How I did my 1040 (1st year TN in USA), and an 8833 question

QC2OH · Post by **QC2OH** » Sun Apr 05, 2015 1:34 pm

Hi all,

I moved from Canada to the USA in January 2014 for work on a TN. After reading here, the IRS website, and calling the IRS international section (1-267-941-1000, option 4, 4), I've prepared my 1040. One challenge was having Canadian income earned this year for work done in a prior year, for which I found a solution in the instructions for 2555.

I'm unsure whether I have to file 8833 in order to file full year 1040, but I wanted to share my process here, in the hopes it might be of help to others moving south of the border. If I made an error, please do correct me :-)

Details:
- single, no owned property
- W-2 income from US workplace (with HDHP and HSA on form 8889)
- T4A income (~$2000) from Canadian workplace, for work done in 2013 but paid in early 2014 (form 2555)
- Canadian bank accounts, including a deposit TFSA account and RRSPs (form 8938)

Form 8833 for full year 1040 declaration (I think):
Still not sure whether this form is needed, but:
Line 1: Canada / XXV(1)
Lines 2-5 are blank
Line 6: "Using non-discrimination article XXV(1) to file 1040 and to use Foreign Earned Income Exclusion. Canadian national residing in US since Jan 2014." (http://forums.serbinski.com/viewtopic.p ... 0a54#29250)

Form 2555EZ for Canadian Income:
From the instructions: "Foreign earned income received in 2014 for services you performed in 2013 can be excluded from your 2014 gross income if, and to the extent, the income would have been excludable if you had received it in 2013. ... Enter the amount that would have been excludable in 2013 on Form 2555-EZ to the left of line 18. Next to the amount enter â€œExclusion of Income Earned in 2013."

My residence was Canada for many years prior to moving south, so I filled out Part I using the Bona Fide Residence test with an end date of 12/31/2013, and filled out all of Part II. I filled line 18 as directed in the instructions, and left the rest of Parts III and IV blank. I'm attaching a short statement to 2555 explaining that I would have been able to claim the full amount in 2013 since it would have been well below my FEIE limit if I'd had to file in 2013.

I used the Bank of Canada (http://www.bankofcanada.ca/rates/exchan ... converter/) to convert the amount on the date I was paid.

Aside: I did look into form 1116, but couldn't find a benefit to using it over the 2555, nor could I find a note on prior-year income in the instructions for 1116.

Form 8938 for Canadian Accounts 
Part I - all non-RRSP accounts (chequing, savings, deposit TFSA)
Part II - all RRSP accounts
Part III, listed only the interest earned from the Part I accounts (i.e., the RRSP gains are not listed anywhere on 8938).
Part V/VI - rather straightforward, with the exception of line 8 for my RRSP. I chose (guessed?) "Issuer" for 8a and "Corporation" for 8b (After spending three hours on Google, reading IRB 2014-44, and searching the Can-US tax convention, I could not find a definite answer for 8a/8b).

Form 1040 - putting it all together:
Combine income from W-2 and T4A (converted to USD) on Line 7.
Combine interest from Canadian bank accounts (including TFSA, but NOT RRSPs) on Line 8a, listed on Schedule B, line 1.
Deduct income from T4A (converted to USD) on Line 21 (Form 2555EZ).
Include HSA deduction on Line 25 (Form 8889)
Claim standard deduction on Line 40.
Calculate Tax using Foreign Earned Income Tax Worksheet (page 42 of 1040 guide).
Include payment for tax withheld on W-2 on Line 64.

For those who haven't moved, here are the things I wish I had done prior to the start of the year in whcih I moved: (i.e. before Dec 31 2013)
- informed my Canadian bank of my move so they wouldn't have sent me a T5 (I didn't realize this until very late in 2014).
- closed my TFSA. Even though it is only a deposit TFSA, I wouldn't have wasted time researching whether I would have to file 3520!
- moved my money to the USA, so I don't have to spend so much time on 8938

nelsona · Post by **nelsona** » Sun Apr 05, 2015 1:50 pm

Excellent post.

QC2OH · Post by **QC2OH** » Wed Apr 08, 2015 1:39 pm

Thanks nelsona, most of it was based on the hard work you've put into the forum!

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jmg · Post by **jmg** » Tue Apr 14, 2015 1:13 am

Great post. I've been referring to this.

Question though: How did you prepare your forms?
I'm using TurboTax and it doesn't allow me to file Form 2555 after I respond "NO" to this question: "Did you live and work outside the US at any time in 2014?"

Like you, I earned income from my employer for work done in 2013.

Thanks.

jmg · Post by **jmg** » Tue Apr 14, 2015 1:13 am

Great post. I've been referring to this.

Question though: How did you prepare your forms?
I'm using TurboTax and it doesn't allow me to file Form 2555 after I respond "NO" to this question: "Did you live and work outside the US at any time in 2014?"

Like you, I earned income from my employer for work done in 2013.

Thanks.

nelsona · Post by **nelsona** » Tue Apr 14, 2015 6:28 am

well of course you can only use 2555 on earned income form 2014. It doesn't matter what you had in 2013. If you were not employed in Canada during 2014, 2555 doesn;'t apply to you. If you did work in Canada in 2014, then you should answer YES.

QC2OH · Post by **QC2OH** » Tue Apr 14, 2015 9:14 am

JMG: I filled out my forms by hand, using 2555-EZ instead of the full 2555, as I didn't have the housing stuff to worry about.

Nelsona: In both our situations, this was income earned in 2014 for work done in the prior year. As cash-basis taxpayers, the instructions for 2555-EZ indicate "Foreign earned income received in 2014 for services you performed in 2013 can be excluded from your 2014 gross income if, and to the extent, the income would have been excludable if you had received it in 2013."

nelsona · Post by **nelsona** » Tue Apr 14, 2015 10:25 am

Sure. But then you would answer yes to the turbotax controls. I meant to say "if you had Cdn wage income in 2014" answer yes.

this ismerely a software switch issue....

jmg · Post by **jmg** » Tue Apr 14, 2015 3:57 pm

nelsona: Previously when I did reply YES to that, the subsequent responses forced me to file a 1040NR. I probably enterred something wrong at the time because it worked this time.

QC2OH: Thanks again. Your post was tremendously helpful.

jmg · Post by **jmg** » Tue Apr 14, 2015 9:31 pm

QC2OH: Sorry, I have another question. What did you say for Form 2555 Line 13a and b? And why?

Thanks in advance.

QC2OH · Post by **QC2OH** » Tue Apr 14, 2015 9:35 pm

jmg,

I used the 2555EZ that doesn't ask the same questions as in 2555, so I didn't have to answer those. If i did, I would have YES for 13b, since Canadians are required to pay income tax on all Canadian-sourced income.

jmg · Post by **jmg** » Tue Apr 14, 2015 9:39 pm

I can't use 2555EZ since i'm claiming moving expenses, I think.

Yeah, that one makes sense. I think 13a is the one stumping me..

QC2OH · Post by **QC2OH** » Tue Apr 14, 2015 9:48 pm

Did you see the 2555 instructions for 13a?

If you submitted a statement of nonresidence to the authorities of a foreign country in which you earned income and the authorities hold that you are not subject to their income tax laws by reason of nonresidency in the foreign country, you
are not considered a bona fide resident of
that country.

The way I read it*, if one didn't send anything to the CRA, they check NO and not worry about anything else.

The way I read it*, if one did send something to the CRA, and the CRA deemed you a non-resident, then one might have to check YES to 13a. But, since non-residents STILL have to pay Canadian income tax on Canadian-source income, a deemed N-R would still check YES to 13b and get to use 2555.

* I am NOT a tax person, an accountant, or anything of the sort. Just a guy who had to figure all this out for the first time this year. So please take what I say with the appropriately sized grain of salt.

jmg · Post by **jmg** » Tue Apr 14, 2015 9:51 pm

On Line 12 (Form 2555EZ), did you indicate the date you moved to the US in 2014 and restate your income earned (i.e., W-2 info)?