ACTC- US citizen studying in Canada

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 11:45 am

Hello,

If anyone can help I'd be grateful. I need to back file taxes in the US. I have been a graduate student receiving a fellowship for my studies. I'm married to an NRA (canadian citizen) with no US status. We have two kids who are (2+5) that are dual citizens. I was curious if I am exempt from claiming the ACTC as my only taxable income is a fellowship and I do not receive a W-2 in canada rather just a T4A.

Thanks in advance.

John

nelsona · Post by **nelsona** » Thu Jan 31, 2013 12:30 pm

No you SHOULD be filing for this free money!

In order to do this, you need to use 1116 instead of 2555 to reduce your US tax to zero, and then you will get the $2000.

Many Cdns are getting this money every year, if they have US chidren.

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 12:45 pm

I'll look into 1116. I wasn't aware this might be an option.

Thanks very much for your advice. Trying to figure out all this out by myself has been daunting and without knowledgeable people like yourself I'd probably give up or have to spend a whole lot of money I don't have.

Regards

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 1:47 pm

Hi Nelson,

I think you lost me. If I am filing as MFS to receive the ACTC I still am required to file 8812 to recieve this credit. In this form for line 4a, I believe I would qualify for the last category where it states I must substract from my earned income any amount of fellowoship or scholarship (my only form of income) that was not on a w-2. As I am in canada studying I do not receive a w-2. The net result is my earned income on 4a becomes 0 on form 8812 thus making me ineligible for this credit.

I hope im not leaving out any critical information.

Regards,
John

nelsona · Post by **nelsona** » Thu Jan 31, 2013 2:20 pm

Be careful, the fact that your income was not reported on a W-2 comes from the fact that you are living in Canada - where no W-2's are issued of course -- not because the income was not earned.

This stipulation on the 8812 is for US residents get scholarships that are reported and unreported on W-2. Some schoalrships are reported on 1098T. This is the income to which this form is referring.
I would review IRS Pub 970 for what is defined as earned/unearned (would have appeared on a w-2 if you were in US) and taxable/non-taxable, in IRS eyes.

Your income was reported to you on to T4, which is equivalent. it is earned income.

So, as I said, the only thing you have to avoid is using 2555 for exclude your income.

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 2:26 pm

Ok. Im following you. Initially I wasn't going to use form 2555 as my exemption for my dependents (2 kids) and MFS deduction would bring me to zero. My concern is 4a line on 8812 instructions. I will quote it here below to be exact.

If i understand you correct I should still report my income as "earned" as it is reported on my t4A? If I get audited as long as I have my T4A to show my earned income I should be ok? All this to say in Line 4a of the 8812 I should put whatever I am putting on line 7 of my 1040 (aka whatever my income is on my T4A???)

Thanks again

"your earned income figured as follows:
Line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR
Subtract, if included on line 7 (line 8 for Form 1040NR), any:
â€¢ Taxable scholarship or fellowship grant not reported on a Form W-2.
â€¢ Amount received for work performed while an inmate in a penal institution (put
â€œPRIâ€ and the amount subtracted in the space next to line 7 of Form 1040 or
1040A (line 8 for Form 1040NR)).
â€¢ Amount received as a pension or annuity from a nonqualified deferred
compensation plan or a nongovernmental section 457 plan (put â€œDFCâ€ and the
amount subtracted in the space next to line 7 of Form 1040 or Form 1040A (line 8
for Form 1040NR)). This amount may be shown in box 11 of your Form W-2. If
you received such an amount but box 11 is blank, contact your employer for the
amount received as a pension or annuity.
â€¢ Amount from Form 2555, line 43, or Form 2555-EZ, line 18"

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 2:30 pm

Error. Would be bring my income to NEAR zero (1000$) but still taxable by about 136$. If I can claim the child tax credit and the additional child tax credit then I dont need the 2555 as i can use those to reduce my tax owed to zero and claim a refund. Howeever if I can't use those credits I was using 2555 to get my income to zero.n

Cheers,

John

nelsona · Post by **nelsona** » Thu Jan 31, 2013 2:56 pm

I have no idea what "error" means.

To end this: you report your school money as taxable (and earned). Period. Do not use 2555, use 1116 instead (i assume you have tax in Canada). This and your normal deductions exemptions, credits on 1040 should wipe out any US tax obligation.

Then you get the $1000 per child added to you.

Your other choice is to report your spouses income, file jointly, and use her income as the earned income. same result.

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 3:02 pm

Thanks.

I am not taxed on my income in canada. Canada does not tax graduate school scholarships or fellowships.

nelsona · Post by **nelsona** » Thu Jan 31, 2013 3:27 pm

Then it makes determining what was earned or not even more important for you.

So, you may not get the full $2000 back if you file MFS. I would try MFJ.

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 3:30 pm

that would be a nightmare for me. I'll do anything to avoid bringing her taxes into the mix!

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nelsona · Post by **nelsona** » Thu Jan 31, 2013 3:34 pm

May I ask why? Other than her being a wealthy heiress (in which case her accountant should be doing your taxes) I don't see the down-side of filing jointly.

Many of the other reporting mechainisms will eventually require her to file as well, so I would get used to it.

Studentincanada · Post by **Studentincanada** » Thu Jan 31, 2013 3:37 pm

Well my tax is relatively simple (I thought). I have a single scholarship. I dont have any benefits in canada, no other income, nothing. Her case is more complicated a lot more!

John

nelsona · Post by **nelsona** » Thu Jan 31, 2013 3:39 pm

As to earned and unearned. Basically, if you can determine what portions of your income were for tuition etc expenses (unearned) and what portion was for working (teaching, research, etc) (earned), the IRS would likely accept this.

This will also help figure out how much was taxable.

Studentincanada · Post by **Studentincanada** » Fri Feb 01, 2013 12:05 am

Well if I get a 20,000$ scholarship. And tuition costs 2,000$, can I not claim the 18,000$ is for research. The only other thing I could go on is my fellowship is for "research on leukemia" and to be eligible "research must be performed in Montreal". Should i ask the university to give me paperwork stating with the scholarship is for in detail?

Cheers,

John