Cdn citizen/resident/full time student worked in US for 4m

[summer]

Hi,

I am a full time university student in Canada (residency in ON, attend university in Quebec, Cdn citizenship) who worked in US for 4 months this year on an H3 Visa.


My situation: I signed a W-8BEN form at the time of my employment to certify that I am a beneficial owner of the income tax treaty with Cdn (income not effectively connected with conduct of trade or business in US).
I also signed a form stating that the summer employment will be my only source of income for the year, so my employer withheld taxes at a much lower rate than if they applied my full annual salary. I am not sure, but I think I was taxed around 30% on the 40,000USD or so I made during the summer. (not sure until I get my W2)


Frankly, I know nothing about taxes, but intuition tells me I must owe taxes in Canada, since 40,000usd is probably taxed higher than at 30% in Canada.

So I have the following questions, but any comments or advice pointing me in the right direction would be greatly appreciated.

1. Was US supposed to tax me at all if I claimed exemption under treaty?
2. If so, at which rate? Is the 30% flat rate that they probably applied (income not effectively connected with trade/business for nonresident aliens) better for me than if they applied reg rate?
3. Should I try to get a complete refund from US? Is this possible?
4. Since they probably applied the flat rate, the only thing I can deduct is the personal exemption? What about tuition spending, etc?
5. Should I take the taxes that I paid in US and treat them as foreign credits in Canada and apply all my deductions in Canada only?

Any strategy or experience with this?

[After some time on the IRS website, it seems I need to file an 8833 and a 1040NR, but neither form nor the instructions provide any insight as to whether I will get a refund and for how much]

Thanks in advance!

[nelsona]

1. The form you signed meant nothing. You of course are taxable in US for the income you earned in US. There is no treaty provision that protects you. (unless you are married, which I can explain if needed, or if the income you recieved had been funneled froma Cdn university, which it does not appear to be, or you were working on a railroad)

You probably owe some state tax as well, and you should have been paying SS and medicare tax as well.


2. You should file a 1040NR reporting this income ONLY. You will get money back from US. Use the tax tables in the 1040NR guide. your wages are effectively connected with US, so they should not be taxed at such a high flat rate. You will have to find out if the state you worked in should have taxed you, and file there too.

3. You will not get it all back, but you should get enough back to lower the tax below your Cdn tax rate, which should not be too high as a student, with all your deductions.

4. 1040NR does not have many deductions, just a pesonal exemption and no standard dedution.

5. You should use the FINAL US tax that you calculate towards a the credit on your federal return, and then the rest on your Prov return. Using a deduction on your US return (if it is allowed) does NOT prevent you from using it on your Cdn return at the same time.

If after you go thru this exercise you 'use up' all your US tax, then you will know that it is not worth trying to reduce your US tax anymore aggressively, all you would be doing is lowering your tax credit. But if you find that you have US tax left over, it may be worth trying to lower your US tax further.