Serbinski Accounting Firms

Hello Nelson,

I really appreciate your great help and generosity. Finally I have some hope finishing my US tax return.

Now I started to work on form 2555 and 1116 and have some follow-up questions. (I did browsed a lot and read your previous answers, but inevitably still have some questions.)

I stayed half/half in Canada/US and made about 50k (wage only) and 75k respectively (so about 125k in total). I have a non-working wife and two little kids. So I assume full year 1040 MFJ would be the best for me?

I added foreign income and used 2555. Most of it was deducted (49.6k out of 50k) using FEIE. But the amount of refund is still much less than if I don’t add foreign income at all. (I had a impression that if the income is excluded, then it’s the same as if I didn’t have that income at all.) I found that the taxed income doesn’t change too much since my CDN income was excluded. But the tax changed a dramatically. My question is if this is normal/expected?

I found you recommended to use 1116 only in many occasions. So I also tried this. It gave me a little bit more than if I use 2555. If I didn’t do anything wrong, I might ended up using 1116 solely.

Regardless which form I might end up using. Here’s some question I had when filling those forms:
1, For RRSP in 2555, I read in one of your answers: “Unless your RRSP deduction was made thru your employer, it is not deductible. If it was made thru employer, you take it off your wage amount directly before entering it.â€￾ Can you elaborate on this a little bit more? In my case, my RRSP contribution were deducted from my payroll directly (A). Then my employer matched my contribution (B). Before I came to US, I did a lump-sum contribution by myself into the same group RRSP account (C). I guess C cannot be deducted since it’s not made through employer. But how about A and B?

2, In 2555: foreign housing expenses, can I put mortgage interest I paid here?

3, For 1116, I can include EI/CPP for my wage income as tax for this income. Since I only have wage income, my total tax to be enterred is federal tax + provincial tax + EI + CPP. Is that correct?

4, When filling 1116, I was asked to “Enter the amount of any foreign losses related to Canadaâ€￾. I sold some stocks before I came to US and had a capital loss. Can I applied it here? (This capital lost was not useful in Canada tax filing since I didn’t have a capital gain last year).

5, For 1116: Should I list itemized deduction or take credit? I suppose taking credit is the correct choice for me?

6, For 1116: “Enter descriptions and amounts for any other gross income you received from sources within Canada. Do notenter any income already reported on Form 1099-INT, Form 1099-DIV, Form 2555, or Schedules K-1â€￾. If I don’t use 2555, this is the full amount of my Canadian income. If I use 2555, this is the full Canadian income minus the amount excluded in 2555. Is this correct?

I have another question about my RRSP (not related to this tax filing):

Now the only account I left in Canada is my RRSP account with Manulife. I was told that if I cash it out now I need to pay tax at higher rate and it will be treated as my income. If I cash it out after two years, I only need to pay the standard non-resident withholding tax of 25%. Does this make sense to you? I thought I can cash it out and pay 25% as soon as I became a non-resident of Canada.

Thank you again!

I browsed a bit and found this is the same situation as me:
http://forums.serbinski.com/viewtopic.php?t=6326

For anyone who is interested, this is the doc about dual residency (need to file two tax return) and how to make a statement to file full year 1040:

http://www.irs.gov ...

Sounds like full year 1040 is actually simpler. I don't find clause XVV in the treaty? Did you actually mean XXV or other clauses?

I had a look at the forms. So I'll report all my Canadian income in 2555 and exclude all or part based on the dates I lived in Canada. Then if there are still taxes I ...

Thank you again for the advice! If I treat myself as resident from July 15th. What form should I use to file the tax return? Can I still use form 1040?

Could you please point me to the exact treaty clause that explains how to decide residency? Thanks!

Thank you so much for your advice!

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Hi,

I moved from Canada to US to work (on TN first then transferred to H1B). The date we entered US is July 15. I thought I am a resident here in US since I moved everything here (family moved w/ me, house sold, etc) and have no plan to go back. But today I heard from a friend about the 183 day ...

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