Filing 1040-NR / Child Tax Credit

rsargant · Post by **rsargant** » Fri Jan 17, 2014 2:53 pm

Very Clear. Thank you once again.

Unfortunately, I didn't fully understand all this when I filed for 2012. I took Option 3 and only reported income transferred from the 1040 statement to the 1040-NR.

Do you think that's serious enough to bother amending the 2012 return or should I just let that ride and choose between Option 1 or 2 for 2013?

nelsona · Post by **nelsona** » Fri Jan 17, 2014 3:15 pm

If you feel real bad about it, you could amend your 2012 1040NR for line 22 and OI. Its up to you.

Just curious, was there a aprticular reason you did not just file 1040 for 2012? Was it becasue you could not use 2555 due to excessive travel to USD after you left?

rsargant · Post by **rsargant** » Fri Jan 17, 2014 3:46 pm

Aside from avoiding the reporting requirements, I ran the numbers and actually paid less tax that way. 2555 pushed the Roth Conversion we made before leaving into a high tax bracket . 1116 didn't work well either because U.S income / Total Income was too high to make full use of the credits (again due to Roth conversion)

If you do a sizable roth conversion before leaving U.S and then stop getting U.S income, I think dual status is the way to go. The Roth conversion goes into the low tax brackets. After applying exemptions and the CTC, we paid 10% tax on a 60K conversion. Pretty sweet deal.

rsargant · Post by **rsargant** » Sat Jan 18, 2014 4:46 pm

One more Q if you don't mind... You mentioned earlier that one does not have to apply the treaty. Is there anything particularly wrong with choosing to apply the treaty one year and not another?

For 2012, I did not report the income or pay tax (Option 3) . I applied the treaty without explicitly doing so on the return.

If I pursue Option 1 for 2013 to get ACTC, I will reporting the income as taxable and not applying the treaty.

Is that, in of itself, an issue? I know the IRS has many different "one-time" election rules.

nelsona · Post by **nelsona** » Sat Jan 18, 2014 5:45 pm

No problem. it depends on the benefit you receive or not. It can be ignored from year to year.

rsargant · Post by **rsargant** » Sat Jan 18, 2014 7:56 pm

Great! I think I'm going for Option 1 then. Who can't use one thousand bucks in the bank. I figure the worst that happens is the IRS spends a year saying no and I'm simply back where I started anyway (Option 2).

Should I include my T4 with the 1040-NR to substantiate the income I enter on Line 8 (earned while physically present in U.S). 1040-NR Schedule O/I has my travel history and mentions my TN visa status. I assume they would put all of that together...

rsargant · Post by **rsargant** » Sat Jan 18, 2014 7:58 pm

Forgot to say thanks again. I'll let you know the final outcome...

rsargant · Post by **rsargant** » Thu Feb 06, 2014 7:11 pm

I have a follow up question on Option #1. I have received my T4 which I intend to include with my 1040-NR to substantiate the income reported for days in U.S.

The T4 clearly shows that all income was paid by my U.S employer and not a CDN one. So, if I include the T4, why won't the IRS say that ALL income is U.S sourced and ALL should be taxable on my 1040-NR?

According to Pub 519 the "source" of wages is based on "where services performed". Under that test, it seems fine. 95% of the work was done in Canada and I'm reporting the wages for the 5% earned while in the U.S.

I just want to be sure about this one point before taking Option 1 to get the Child Tax Credit.

nelsona · Post by **nelsona** » Mon Feb 10, 2014 9:49 am

Keep your substantiation for future enquiries. It is not worth sending.

rsargant · Post by **rsargant** » Mon Feb 10, 2014 4:20 pm

Ok. I can certainly appreciate that less is more here.

rsargant · Post by **rsargant** » Wed Apr 09, 2014 1:40 am

I mailed the "Option 1" return today. I'm crossing my fingers and waiting for cash to appear in the bank.

rsargant · Post by **rsargant** » Fri May 30, 2014 7:51 am

Update: Option 1 worked. I received the refund deposit yesterday.

So the additional child tax credit is "free money" available to a non USC who works for a CDN employer, lives in Canada with USC children and intermittently (rarely) travels to the U.S for work.

For best results, don't earn/report more income in the U.S then your 1040-NR exemptions eliminate. If your income is too high, the "additional child tax credit" becomes "child tax credit" and filing is just an exercise in paperwork.

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