NY credit for taxes paid to Canada

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NY credit for taxes paid to Canada

Post by configuration »

I am a NY resident who earned employment income in 2013 in Canada (Ontario). However, I only lived in Ontario for a few days, and certainly don't pass any Canadian residency tests. My Ontario income was fully taxed in Canada and reported on a T4.

I need to declare this Canadian income on my US federal and state returns and hopefully claim credit for foreign taxes paid. NY has form IT-112-C which allows a credit for taxes paid to a Canadian province. But I don't know how to figure my Ontario taxes: my Canadian T4 simply reports my total income tax for the year. I won't be filing an Ontario return, as I'm a non-resident of Canada.

Should I just figure out the the portion of my Canadian taxes that went to Ontario, by filing out an Ontario provincial return, and report that on form IT-112-C?

Hope to get your responses.
nelsona
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Post by nelsona »

You have to file a Cdn return to come up with your federal and provincial tax. You cannot rely on your T4 anymore than you can use your W2 as your tax payment on your 1040.

So, do your Cdn taxes and then find exactly what Cdn taxes you owe (or get refunded) before you can claim any credit on your 1040 on NY return. You will use the tax return for an Ontario resident, reporting only the wages (I assume you had no other Cdn income).
I'm not sure what you meant by living in Canada only a few days.

The Cdn federal tax will include the EI and CPP you might have paid.
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Post by configuration »

Thanks very much nelsona.

To clarify: I did not live in Ontario at all in 2013. What I meant was that I was only physically present in Ontario for a few days (about 10) in 2013.

So I will fill out a Canadian federal and Ontario return, to compute the taxes paid to each, and use the Ontario taxes to get a credit from NY State. I'll do this even though I won't be filing an Ontario return.

Thanks again.
nelsona
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Post by nelsona »

Well, you WILL be filing a Cdn tax return. There is no Ontario return, it is combined. You want to do this to get tax back.

Remember that you can use all the tax you calculate, plus EI and CPP on your 1040. NY gives you an extra bonus of allowing you to take credit for Ontario tax specifically. Few other states do this.

Can I ask, if you are physically working in US, why you are on a Cdn payroll? You should simply be a contractor, as Cdn fringe benefits are of no use to you.
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Post by nelsona »

Your wife should also be looking at filing a 217 return in canada to reduce her taxes on EI, assuming she didn't work in US (or vewry little) in 2013.
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Post by configuration »

Hi Nelson. To answer your question:
I was a professor in Canada, and moved to the US in November 2012. From then until June 2013 I kept getting paid, as I was still doing my research for the university, but had no teaching obligations and was not required to be in Canada at all. When I moved, I did not completely think through the tax consequences, and did not ask the university to change my tax withholdings to reflect my non-residency status. I realize now that I should have been paid as a contractor rather than as a regular employee.

Thanks for your second answer, really appreciate it.
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Post by nelsona »

di you note what I said about your wife's taxes.
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Post by configuration »

Yes, I wasn't sure why you wrote that. My wife is a US resident and citizen with no ties to Canada. She's never lived in or earned income from Canada.
nelsona
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Post by nelsona »

I though in another post you said she was recieving EI benefits.
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Post by nelsona »

My mistake, YOU were recieving EI. forget the 217 return then. Don't include any EI on your Cdn return the tax that was withheld (assuming they witheld exactly 25%) was your final payment.
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Post by configuration »

Thank You! Yes, I was receiving the EI as a parental leave benefit.
They did withhold 25% tax.
I was going to include the EI on my return anyway (and therefore pay a higher rate of tax on that amount). I assumed that was the right thing to do. THank you for saving me some cash!
Yes, I was not going to file a 217 return- it would have meant paying tax on my US income.
Cheers
nelsona
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Post by nelsona »

That advice to include EI was incorrect (who else are you talking to, I.m pretty sure I explained this last year to you).

Just to explain a 217 return: you do NOT pay Cdn tax on your US income. What happens is that you determine a taxrate on your Cdn income AS IF all your income was earned in canada, and apply this RATE to your 217-eligible income (in your case EI). If it is favourable (in your case less than 25%) you make the election, otherwise you do not.

Given that you were still working, and subject to Ontario tax, it is unlikely that your taxrate on the EI would be lowered by 217.
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Post by nelsona »

was the person whoi advised you also the one who told you would have to file a Cdn tax return, or an ontario one?
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Post by configuration »

Yes, I understood the part about the 217 return raising my tax rate, but that it would not apply to my US income. Therefore a 217 return isn't for me.

I'm working on this myself, no advice from anyone this year. So the (wrong) idea to include my EI income on my Canadian return was entirely my own.

Can I ask you one last question? I'll be filing a retrun as a non-resident of Canada. Therefore, there is no specific Ontario portion of tax paid, just a federal tax plus a federal surcharge which more or less reflects the Ontario tax I would have paid had I been an Ontario resident.

When figuring my Ontario tax paid for the purpose of the NY IT-112-C, should I report the amount I would have paid as Ontario tax by filling out a Canadian resident return?
nelsona
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Post by nelsona »

As I said at the outset, you will be filing a fedearl return for residents of the province of Ontario:

from the non-resident tax guide:

"If you receive only income from employment or business use the General Income Tax and Benefit Package for the province or territory where you earn the income along with Guide T4058, Non-Residents and Income Tax. However, if you also receive other types of income (capital gains and/or taxable scholarships, fellowships, bursaries, or research grants), you will also need Form T2203, Provincial and Territorial Taxes for 2013 - Multiple Jurisdictions.

"If you receive only other types of taxable Canadian-source income (such as scholarships, fellowships, bursaries, or research grants, capital gains, or from a business with no permanent establishment in Canada), use the Income Tax and Benefit Package (for Non-Residents and Deemed Residents of Canada)."

Assuming you only got a T4 from your school, and had no other type of Cdn income listed above, you file an Ontario return, so you will know exactly what your Ontario tax will be.
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