Claiming tax credit for FICA

rsargant · Post by **rsargant** » Tue Mar 13, 2012 12:31 pm

Hi,
I have moved back to Canada from U.S as of 03/01. My U.S employer is transitioning to me a CDN payroll effective 03/29 but I received a bonus and one payroll after 03/1 which I understand will be taxable in Canada.

Wil I be able to claim a foreign tax credit for U.S taxes witheld (Federal AND FICA) against canadian tax due?

nelsona · Post by **nelsona** » Tue Mar 13, 2012 1:16 pm

Not the tax withheld, because this is based on what you payfor the yeasr vs income you report on your Cdn return, but the fica for those pay periods is eligible.

nelsona · Post by **nelsona** » Tue Mar 13, 2012 1:17 pm

What did you do about 401(k)/IRA/Roth?

nelsona · Post by **nelsona** » Tue Mar 13, 2012 1:19 pm

Side question: what benefits are they providing to you on the "Cdn payroll".
If there aren't any, contractor would probably have been better.

rsargant · Post by **rsargant** » Tue Mar 13, 2012 1:52 pm

I meant tax "due" not withheld. I guess a better question would have been : Will I be double taxed in any way?

They weren't too interested in the contractor route and wanted to maintain an employee relationship with me. There are really no benefits as I'm their only CDN employee.

My wife's 401K was converted to Roth before leaving but I had to leave my 401K . I couldn't get at the funds since I'm still considered an "employee" somehow. This didn't bother me too much as I really couldn't afford the conversion right now anyway.
I stopped making contributions before leaving and intend to resume funding an RRSP..

nelsona · Post by **nelsona** » Tue Mar 13, 2012 3:27 pm

Will you be double taxed? Probabaly slightly, since your US income will be added to the top of your Cdn income (at your marginal rate), but the US tax will be credited at your effective rate.

If your US tax is low enough, it should all be used up.

rsargant · Post by **rsargant** » Tue Mar 13, 2012 3:51 pm

I can live with that.. thanks.

nelsona · Post by **nelsona** » Tue Mar 13, 2012 4:04 pm

Are the recompensing you somewhat for (a) not having to pay medical (b) no longer funding your 401(k), and (c) higher taxes?.

This was your chance to negociate, since they apparently wanted to keep you.

rsargant · Post by **rsargant** » Sat Mar 24, 2012 10:41 pm

Not yet. Honestly, I was pretty happy that they would accept me working from home almost exclusively from a foreign country so I didn't push much beyond that.

I was just wondering about this FICA issue. When are you considered to have established residential ties in Canada?

We've leased a home to live in for 04/01 but have been in temporary housing since 03/01. Would it be a defensible position to say that I did not re-establish residential ties until 04/01 so I don't need to report income I received from 03/01 to 04/01 to CRA?

Obviously all my border/customs documentation says 03/01.

Another ridiculous thing which occurred is that as a final step of shutting down my traditional IRA (which I had converted to roth weeks earlier) Fidelity dropped $0.02 into my Roth on 03/01. Will that count as a Canadian contribution? lol

rsargant · Post by **rsargant** » Sat Mar 24, 2012 10:51 pm

re: the silly roth conversion thing.. The transaction is flagged as being associated with a roth conversion clearly made before 03/01. I hope that saves me. This wasn't my fault!

03/01/2012 ROTH CONVERSION VS 192-351113-1 CONV. TO ROTH IRA
No Description
Cash Amount: $0.02

02/17/2012 ROTH CONVERSION VS 192-351113-1
No Description
Cash Amount: $XXXXXX

nelsona · Post by **nelsona** » Sat Mar 24, 2012 10:59 pm

the conversion would be considered a Cdn contribution, but I'm sure we could ignore it at this point.

rsargant · Post by **rsargant** » Sat Mar 24, 2012 11:17 pm

That was definitely my plan. There is no way $0.02 is going to cost me a lifetime of tax free growth :) I was just going to follow these instructions http://www.cra-arc.gc.ca/E/pub/tp/itnew ... s-43-e.pdf and not even mention it.

What are your thoughts on using 04/01 as the date I reestablished ties? That probably won't fly right?

nelsona · Post by **nelsona** » Sat Mar 24, 2012 11:26 pm

Only if you still had a home in US, could you claim 04/01.