Prorate Income US/Canada

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

nelsona
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Re: Prorate Income US/Canada

Post by nelsona » Fri Feb 22, 2019 2:07 pm

You can't use the 10K limit until you ARE a non-resident, not in your departure year.

You would need to write a letter to Int'l explaining your situation, asking them to include only your portion while in Canada. Your employer would need to sign on to this.
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CadCad
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Re: Prorate Income US/Canada

Post by CadCad » Sat Feb 23, 2019 1:59 am

Regarding "employer would need to sign on to this", would a copy of a pay stub right after emigration date plus the EOY T4 work? I was a low ranking employee in a major corporation and now I'm with a different employer in the USA so I don't see a path to get them to provide something custom to support my claim.

And for "write a letter to Int'l explaining your situation", should I file this letter with my return or ahead of time so they provide approval before I file excluding my Canadian source income after becoming a non-resident?

Apologies in advance for so many follow ups, as the says goes, the devil is in the details and so far calling CRA help line is of little help (nice agents willing to help but lacking the knowledge to cover my edge cases and can't provide links to the supporting regulations :( )

nelsona
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Re: Prorate Income US/Canada

Post by nelsona » Sat Feb 23, 2019 6:01 pm

Not sure what you mean by "excluding my Cdn source income". With the letter you include with your return, you are saying that the income is NOT Cdn-sourced, but rather US-sourced, since you were working within the US. This is not Cdn-source income that you are exempting somehow.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

CadCad
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Re: Prorate Income US/Canada

Post by CadCad » Sat Feb 23, 2019 8:32 pm

Employment income paid by a Canadian employer to someone living in the USA is not Canadian sourced?

With "excluding my Cdn source income" I meant file declaring only the part of my employment income paid by my Canadian employer until I became a non-resident of Canada. I assumed since it was paid by a Canadian employer it was all Canadian sourced, even after I moved to the USA.

nelsona
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Re: Prorate Income US/Canada

Post by nelsona » Sat Feb 23, 2019 10:25 pm

Wrong. Employment income is sourced by where the work is performed.
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CadCad
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Re: Prorate Income US/Canada

Post by CadCad » Tue Feb 26, 2019 11:48 pm

Hi Nelsona,

I have been trying to find supporting material to sustain this claim since it would make a significant impact in departure return tax liability. Unfortunately all I can find says otherwise. Could you please point me or share what to look for since clearly my searches are pointing me astray? I have also called CRA non resident line and got the same response.

What I have found, most relevant section in []:

From US-CAD tax treaty (https://www.fin.gc.ca/treaties-conventi ... is-eng.asp):
Income from Employment
1. Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government Service), salaries, wages and other remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State [unless the employment is exercised in the other Contracting State]. If the employment is so exercised, [such remuneration as is derived therefrom may be taxed in that other State].

From Serbinski site (https://serbinski.com/taxation-us-citiz ... ada-2019#1)
Therefore, to be exempt under the Treaty, an individual must be employed in Canada. by a U.S. corporation without a fixed base in Canada. [Employment in Canada by Canadian. employers, and U.S. employers with a permanent establishment or fixed base in the Canada. is fully taxable in Canada]

From CRA non resident's page (https://www.canada.ca/en/revenue-agency ... anada.html)
Even if the payer deducts tax from your income or you pay an amount of tax during the year, you may also [have to file a Canadian income tax return] to calculate your final tax obligation to Canada on:
-income from employment in Canada or from a business carried on in Canada

What am I missing?

nelsona
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Re: Prorate Income US/Canada

Post by nelsona » Wed Feb 27, 2019 8:44 am

I'm not sure where you are stuck.
Remember, that for the income in question, you are a US resident, with a Cdn employer, performing work in US.

So from your quote of the treaty, wages derived by a US resident shall be taxable only in US unless the employment is exercised in Canada -- which it was not. you were not a Cdn resident down in US on a business trip for your employer, you are a US resident working in US

the serbinski quote is talking about US residents working IN Canada, possibly being exempted from Cdn tax, so that doesn't apply. You are a US resident working IN US.

The CRA quote: says Income from employment IN Canada of from a business carried out IN Canada. You are doing neither. This is, once again, discussing a foreign (US) resident, working in Canada.

Obviously Frank did what was suggested and had no issues, otherwise he would have reported back.

So, report all the income (because it was on your T4, deduct the US-sourced portion at line 256. the fact that this is a departure return will be sufficient proof that you left Canada, along with a paystub at the time you left. If CRA asks for more, then you will have to ask from your old employer. It really doesn't matter how low you were in the totem pole, they still have to help you.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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