Hi,
Here is my situation.
I'm a Cdn citizen. I lived in Canada from jan to aug 2005. From may-june, I did some contracting work for a Cdn company.
Around may, I also found a job with a US company. In may, the company gave me money (4.5k) to help me move to the US. They also paid 1.5k to the US gov't as tax. I moved to the US in Sept on a TN visa in Sept 2005 and started my job. I have lived in the US ever since and I have no substantial connection to Canada.
My question, how do I do my tax returns for 2005? Here is what I think should happen.
1. Report all income from Jan to Aug to Canada gov't including my contracting work and the 4.5k + 1.5k from the US company for moving.
Use the 1.5k as a tax credit.
2. Create a dual tax return for the US gov't. Report the 4.5k and 1.5k on the 1040NR and my worldwide earnings from Sept on the normal 1040.
Is there anything I'm missing?
Should the moving advance be included as part of my normal income and be taxed at the normal income tax rates?
Thanks!
Sung
Cdn / US tax return help
Moderator: Mark T Serbinski CA CPA
you are pretty close, but i'll correct a few thins:
1. your hadling of the cdn reported income is correct. the 4.5k must be reported. the us tax however will not be the 1.5k withheld but it will be determined as a ratio of you total us income for the year and yout total us tax. (in hindsight is twould have been better for you to receive this after you beagan work, living in US). Remember to also comply with any dep[arture tax requirements, ands follow the CRA instructions for treating SS/Fica payemnts and tax credit.
2. You will be a dual-status taxpayer for US purposes (although you could choose to be full year US resident). While you would report the 4.5K on the 1040NR, this is not really a teax return in your case, it is merely information; you will report all US income for all of 2005 on a 1040, and any non-US income earned after Sept as well, and then calculate you US tax accordingly on 1040.
As a dual-status, you will not be entitled to the standard deduction, so that is why I said you might wish to file a FULL 1040 reporting all income from 2005, and then excluding or crediting what you can. When determining your US residency starting date, if you spent a lot of time in US before september, you may fing that it actually statrted much earlier in the year, thus making your Cdn income taxable anywyas, even as dual-status. Pub 519 is your guide.
In either case, it would be at this point that you would determine what portion of your total US tax would be reported a s foreign tax on your Cdn tax return.
The income you received for 'moving' is ordinary wages in the eyes of both IRS and CRA. You will however be able to claim a tax deduction for moving expenses on your 1040 (not on Cdn return), if you (or your firm) have kept decent records
1. your hadling of the cdn reported income is correct. the 4.5k must be reported. the us tax however will not be the 1.5k withheld but it will be determined as a ratio of you total us income for the year and yout total us tax. (in hindsight is twould have been better for you to receive this after you beagan work, living in US). Remember to also comply with any dep[arture tax requirements, ands follow the CRA instructions for treating SS/Fica payemnts and tax credit.
2. You will be a dual-status taxpayer for US purposes (although you could choose to be full year US resident). While you would report the 4.5K on the 1040NR, this is not really a teax return in your case, it is merely information; you will report all US income for all of 2005 on a 1040, and any non-US income earned after Sept as well, and then calculate you US tax accordingly on 1040.
As a dual-status, you will not be entitled to the standard deduction, so that is why I said you might wish to file a FULL 1040 reporting all income from 2005, and then excluding or crediting what you can. When determining your US residency starting date, if you spent a lot of time in US before september, you may fing that it actually statrted much earlier in the year, thus making your Cdn income taxable anywyas, even as dual-status. Pub 519 is your guide.
In either case, it would be at this point that you would determine what portion of your total US tax would be reported a s foreign tax on your Cdn tax return.
The income you received for 'moving' is ordinary wages in the eyes of both IRS and CRA. You will however be able to claim a tax deduction for moving expenses on your 1040 (not on Cdn return), if you (or your firm) have kept decent records
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best