US Res working across the border

[Shrek]

I live in the US and work for an airline in Canada. I commute into Canada w(where I am based) and then fly around the world.
Am I subject to pay any tax in Canada-I know I will have an obligation to the IRS
Tax treaty says...
under ARTICLE XV (Dependent Personal Services)
...
3. Notwithstanding the provisions of paragraphs 1 and 2, remuneration derived by a resident of a
Contracting State in respect of an employment regularly exercised in more than one State on a ship,
aircraft, motor vehicle or train operated by a resident of that Contracting State shall be taxable only in
that State.

Thanks in advance

[nelsona]

Many AC employees have tried this over the years to avoid Cdn taxation. The key is whether you legally live in US or not. What is your US status?

[Shrek]

Dual citizen, living in the US

[Shrek]

Other employees in a similar predicament are telling me they divide the flying up into work done in Canada vs. Work done outside Canada and file those percentage's with CRA for a reduced tax liability.

But the way the treaty reads, it sounds like transportation employees like myself would have no tax liability in Canada, however all income.must be declared to IRS.

Thanks again for.your time

[nelsona]

The reason that you cannot use that treaty clause, is the key words: "aircraft...operated by a resident of that Contracting State". The airline is a resident of Canada and operates that aircraft. You are the employee, not the operator. So if you worked for Delta and flew flights to YVR, etc, Canada would not tax you on any portion of those flights, because of that clause. But since you work for a Cdn airline, your income is sourced by a set of rules established by CRA (thru court cases).

http://www.avcanada.ca/forums2/viewtopic.php?t=122337

As a US citizen, you report world income to IRS regardless. So what you are determining is what percentage of your income is taxed in Canada, and what credit will be given on your 1040, through form 1116.

[Shrek]

That makes sense. Thank you also for the link.
On a related topic, would I report my pension contributions as a deduction on my 1040?
I have heard some employees do and some don't.
where is there guidance for such info?

Also has your firm handled situations like mine, if so I would like to discuss further strategies, if not, is there a specialist out there that you are aware of.

Once again
Thank You

[nelsona]

As it states in my signature, I am not a pro.

On pension deduction in US:
You have 2 choices
1. Do not deduct it from your wages. This means paying higher US taxes right now. It then means that a portion of your pension, when you take it, is not taxable in US. But since it is all taxable in Canada anyway, there is little point just building up an unusable foreign tax credit year after year in retirement. And you may retire in a state with no income tax.
2. take the deduction now. It will lower your US tax, especially if you live in a state with income tax. When you take the pension it will all be taxable in Canada and US, but the Cdn credit will still be more than enough to cover the allowable tax credit.

I don't see the benefit of NOT deducting it, since it will all be taxable in Canada anyways, so there isn't much value in making it less taxable in US in future. Save the US tax now.

[Shrek]

For a non expert, you make a lot of sense ;)
The explanation I was given by those who do not claim their pension deduction (to the IRS) is that a nonresident of Canada will only pays 15% tax to CRA when they start drawing their pension. This 15% will mean that the IRS will likely assess more taxes above the foreign tax credit amount.

Also, do you have a firm that you would recommend for someone in my situation.

Thanks again

[nelsona]

Firms are easily forund. It would not be proper to have recommendations of other tax firms on this site generously provided by serbinski.

Google is your friend.

Its not a bad argument, except that one will generally be taxed less in retirement, and it is still only the contributions that are not taxable, so it is a pay tax now or pay tax later issue. I usually side with later. your giving up a tax credit now for a tax credit later. I say take it now.

[Shrek]

How would one going about claiming T4 deductions on the 1040?
CPP, EI, Pension contribution
Looked online can't find a thing.

[nelsona]

Really, you looked on this forum and could not find the answer. I would suggest to try harder. There have been posts on this in the last 2 weeks.

[Shrek]

Maybe I'm searching the wrong words,I've searched:
1116
T4 deductions
Canadian Pension Deductions
Ive also read IRS pub 54
Ive been on Turbo tax website

I'm obviously not typing/asking the right questions. All I can find is general info, no specific data entry location points
any help would be appreciated

[nelsona]

there is a search window at the top of each page. Going to the 'net to find cross-border answers when you have this site?

How about 'CPP' to start.

[nelsona]

Anyhoooo....
CP and EI are considered foreign taxes, so you will use these along with your final federal and provincial taxes as a foreign tax credit.
pension contributions can simply be removed from your gross wages.

[Shrek]

Thank you,
I do appreciate your time.
I will re-search cpp (thanks for the tip)

As for pension deduction, (and union dues?), just subtract them from gross earning and the resulting number would be the foreign income?
It sounds simple and logical, I just thought the IRS would have mad it a lot more complicated.

Thanks again