Hello, I am in the process filing for Canada income tax return for 2015.
I earned $76 000 CAD from an American company as a employee while living in US for 6 months, and then I returned to Canada and earned $32 000 CAD as a self employee/independent contractor.
I already paid $14 065 income tax to the IRS for my US income. Does that mean that I don't have to pay any tax to CRA for the $76 212 income from US since I already paid to IRS? How is foreign tax credit really calculated and applied to my total income in 2015?
Any comments are welcome
thank you.
amount of income tax paid in the USA = Foreign Tax Credit ?
Moderator: Mark T Serbinski CA CPA
Hello,
You still have to report your income from work in the US on your Canadian return. The $14,065 you paid to the IRS should be credited back to you on your Canadian tax return using form 2209. You still have to report all your income from Canada and the US on your Canadian return since you are a resident of Canada.
Once the $14,065 is credited back to you on your Canadian return, you will still likely owe some additional Canadian tax because in general, Canada's taxes are higher.
Hope this helps.
You still have to report your income from work in the US on your Canadian return. The $14,065 you paid to the IRS should be credited back to you on your Canadian tax return using form 2209. You still have to report all your income from Canada and the US on your Canadian return since you are a resident of Canada.
Once the $14,065 is credited back to you on your Canadian return, you will still likely owe some additional Canadian tax because in general, Canada's taxes are higher.
Hope this helps.
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
A follow-up and related question. My situation is that I have significant residential ties in Canada and, in 2015, I was employed in the US by an American company. I am in the US under a NATO-2 (spouse) visa. I had a Canadian accountant prepare my Canadian taxes last year and he did not add the Social Security and the Medicare tax; he just claimed the US Federal taxes paid as my Foreign (in Canada) tax credit. I am now understanding that this is wrong and I will be corrected. It makes a huge difference in my 2015 taxes; including SS and Medicare taxes take me from owning 12kCDN to owing about $1k. THANK YOU FOR THAT INFORMATION
My question is concerning the revenue figure that I must use to declare in Canada, my W-2 "describes" my w-2 wages in 4 columns; Federal, Social Security, Medicare and State. Social Security is about 3k more than Federal, Medicare is about 9k more than Federal and State = Federal. There is a "deferred comp" which I assume is my pension plan contribution that reduces my gross salary in the Fed ans State Column. The Social Security column doesn't have the deferred comp deduction but it has a deduction for "Wages over limit" which doesn't appear anywhere else.
Which of those figures should I use and convert to include on line 104 of my T1?
Thank you!
My question is concerning the revenue figure that I must use to declare in Canada, my W-2 "describes" my w-2 wages in 4 columns; Federal, Social Security, Medicare and State. Social Security is about 3k more than Federal, Medicare is about 9k more than Federal and State = Federal. There is a "deferred comp" which I assume is my pension plan contribution that reduces my gross salary in the Fed ans State Column. The Social Security column doesn't have the deferred comp deduction but it has a deduction for "Wages over limit" which doesn't appear anywhere else.
Which of those figures should I use and convert to include on line 104 of my T1?
Thank you!
[quote="nelsona"]you would add the wage portion plus your deferred comp. Don't use the figures used for SS or Medicare, any equating to what I describe above may be purely coincidental.[/quote]
Just to clarify, I can add W-2 boxes 2 (Federal Tax), 4 (Social Security Tax) and 6 (Medicare tax) for my claimed foreign taxes paid (plus my state taxes) right?
Just to clarify, I can add W-2 boxes 2 (Federal Tax), 4 (Social Security Tax) and 6 (Medicare tax) for my claimed foreign taxes paid (plus my state taxes) right?
That isn't what you asked.
Your WAGES for T1 purposes are from your W-2 as I described: wages (box 1 plus any pension/plan that reduced box 1 usually found in box 12)
Your TAXES eligible for foreign tax credit on T1 are the Fed taxes you calculated on 1040, Your state tax is the tax calculated on your state return, and the Fica taxes on box 4 and box 6 from your w-2.
I already stated this in this thread:
and the tax has to be calculated, not simply what was withheld.
You also include any state tax from your state return, medicare and social security tax.
Your WAGES for T1 purposes are from your W-2 as I described: wages (box 1 plus any pension/plan that reduced box 1 usually found in box 12)
Your TAXES eligible for foreign tax credit on T1 are the Fed taxes you calculated on 1040, Your state tax is the tax calculated on your state return, and the Fica taxes on box 4 and box 6 from your w-2.
I already stated this in this thread:
and the tax has to be calculated, not simply what was withheld.
You also include any state tax from your state return, medicare and social security tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 