Owe US taxes, but have a Canadian tax refund??

etone · Post by **etone** » Sat Apr 28, 2012 9:00 am

Hi Everyone,

I am a Canadian resident who in 2011 made US income for half the year, and then switched jobs, working for a Canadian company the second half of the year.

In the year before, for my 2010 taxes, I made US income the entire year, and filed a 1040NR in the US, and then filed a Canadian return claiming foreign tax credits. I used an accountant for my 2010 taxes and in that year, I owed taxes in the US, and then owed additional taxes in Canada after the foreign tax credit. This made sense to me as the Canadian tax rate is higher.

Now for my 2011 taxes, I did a rough copy of my taxes on my own and followed the same steps as the accountant - figure out my US taxes paid/owed first, then do a Canadian return claiming the foreign tax credits. My US return consisted of just my US income, and my Canadian return consisted of both my US income and Canadian income. Is this assumption correct? I believe this to be correct, but someone correct me if I'm wrong and need to include both US and Canadian income on my US return.

In my rough copy, I calculated a US refund, and then a Canadian refund. I also went to a new accountant to do both returns to help maximize deductions. However, I was surprised to find out that instead, he had calculated that I owe a large amount of US taxes, but get a Canadian tax refund. Does this make sense? Why would I only owe US taxes and not owe Canadian taxes when the Canadian tax rate is higher? The only thing I can figure out is that the accountant did a lot of deductions against my Canadian income to reduce my taxes owed...

I am going to see the accountant next week, but need to understand income declaration so I can ask knowledgeable questions.

Thanks in advance!

nelsona · Post by **nelsona** » Sat Apr 28, 2012 9:39 am

First off, talking of refunds or owing is meaningless, since this is dependant on hw much taxes were or were not withheld.

Second, once you have income in Both countries in the same year, the FTC is designed to credit your foregn tax at your effective tax rate, but tax you at your marginal rate.

etone · Post by **etone** » Sat Apr 28, 2012 9:44 am

I agree. Talking about refunds or not depends on taxes withheld or not.

My main question is, do I need to declaring my canadian income on my us tax return as a canadian resident? I think the answer is 'no'.

nelsona · Post by **nelsona** » Sat Apr 28, 2012 9:50 am

If you file a 1040NR, how can you report Cdn income? It is only for US-sourced income.

If you fiel a1040 however, you MUST report world income.