Califirnia Tax

tgraham628 · Post by **tgraham628** » Wed Mar 21, 2012 8:13 pm

I am a foreign government employee working for the Consulate General of Canada. I am not a U.S. citizen, however I am a Lawful Permanent Resident of the US. My employment income is subject to taxes in Canada. I am exempt from tax in the US by virtue of Article XIX of the Canada-US treaty. Is my employment income subject to California tax?

JGCA · Post by **JGCA** » Wed Mar 21, 2012 8:35 pm

Under treaty you are not taxable Federally in the US, however the treaty is not necessarily followed by the states, in this case if california were to tax you ( as I fell they would) then you simply claim back this tax on your CND tax return.

tgraham628 · Post by **tgraham628** » Thu Mar 22, 2012 6:05 am

What if I am a not resident of Canada and therefore not eligible for a foreign tax credit? How do I claim it?

nelsona · Post by **nelsona** » Thu Mar 22, 2012 6:06 am

Be careful, Canada is generally reluctant to grant foreign tax credit on income that they consider Cdn-sourced.

However, a little research reveals that Cali DOES grant tax immunity for consular workers BY TREATY, so this would probably cover you.

https://www.ftb.ca.gov/law/infoletter/20060323.pdf

The best source to ask uis your co-workers.

tgraham628 · Post by **tgraham628** » Thu Mar 22, 2012 7:10 am

Thank you. Do you know if I can use my mortgage interest and property taxes for my house in the US on my Canadian return?

JGCA · Post by **JGCA** » Thu Mar 22, 2012 8:48 am

As Nelsona investigated it seems you may be able to exempt by treaty the Cali wages, so I would try that for sure.

You are a resident of Canada ( factual resident) since your employment with the Federal govt deems this to be so and therefore you need to file T1based on your province of residence. You can not claim mort interest or taxes on a T1 we do not itemize in Canada.

nelsona · Post by **nelsona** » Thu Mar 22, 2012 12:43 pm

Whether or not you treat this home as your principal residence, unless it is an investment property, you cannot claim expenses against it.

Just like a home or cottage.

tgraham628 · Post by **tgraham628** » Thu Mar 22, 2012 2:40 pm

Thank you both.

tgraham628 · Post by **tgraham628** » Thu Mar 22, 2012 5:46 pm

The California FTB letter referenced by nelsona does not specify which country the consular officer the ruling is for. FTB Pub 1031 says in section I, "residents of California are taxed on all income". It also says in section K, "a tax treaty between the U.S. Government and a foreign country may exempt some types of income from federal taxation. . Generally, unless the treaty specifically excludes the income from taxation by California, the income is taxable". The Canada-US treaty does not specifically exclude income from taxation by California. Article II of the treaty says, "Taxes imposed by the states of the United States, and by the provinces of Canada, are not generally covered by the Convention. However, if such taxes are imposed in accordance with the provisions of the Convention, a foreign tax credit is ensured by paragraph 7 of Article XXIV (Elimination of Double Taxation)."

nelsona · Post by **nelsona** » Thu Mar 22, 2012 9:52 pm

Its up to you. You do not know which country was specified, and could very well have been canada.

The treaty language for governemnt services is boilerplate for most traties, so I do not believe that canada's would be different than the unnamed country. Add this to the genral non-treaty provisions accorded all diplomats, regardless of treaty status, and I'm 90% confident that you are not taxable in US on your Cdn govt income. I pulled that out with 15 seconds of research.

As I said, your colleagues would be in best position to know if they have had to pay Cali tax or not. ask around at the LA consulate. You obviously are not in a vacuum.

tgraham628 · Post by **tgraham628** » Thu Mar 22, 2012 11:15 pm

Actually my colleagues don't know. How can I find out for sure? I emailed the FTB and got the response below.

Thank you for visiting the FTB website.

California taxes all income you received while you were a resident of California and/or the income you received from California sources while a nonresident.

A resident is any individual who is:

In California for other than temporary or transitory purposes,or Domiciled in California but who is outside California for temporary or transitory purposes.

We have provided a link below to FTB Publication 1031,Guidelines for Determining Resident Status for additional information.

http://www.ftb.ca.gov/forms/2010/10_1031.pdf

Nonresidents are taxable only on income from California sources. A nonresident or part-year resident will file FTB Form 540NR.

nelsona · Post by **nelsona** » Fri Mar 23, 2012 8:03 am

Obviously that was a canned response and worth nothing as expected.

Wow for your colleagues. Then if they don't know, just do what they do. There is nothing like consistency.

tgraham628 · Post by **tgraham628** » Wed Mar 28, 2012 11:24 pm

Some file and pay. Others don't file. My concern is I have been filing for the past 3 years and I wonder if they will come after me if I stop filing.

nelsona · Post by **nelsona** » Thu Mar 29, 2012 12:31 pm

As long as CRA hasn'rt denied you the the Cali tax on your Cdn return as a credit, I would just keep on doing what you are doing.

You and the others that are paying could ask FTB. Then you would know going forward.