Form 2555 Questions
Moderator: Mark T Serbinski CA CPA
Form 2555 Questions
I meet the bona fide residence test, being a CDN PR etc. I am salaried employee of a Canadian company. My occupation takes me to the USA for a few days every now and again. The instructions for form 2555 are confusing to me regarding whether I have to apportion part of my Canadian salary as US income for those days spent in the US on business or not. I do not have employment income from US sources otherwise. Example: Let’s say the annual salary is $50,000 and I spent 10 days in the US on business. I calculate $50,000 * 10/365 = $1370. In this scenario I would have to declare $1370 as US source income on form 1040. My question is whether I really have to do that. That means no FTC or anything else can be deducted from those $1370. How about vacation days in the US? Do I have to apportion some of my salary for that as well?
Your interpreation is correct about source. Publication 54 speaks to this directly, and shows how to calculate it: days <u>worked</u> in US over total days paid so not 10/365 but more like 10/200.
You are correct that FTC cannot be taken for this income, but you could take the pro-rated portion of your Cdn tax as a deduction (asuming you itemize)
But otherwise, your working in US does preclude using FEIE on that portion of money.
Your US tax shouldn't be too high though, since you still have at least the standard deduction, yours and your wife exemptions and a mighty low taxrate on the the first portion of taxable income.
Using your example, if I had $2000 of such US-sourced income, I would still need at least another $10,000 of reportable income (interest, etc) before I owed any US tax, as my standard deduction and the exemption for me and my wife would take care of any US tax obligation.
You *could* turn arround and claim that US tax as foreign tax credit on your Cdn return, but you might have a tough time arguing to CRA that it is foreign sourced.
But as a US citizen you should expect to have to pay a little US tax for the rest of your life, that is part of the deal.
I somehow think, though, that you won't have to pay any tax on the $2000 you *earned* in US last year, and if last year was a freakish year becuse of your HUGE interst income and you , then so be it.
<i>nelsona non grata... and non pro</i>
You are correct that FTC cannot be taken for this income, but you could take the pro-rated portion of your Cdn tax as a deduction (asuming you itemize)
But otherwise, your working in US does preclude using FEIE on that portion of money.
Your US tax shouldn't be too high though, since you still have at least the standard deduction, yours and your wife exemptions and a mighty low taxrate on the the first portion of taxable income.
Using your example, if I had $2000 of such US-sourced income, I would still need at least another $10,000 of reportable income (interest, etc) before I owed any US tax, as my standard deduction and the exemption for me and my wife would take care of any US tax obligation.
You *could* turn arround and claim that US tax as foreign tax credit on your Cdn return, but you might have a tough time arguing to CRA that it is foreign sourced.
But as a US citizen you should expect to have to pay a little US tax for the rest of your life, that is part of the deal.
I somehow think, though, that you won't have to pay any tax on the $2000 you *earned* in US last year, and if last year was a freakish year becuse of your HUGE interst income and you , then so be it.
<i>nelsona non grata... and non pro</i>
The rules are pretty clear: Days WORKED divided by total days PAID to work.
There is even an example in Pub. 54 that matches your case entirely, did you read it?
http://www.irs.gov/publications/p54/ch04.html#d0e2926
<i>nelsona non grata... and non pro</i>
There is even an example in Pub. 54 that matches your case entirely, did you read it?
http://www.irs.gov/publications/p54/ch04.html#d0e2926
<i>nelsona non grata... and non pro</i>