I transferred within the same company from Canada to the U.S., and have encountered tax complexities related to RSUs under the U.S.-Canada tax treaty.
What I know:
RSUs involve two key dates: Grant and Release. The grant typically occurs at hiring or salary adjustment, while the release occurs later, often over several installments. If I change countries between these two dates, each released RSU amount is allocated proportionally to the time spent working in each country. For example:
Jan 1, 2024: RSUs granted while working in Canada
Mar 1, 2024: Transferred from Canada to the U.S.
Apr 1, 2024: RSUs released, valued at $3,000
This would roughly mean $2,000 is Canada-sourced income (2 months) and $1,000 is U.S.-sourced income (1 month)
Taxes are withheld when RSU is released by each country based on where the income is sourced. As both Canada and the U.S. tax residents globally, we must report foreign income to the country of tax residence. In my case, I was a Canadian tax resident and U.S. non-resident for the first half year I transferred. Thus, CRA should withhold tax on the $2,000 Canadian portion, and IRS on the $1,000 U.S. portion. I don't need to report Canadian income to the IRS (as a U.S. non-resident), but I must report the $1,000 U.S. income to the CRA (along with claiming foreign tax credits).
The issue:
My company withheld correctly for the $2,000 Canadian portion on my T4 but withheld U.S. taxes on the entire $3,000 on my W2 (not just the $1,000). This resulted in double taxation on the $2,000. Also, the full $3,000 was reported on my U.S. W2, and $2,000 was reported again on my Canadian T4, leading the CRA to incorrectly see my total income as $5,000 instead of the correct $3,000.
The Payroll team insists this is required by the IRS to report worldwide income, and refuses to amend the W2, nor can they provide any documentation proving this double-counting. Has anyone else experienced this issue or could a tax professional suggest how to handle this situation?
RSU Double-Taxation Issue after Canada-US Transfer: Income Reported Twice on W2 and T4
Moderator: Mark T Serbinski CA CPA
Re: RSU Double-Taxation Issue after Canada-US Transfer: Income Reported Twice on W2 and T4
In my case, as I'm a US non-resident, I deducted the Canada-sourced income part when filing US tax, by adjusting my total income (1040NR line 10).
I report this adjusted US income as foreign income to CRA. But now I'm audited. CRA asks me to provide proof of my foreign income. They only recognizes my W2 (which includes the double RSU income), but they don't accepts the RSU release statements nor the IRS transcript. Now they asks for statement from your employer confirming the following information:
- the type and amount of income you received (employment, dividends, interest)
- the gross foreign income you received (before any foreign deductions, allowances, or credits)
As said above, my employer refused to provide such statement. I don't know who's responsibility is this now:
- Should my employer provide such statement?
- Should I provide any other documents to CRA?
I report this adjusted US income as foreign income to CRA. But now I'm audited. CRA asks me to provide proof of my foreign income. They only recognizes my W2 (which includes the double RSU income), but they don't accepts the RSU release statements nor the IRS transcript. Now they asks for statement from your employer confirming the following information:
- the type and amount of income you received (employment, dividends, interest)
- the gross foreign income you received (before any foreign deductions, allowances, or credits)
As said above, my employer refused to provide such statement. I don't know who's responsibility is this now:
- Should my employer provide such statement?
- Should I provide any other documents to CRA?