less tax implications for my wife and her parents estate if she files MFJ vs MFS?
Obviously MFJ adds a little bit more complexity to the scenario but if the benefits out weigh the cons then it may be worth it....
I'm gathering everything for my wifes 2011 return, up to this point she has been filing MFS using 2555, her income has been much lower than the FEIE amount. We also have a 2 1/2 year old daughter and another one on the way. Our daughter is a dual citizen with a US SSN and has been on my wifes 1040 since 2009 as an exemption. Our 2nd child will have the same status.
Couple of questions:
1. We just recently found out about the $1000 additional child tax credit and my understanding is that she would have to use form 1116 to claim this. However, is this credit generally something that she can get based on filing MFS or would it be beneficial for her to file MFJ? This would require me to obtain an ITIN via form W-7 - I am a Canadian Citizen only.
2. would this child tax credit be based on her income? I'm going to print off the necessary forms and instructions and work my way through them, but I'm guessing income is a factor...
3. Any other benefits to her filing MFJ? Specifically, we are thinking about her parents estate when that time comes....they are both US citizens living in the US and I wonder if there would be less tax implications for my wife and her parents estate if she files MFJ vs MFS?
Obviously MFJ adds a little bit more complexity to the scenario but if the benefits out weigh the cons then it may be worth it....
Thanks!
Please forgive me if this is a silly question. It pertains to converting CAD to USD for form 1116 and the term functional currency....
One source on the IRS website says: "...to convert from foreign currency to US dollars divide the foreign currency amount by the applicable yearly average exchange rate from the table..."
The other source says: "....you must translate the foreign currency into US dollars. How you do this depends on your functional currency. Your funtional currency generally is the US dollar unless you are required to use the currency of a foreign country."
So: my wife's 2011 general income from her T4 is $37,000 CAD and the taxes from the T4 are lets say $10,000.
Average yearly exchange rate for 2011 was 1.029 (from the IRS table), stronger USD.
$37,000cad divided by 1.029 = $35,957USD and $10,000CAD = $9,718USD.
These USD amounts are what go on the 1116, 1040 etc..
So by converting the CAD amounts to USD as I have done above, my functional currency is now the US dollar. Is this correct?
I'm a little embarrassed to ask this but for whatever reason I think the term functional currency is throwing me off....I'm sure its as simple as converting CAD to USD as I have done.
Please forgive me if this is a silly question. It pertains to converting CAD to USD for form 1116 and the term functional currency....
One source on the IRS website says: "...to convert from foreign currency to US dollars divide the foreign currency amount by the applicable yearly average exchange rate from the table..."
The other source says: "....you must translate the foreign currency into US dollars. How you do this depends on your functional currency. Your funtional currency generally is the US dollar unless you are required to use the currency of a foreign country."
So: my wife's 2011 general income from her T4 is $37,000 CAD and the taxes from the T4 are lets say $10,000.
Average yearly exchange rate for 2011 was 1.029 (from the IRS table), stronger USD.
$37,000cad divided by 1.029 = $35,957USD and $10,000CAD = $9,718USD.
These USD amounts are what go on the 1116, 1040 etc..
So by converting the CAD amounts to USD as I have done above, my functional currency is now the US dollar. Is this correct?
I'm a little embarrassed to ask this but for whatever reason I think the term functional currency is throwing me off....I'm sure its as simple as converting CAD to USD as I have done.
I did some reading in publication 514 and it seems to clarify things with regards to functional currency and exchange rate.....
It looks like using the average yearly exchange rate for 2011 to convert the CAD income to USD is appropriate in my wife's case as she gets paid regularly throughout the year - every two weeks and her income tax deducted is on those same pay checks as well.
Im pretty sure based on that she meets the requirements to use the yearly average exchange rate...
The other condition to be met for using the average exchange rate is that the foreign tax liability is not denominated in an inflationary currency. I have to look at the definition for that but I believe that Canada does not fall under this category.
It looks like using the average yearly exchange rate for 2011 to convert the CAD income to USD is appropriate in my wife's case as she gets paid regularly throughout the year - every two weeks and her income tax deducted is on those same pay checks as well.
Im pretty sure based on that she meets the requirements to use the yearly average exchange rate...
The other condition to be met for using the average exchange rate is that the foreign tax liability is not denominated in an inflationary currency. I have to look at the definition for that but I believe that Canada does not fall under this category.
My wife has some student loans in the USA that she has been paying down and these generate a 1098-E to show the interest paid to the lender.
When we prepare her 2011 US return, I am wondering if this 1098-E is something that comes into play or, is there any benefit when filing based on foreign earned income? She has been using form 2555 with her 1040 thus far....this year she is going to file using form 1116 in hopes of qualifying for the additional child tax credit, so I'm not sure if that makes a difference or not.
I'm sure that when she lived and worked in the US she was able to use her tuition and student loan interest to her benefit as deductions on her yearly returns but, I wasn't sure if that would still be the case now that she is filing her US returns from Canada based on income in Canada.
When we prepare her 2011 US return, I am wondering if this 1098-E is something that comes into play or, is there any benefit when filing based on foreign earned income? She has been using form 2555 with her 1040 thus far....this year she is going to file using form 1116 in hopes of qualifying for the additional child tax credit, so I'm not sure if that makes a difference or not.
I'm sure that when she lived and worked in the US she was able to use her tuition and student loan interest to her benefit as deductions on her yearly returns but, I wasn't sure if that would still be the case now that she is filing her US returns from Canada based on income in Canada.
She can use them, but since she is not taxable in US, it is of little value.
She should proabbaly be going back to ammend previous 2 or 3 years returns to get the child tax credit for those years.
She should proabbaly be going back to ammend previous 2 or 3 years returns to get the child tax credit for those years.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
During my research, I came across head of household status.....just wondering if this is something that someone in my wifes position could use as a filing status to maximize child tax credits?
Would she be considered unmarried for HOH because I am a nonresident alien spouse? She's the USC in Canada, I am Canadian only..
Is it even possible with us living in Canada?
Just wondering as I had not previously thought about this possible filing status for her..
Would she be considered unmarried for HOH because I am a nonresident alien spouse? She's the USC in Canada, I am Canadian only..
Is it even possible with us living in Canada?
Just wondering as I had not previously thought about this possible filing status for her..