1040 question

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nbaker
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1040 question

Post by nbaker »

TN1 since June 2004. Meet 183 days SPT test, I prefer to file whole year 1040 MFJ, just wondering which line should I put in my canadian income? everything to Line 21? I have Canadian wage(T4), T5008 and bank interest(T5) incomes from January to May 2004.
nelsona
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Post by nelsona »

The income would go exactly where it would were it from US.

You do realize that this will cause your Cdn income to be taxed, with incomplete (like less than half) credit given for your Cdn tax.


See other threads about using FEIE and Form 2555, to report Cdn income, but then exclude the Cdn wages from US tax. This would yield the lowest US tax on your 1040 MFJ.

If you or your wife made good Cdn income before arrival in US, this will save you quite a bit.


<i>nelsona non grata</i>
nbaker
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Post by nbaker »

Thanks Nelson, has anybody used this technique (1040MFJ plus FEIE.)successfully? It looks TOO good to me, why everybody else (such as David Ingram) still talking about 1040MFJ or 1040NR/1040MFS? Don't take me wrong, I'm not questioning your expertise, I just got myself confused.
nelsona
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Post by nelsona »

This is the correct way to file, if you can meet the FEIE criteria, which should be no problem if you have spent little time in US before moving down.

The 'German treaty procedure' is way out there, but it does work and has been outlined by a very highly respected cross-border type.

I personally did NOT use FEIE when I moved, because I di not know of the treaty position, otherwiuse I would have used it.







<i>nelsona non grata</i>
nelsona
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Post by nelsona »

As I said, <u>you</u> probably did not need the treaty election to use FEIE beacuse of your previous US residency.

As I said, if your Acct didn't use the double treaty position for FEIE, what on earth did he use it for!!?

<i>nelsona non grata</i>
nelsona
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Post by nelsona »

If you leave US and then come back real soon, you must file as a resident, even for your departure year

Pub 519:

Residency during the next year.

If you are a U.S. resident during any part of 2004 and you are a resident during any part of 2003, you will be taxed as a resident through the end of 2003. This applies whether you have a closer connection to a foreign country than the United States during 2003, and whether you are a resident under the substantial presence test or green card test.

<i>nelsona non grata</i>
rschneg
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Post by rschneg »

This all real interesting. Can one apply the FEIE rule after the fact? In other words can this be done on a 1040X. My accountant told me that one cannot declare a treaty position (which you need for FEIE)once the tax year is passed. Do you guys agree?
nelsona
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Post by nelsona »

You can do it after the fact.

You are changing your return, not simply realizing that you forgot to file the 8833.


<i>nelsona non grata</i>
nelsona
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Post by nelsona »

In general -- as I have grown weary of over-specifics -- if a taxpayer takes a treaty position but fails use 8833, their position will be denied, that is all.

If the taxpayer <u>subsequently requests that the treaty position be honoured</u>, IRS will honor it.

<b>But</b> if IRS concludes that an 8833 form HAD TO BE FILED (which is different that concluding that you held a treaty position) the tax saving will be reduced by the penalty.

Remember, not all treaty positions REQUIRE 8833, only those which involve larger sums of money. I'd say most times an 8833 is not mandatory. Most times an 8833 is filed, not because it was required, but as a means of telling IRS what is going on.

In other words, if you took a treaty position, and were ALSO required to file a 8833, but did not, and you end up owing less than $1000 dollars in back tax, late fines and penalties, you are better off just paying the bill, rather than submit the 8833 and pay $1000.

If your treaty position wouls save you $10000, then go ahead and re-file, with the 8833, and expect a $9000 check.




<i>nelsona non grata</i>
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