grievance settlement

[vduclos]

Hi, I'm a Canadian living in the US on a Green card. I'm currently preparing my US tax return. In 2019, I received a grievance settlement for work which had been done prior to leaving Canada. Almost half of it went out in taxes to both federal and Quebec govt when I received the check. Now, do I need to report the revenue to the IRS? When I enter 'foreign income' into turbotax it seems to get taxed again. Will I be able to get back some of it back if I file a tax return in Canada/QC when March comes, as a non-resident who paid taxes? Or should I just not bother reporting that anywhere, and take just let go of the taxes paid on the check? many thanks!

[nelsona]

You need to include this on your Cdn return (for the province you worked in), and perhaps get some funds back.
You also report it in your US return, and take credit for any tax you pay in Canada.

If the amount is less than CAD$10K, you can exclude it completely in Canada, and get all your Cdn tax back, but you still need to report it in US>

[vduclos]

Thx. Do I report the gross or the net salary to the US? It is a little under 10K. In the US, how do I 'take credit for any tax you pay in Canada'? Doable with turbotax? In Canada, what do you mean by I can 'exclude it completely'?

[nelsona]

Gross salary. Any final tax that you calculate on your Cdn return 9which you see will be zero, plus EI, CPP are considered foreign tax credits.

[vduclos]

Not sure I get it. What do you mean by 'you see will be zero'? I already how much I paid in taxes, since I only received one check with a slip. Can I simply add taxes paid (Cdn + Qc) + EI + CPP) and take credit for this?

[nelsona]

You can only take credit for taxes that you actually paid AND owed. Since the amount you earned is less than $10K, you are expected to exempt this income on your CDn and Quebec tax returns, so the income tax you OWE in Canada is zero for this income (ie. you will be refunded these taxes after you file). The CPP and EI will probably stay as is, so those 2 items will be the "tax" you can use on your form 1116 with your 1040.

It is NOT the tax that was withheld from your settlement that matters, it is the tax that is determined on your Cdn/QC tax returns. Ypu need to prepare these Cdn returns before you will actually know what taxes you can claim on your US return.

[vduclos]

Many thanks for the clarification, now I get it. Although I sincerely hoped I would not have to prepare the Cdn returns before....I guess I can simply 'mock' the return in Ufile for now, since the Cdn tax season is a bit later, correct?

[nelsona]

You need to prepare the return accurately, and you can file whenever you want. Once you get the T-slip from your former employer, you can file.

But you do not need to wait to file before working on your US return. There is no required order of filing.

[vduclos]

Ok, got it. thanks

[Luciad71]

vduclos wrote:
> Thx. Do I report the gross or the net salary to the US? It is a little
> under 10K. In the US, how do I 'take credit for any tax you pay in Canada'?
> Doable with turbotax? In Canada [url=https://www.comparateur-mutuelle-assura ... entreprise]mutuelle entreprise[/url], what do you mean by I can 'exclude it
> completely'?
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