What should a person do if she has a U.S. sourced income; having to file a U.S. non-resident tax return; and regarding to Canadian tax application; should her related Canadian Tax Return in the same year be applied by Foreign Tax Credit, or under the Canada-U.S. Tax Treaty there is a different tax approach?
For example, Ms. A received U.S. source interest income and has to file 1040NR (US tax return for non-resident) with U.S. tax payable. In her Canadian Tax Return for the same tax year, should she claim a Foreign tax Credit or the Canada-U.S. tax treaty has a different approach?
Your assistance is greatly appreciated.
US Interest Income
Moderator: Mark T Serbinski CA CPA
US does not tax non-residents on interest, even if the bank is in the US.
You have nothing to report in US, and should include the interst on your Cdn tax return only.
IRS PUB. 519 is pretty clear on this, indicating that interest is considerted to be 'sourced' in the country of residence.
This is not a treaty issue. IRS treats all non-residents like this.
The only time you would file a 1040NR in your case is if the bank somehow withheld tax on the interset. You would file the 1040NR to get the tax back.
In neither case would any foreign tax credit apply on your CDn tax return, since no foreign tax was legally owed on this interest.
<i>nelsona non grata... and non pro</i>
You have nothing to report in US, and should include the interst on your Cdn tax return only.
IRS PUB. 519 is pretty clear on this, indicating that interest is considerted to be 'sourced' in the country of residence.
This is not a treaty issue. IRS treats all non-residents like this.
The only time you would file a 1040NR in your case is if the bank somehow withheld tax on the interset. You would file the 1040NR to get the tax back.
In neither case would any foreign tax credit apply on your CDn tax return, since no foreign tax was legally owed on this interest.
<i>nelsona non grata... and non pro</i>