CANADA/USA Filing

[adeboloj]

Hello,

I just filed 1040NR, I would like to know what credits I can claim with CRA?
Can I claim Medicare and Social security as foreign tax paid, I know I can claim Federal taxes paid to the US government for Canada return.

Secondly, do I use the W2 result for my taxes as foreign tax paid or I have to use the number based on the refund (as I got some credit back on 1040NR).

Thank you

[nelsona]

You can claim the Medicare and social security taxes based on your W-2. For any IRS or stste tax you can only calim the result of your US tax return.
That would essentially be the tax withheld on W-2 minus the refund you are climing (or plus any you might owe).

[nelsona]

I always ask first timers if they are filing 1040NR and reporting the US income in Canada: what makes you sure you need to report this income in Canada. Do you live in Canada and commute back and forth? Otherwise you should be a non-ressint of Canada.

[adeboloj]

Thank you Nelsona for your response.
Well, on 1040NR, I did not claim Medicare and Social security as I was made to know this is my CPP and EI in Canada and wasn't supposed to be claimed on 1040NR.
I work in a state with no state taxes, so I filed 1040nr and got refund on the taxes I paid on income. So the question now is that when I file my tax return in Canada can I claim the Medicare and Social security already paid to the IRS?

As per your second response, I was in Canada till June 2016 and moved to U.S same year on TN visa, been the first year and I commute to Canada every other week sometimes weekly- and I have my spouse and children still living in Canada, I can not file NR in Canada due to my strong ties as I was the only one in the U.S.
Since I file 1040NR in the U.S, I can not file as a non resident in Canada again (rule is you can only file NR resident in one of the two countries) based on my ties to Canada I think its more appropriate to file as resident in Canada and NR in the U.S, so I will have to report all the taxes I paid to IRS to CRA when I file my taxes in Canada.

[nelsona]

There is nothing on 1040NR that would allow you to "claim" social security taxes. You simply pay these from your payroll, that is why it is on w-2. I never suggested that you claim these on 1040NR. you claim these on your Cdn return, as foreign taxes, as I already told you, not as EI or CPP.

I agree that you are not a non-resident of Canada, and must therefore report US income on your Cdn return.

If the tax is too high in US such that you cannot use all of it as a credit in Canada, consider doing an article XXV 1040NR. I have explained this elsewhere. It gives you a better US tax rate. Only use this if you cannot use up al your US tax. I've explained this elsewhere.

Just FYI, it is not quite true that you cannot file as a non-resident in both countries. You could in your transition year, if you, say moved to US in Aug/September. You will still be considered departed Cdn emigrant, and would still file 1040NR. Just for that year. keep it in mind when you decide to actually move to US.

[adeboloj]

Thank you so if I understand you correctly, I can add the federal taxes paid (minus the refund I received after 1040NR filing) to Medicare and Social security and that totals my foreign tax claim on Cdn return. See below

1) Medicare paid on W2 = A
2) Social security on W2 = B
3) Federal Tax withheld on W2 = C
4) Refund after 1040NR filling = D

Does all these make up the foreign tax to be claimed in Canada when filing with CRA? or D is not included. Some say you don't claim B & C as well on Canada side except your income is less than $10,000, not sure how true this is?

As per tax been high in the U.S, I will keep this in mind if I ever moved to the states but do not think I paid high on taxes, and if I do on W2 based on the chart on the 1040NR instruction table, I got some refund back with IRS.

[nelsona]

Whoever gave you the information that Social security and Medicare tax were not eligible was incorrect, regardless of how much or little you made in US.

I already explained how to determine how the federal tax for the year in my first port. Please read more carefully.

My reference to US taxes being high had nothing to do with the year you move. It had to do with the year when you are stil Cdn resident, like 2016.

You really need to read my posts more carefully. I'm going to leave this thread now. It is becoming repetitive.

[adeboloj]

Thank you- that was helpful.

[adeboloj]

Hello,
Please I have read most of your comments on this topic but still not cleared, please could you take time to explain this further...

"If the tax is too high in US such that you cannot use all of it as a credit in Canada, consider doing an article XXV 1040NR"

At what point does one knows or aware that the US tax is too high and might not be able to use all the credit in Canada- my impression is that, all federal taxes, medicare and social security are deductible by default as foreign taxes paid.

[nelsona]

Well, when you do your taxes, you will see that when you take the deduction, you may not be able to use all the US tax, ie the deduction will be less than the total US tax.

That is how you would know,

If that does not happen, then you have nothing to worry about.

[adeboloj]

Hello Nelsona,

Thank you for your help on this, i really appreciate it.
So i went back and check my Canada return for 2016 (just because CRA is demanding W2 and 1040NR forms that I completed), there I noticed what you said, I was not able to use all the foreign tax credits (Federal tax withheld + Social Security + Medicare - Tax refund), I had less CAD $7,000 on my foreign tax that I wasn't able to use as foreign credit. So the questions are:

- Am I still able to use this amount in future i.e. 2017 returns?
- Secondly, if am not able to, which is fine, how do I use article XXV 1040NR in future to ensure I use all the foreign tax credits or to get a better US tax rate?
If there is a link where it was explained previously, I will appreciate this information so am better informed for my tax return for 2017.

Thank you for your help.

[nelsona]

Unlike US, Canada does not allow carry forward of unused non-business foreign tax credits.


So, you should be looking to lower the tax on your 1040NR.

By looking for XXV you should be able to find it. Essentially, you prepare a NORMAL 1040, and use the tax rate on that on your 1040NR. It is designed for married couples.

Remember though, that from the reading of your thread, it appears you live in US, and this only applies to the US income that you earned before moving away.

I assume you filed a departure return for Canada in 2016?

[adeboloj]

Thank you and that was helpful, if I remembered correctly, I used a tax rate for married couple and was able to get some refund from IRS, just that I didn't see the XXV part but will watch out for this next year when i do my tax return with IRS but come to think of it, since Canada tax rate on income is higher than that of the U.S, even if I have get more refund with IRS, I might end up paying back all the money to CRA when I do my tax return in Canada- just a thought and any advice from you?.

As per your comment, I did not relocate to the U.S, I have my family live in Canada and am just in the U.S for work reason only, last year I spent less than 183 days and no issue with presence residency test but next return i will definitely be over 183 days in the U.S so my plan is to use form 8833 (Article on Residence) to file 1040NR with IRS.

Thank you

[nelsona]

YEs, I understand about your residency status. It is borderline in yoru case going forward, and if, as you found last year, it costing more in US, you might want to consider claim US residency.
In 2016, you had mixed US/Canada income, which plays havoc with FTC. In 2017, if you are fully working in US, it will all be US income, and you should get a better use of FTC.
Buit I would be double checking that I'm not overpaying in US.

[canadian81]

According to nelsona, since you are more than 183 days working from Canada last year, your US company should run canadian payroll