US income or Foreign income

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rrspresp
Posts: 8
Joined: Tue Apr 08, 2014 11:59 pm

US income or Foreign income

Post by rrspresp »

Lived in US and worked as a contractor for a Canadian company. Got paid by the Canadian company. Was the money US income or foreign income for US tax return? I was a tax resident for both countries and didn't claim any foreign tax credit from CRA.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

It was Cdn-sourced.

Be careful though, as you truly can only be resident in one country or the other. It makes a difference. That is why so much effort is put into the treaty article on residence. You can file in US anywya you want, but that does not make you tax resident. Only canada meshes both your tax residency and how you file>

Why this matter? you could see your foreign tax credits denied in BOTH countries, until the matter of residncy is established.

If you are a Cdn resident, your contractor income is fully taxable first in canada, and US will give credit, but if you are a US resident,they could request that you use the treaty and file for double-taxation relief in canada.

It is rare that this happens in the situation you describe. But the other way with a CDn residnt contracting in US. Canada and US both view themselves as having first-cut.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

... and theissue of residence would need to be determined to solve that.

So pick one.

My guess is since you say "lved in US", that is your treaty-determined residence, and you should file as a deemed non-resdint of canada, which is the same as non-resident.
What is your status in US?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
rrspresp
Posts: 8
Joined: Tue Apr 08, 2014 11:59 pm

Post by rrspresp »

Thanks, Nelsona.
I moved to US on TD visa at the beginning of 2011 and worked on several projects for my previous employer in Canada that year. So I filed tax return for the whole year to CRA and did wrote down my departure date. You are right. CRA denied the foreign tax credit I claimed. The reason why I asked the above question because I didn't report my RRSP and RESP on FBAR, 8891 and 3520/a for previous years. It seems that there are only 2 solutions to make late election of tax deferral for RRSP: PLR or OVDP. The money from the several projects is little, about 8000, but enough to offset the income from my RRSP and RESP accounts in 2011. If there is no tax owing or just a little, maybe IRS won't give me a big penalty. That's my hope. Don't know if that works.
rrspresp
Posts: 8
Joined: Tue Apr 08, 2014 11:59 pm

Post by rrspresp »

Forgot to mention that I filed jointly with my husband for US tax return.
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