Standard deduction , TN, first time

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sajc
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Standard deduction , TN, first time

Post by sajc » Sun Apr 12, 2020 6:29 pm

Hi there

This is my first year submitting to IRS. I reside in Canada and on TN status (commuter). I have seen many threads in the forum's and tried to understand the treaty. I see that I can start with MFJ 1040 ( both Canada and USA income) use standard deduction to get a rate. And use that rate for 1040 NR (just US income). Got 2 questions:
1) what is the value I need to keep for itemized deductions (line 37 on NR) (standard deduction?)
2) can I apply for ITIN for my child and apply for child tax credit eventhough kid lives with us in canada.
Thank you for the help

nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Sun Apr 12, 2020 10:56 pm

1. You can only use the itemized decuctions you are eligible for (which is typically very little). When you use the 1040 MFJ to determine rate, you no longer use any of the calculations on 1040NR, you find your taxable income and apply the rate. No standard deduction (you already took them on the 1040).
2. Yes.
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sajc
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Re: Standard deduction , TN, first time

Post by sajc » Mon Apr 13, 2020 4:11 pm

Thank you nelsona. Last question: let's say I make 50000 a year. So the MFJ 1040 the taxable income is 50K-24k=26K for which I would get the rate. So are you saying that for 1040NR, I need to use that rate for the whole 50000? Sorry if it's a dumb question.

nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Mon Apr 13, 2020 4:54 pm

Pretty much, but that rate is still better than the 1040NR rate you would have to use. Don't forget the rate you use is 1040TAX/50K not 1040TAX/26K.
The big change in 1040/1040NR is the removal of the exemption, and raising the standard deduction which has never been available to 1040NR users.

Of course, if you wish, you can always file 1040 if that is better, but the complexity of other reporting requirements might not be desirable.
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nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Mon Apr 13, 2020 4:56 pm

btw, why would you need ITINs for your dependents? They don't get you any deductions on 1040NR, and are not needed if you are simply using 1040 to figure the rate.
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sajc
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Re: Standard deduction , TN, first time

Post by sajc » Mon Apr 13, 2020 5:01 pm

Thanks a lot nelsona. that makes lot of sense. I thought if I need apply for child credit on 1040NR I need to get a ITIN for my kid? Do I have to get a ITIN for my spouse too since I am applying as a married status?

sajc
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Re: Standard deduction , TN, first time

Post by sajc » Mon Apr 13, 2020 5:37 pm

https://www.irs.gov/pub/irs-trty/canatech.pdf in page 48, the example seems to show that standard deduction was used for both cases. (1000 was standard deduction per person in 1985). So was confused.

nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Mon Apr 13, 2020 5:57 pm

That is from a long time ago and both forms have changed drastically, including ineligibility for standard deduction probably.. Use the method I described above, it incorporates the standard deduction (and allows for use of the 1040 list of itemized deduction if that is higher). tax/AGI = rate.
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nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Mon Apr 13, 2020 6:00 pm

The child tax credit is typically not available for children without an SSN. There is no treaty provision to grant this to Cdns, since it is not based on residency or citizenship - just SSN.
But, again, please don't go overboard on reducing your US tax payment, all you are doing in making your cdn tax payment higher!
Just calculate the simplest 1040Nr that results in a tax lower than what you can use on your FTC in Canada.
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sajc
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Re: Standard deduction , TN, first time

Post by sajc » Tue Apr 14, 2020 5:59 pm

Thank you Nelsona. Appreciate your help in this. US side does not accept moving expenses anymore but Canada does, so just trying to decrease US side. But yes, not using child tax credit anymore.

nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Wed Apr 15, 2020 8:16 am

Canada does not accept moving expenses in/out of Canada. Technically, if you are still resident, you didn't move, and if you are not resident, you aren't eligible, since you are not repotting wages from that new job.
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Grad467_2
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Re: Standard deduction , TN, first time

Post by Grad467_2 » Wed Apr 15, 2020 7:14 pm

Question about ITIN - when I did my 1040NR, I found no deductions on the federal side but got a bigger return via my state return (Michigan). Did I make a mistake or is this the case (claiming dependents will increase your state refund)?

If so, I have another question. Both my adult children (one is 24 and the other is 22) I included as dependents. Both of their ITIN numbers expired but my daughter (who still lives with me) started working in the US under the TN visa program and received a SSN but I also included my son's expired ITIN (which I included on the 1040NR for 2019). Will this be an issue (my son's expired ITIN number) and if so, I assume I can include an application for renewal accompanied with my return (assuming this is necessary)?

sajc
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Re: Standard deduction , TN, first time

Post by sajc » Wed Apr 15, 2020 7:37 pm

Nelsona, I moved from Alberta to Ontario for the job. So planning to claim the moving deduction. Is that acceptable?

nelsona
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Re: Standard deduction , TN, first time

Post by nelsona » Wed Apr 15, 2020 9:07 pm

Maybe. Check the distance rules. As I said, you are not allowed to claim moving to/from Canada.
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sajc
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Re: Standard deduction , TN, first time

Post by sajc » Wed Apr 15, 2020 10:39 pm

Thank you . Yes I checked the distance rules..moved 3000 odd kms in Canada :)

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