Hello,
I've been working in the US for 7 years (living in Windsor, commuting daily), and from a quick look at my tax situation for 2007 it looks as though I'm going to be stung by the AMT this year for over $2K.
I've traditionally been filing a 1040NR. After reading through the forums I understand that I could actually file a 1040 (claiming a tax treaty - article #?)
Would filing the 1040 for 2007 reduce my US taxes enough that what I have payed would absorb the AMT essentially eliminating the few hundred $'s I usually get back each year? I am married with two kids, so I'm assuming with the 1040 I would be able to use them as more significant deductions as well as my interest on my mortgage.
Dealing with the AMT
Moderator: Mark T Serbinski CA CPA
I'm not a BIG expert on AMT, but isn't AMT triggered by the amount of deductions you have, rather than being helped.
If so, I don't see how switching from 1040NR to 1040 helps you, since the 1040 actaully gives you MORE deductions, and these would simply be wiped out MORE by AMT.
As I say, I haven't done too much research on this topic, but AMT is designed such that if you have XX income, you will pay YY taxes, regardless of deductions.
One thing for sure though is that your basic taxrate will go down immensely if you file a 1040, and even more so if you file the 'non-discrim treaty 1040NR' based on your wages only.
If so, I don't see how switching from 1040NR to 1040 helps you, since the 1040 actaully gives you MORE deductions, and these would simply be wiped out MORE by AMT.
As I say, I haven't done too much research on this topic, but AMT is designed such that if you have XX income, you will pay YY taxes, regardless of deductions.
One thing for sure though is that your basic taxrate will go down immensely if you file a 1040, and even more so if you file the 'non-discrim treaty 1040NR' based on your wages only.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
By changing your status to married filing jointly (which can only be done wi tha 1040) you will get yourself a greater exemption from AMT.
If this works out, it will reduce your tax AND avoid AMT.
have you been able to use all your US tax on your Cdn return? If not you should have been using a method other than 104NR all along.
If this works out, it will reduce your tax AND avoid AMT.
have you been able to use all your US tax on your Cdn return? If not you should have been using a method other than 104NR all along.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Yes I have been able to use all my US taxes on my Canadian return to date.
I also feared that this additional AMT would push me over that foreign tax credit limit this year if I simply filed a 1040 NR.
I'm actually a friend of Telly and have been reading some of her posts and talking with her. Not sure I completely understand how to get the most out of the 1040, but I will keep reading and talk with her some more.
It is frustrating that no "tax" people I've been with in the past are interested in doing the US taxes this way!
I also feared that this additional AMT would push me over that foreign tax credit limit this year if I simply filed a 1040 NR.
I'm actually a friend of Telly and have been reading some of her posts and talking with her. Not sure I completely understand how to get the most out of the 1040, but I will keep reading and talk with her some more.
It is frustrating that no "tax" people I've been with in the past are interested in doing the US taxes this way!
AMT paid on US source employment income is creditable on your T1 against the Canadian tax. So, unless the total US taxes paid are not being fully credited on your T1, there is no need to file a 1040.
But, as Nelson has said, filing a 1040 jointly will - relatively speaking - reduce or eliminate AMT as compared to filing Married, separately. remember though, you would have to include your spouse's world income on the 1040.
Nelson, I noticed that starting with 2006, the Married, filing separate, 1040 for US citizens easily generated AMT, even with minimal deductions. The regular FTC was 100%, though under AMT rules, the FTC is not 100%.
But, as Nelson has said, filing a 1040 jointly will - relatively speaking - reduce or eliminate AMT as compared to filing Married, separately. remember though, you would have to include your spouse's world income on the 1040.
Nelson, I noticed that starting with 2006, the Married, filing separate, 1040 for US citizens easily generated AMT, even with minimal deductions. The regular FTC was 100%, though under AMT rules, the FTC is not 100%.
Most married ontarian commuters do NOT use up all their US tax if they file 1040NR (rememebr, FICA is a tax too), that is why I encourage them to file either the treaty 1040NR or a straight 1040.
If you are using all your 1040NR tax, you should be reviewing your Cdn return for more deductions (like RRSP).
If you are using all your 1040NR tax, you should be reviewing your Cdn return for more deductions (like RRSP).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I believe I'm using the FTC correctly.
Last year I paid $21945.96 in US taxes (fed, state, SS, medicare)...$15,446.38 of that went to the Federal FTC and the remaining $6499.58 went to the Provincial FTC.
The numbers tell me I used all that I could. Essentially I came up shy $1200 for Ontario taxes.
Note: Last year I did not contribute to RRSP in time, I was misinformed about an amount of carryover RRSP from a previous tax person...reason I had elected to try doing this myself last year.
NO reason to pay someone $300 to screw up my tax return when I can do that myself..right?
Does that all make sense?
So for 2007 my main objective needs to be to not have to pay anything more to the US gov't and it looks like the AMT is going to sting me.
Last year I paid $21945.96 in US taxes (fed, state, SS, medicare)...$15,446.38 of that went to the Federal FTC and the remaining $6499.58 went to the Provincial FTC.
The numbers tell me I used all that I could. Essentially I came up shy $1200 for Ontario taxes.
Note: Last year I did not contribute to RRSP in time, I was misinformed about an amount of carryover RRSP from a previous tax person...reason I had elected to try doing this myself last year.
NO reason to pay someone $300 to screw up my tax return when I can do that myself..right?
Does that all make sense?
So for 2007 my main objective needs to be to not have to pay anything more to the US gov't and it looks like the AMT is going to sting me.
As I said, if you aren't using RRSP, then your ON taxrate will be higher. Also, you would want to lower the US rate in future so as to take advantage of the RRSP contributions.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best