canadian holding TN working in US

[frank]

Hi,
I am a Canadian, have been working with TN visa since July 16, 2007 in US. I had income from Jan 01 -- July 16 2007 in canada.

Here is my situation:
1. My wife and sons are still live in canada. they don't have SSN and ITIN.
2. I go back to canada every month.

Following is what I am thinking for filing 2007 US and Canada tax return.

1) file US return (only for income got in US from July 16)
2) use US tax as credit to file canadian tax return (for entire one year income)

Do you think they are correct?

I also have follwoing questions?

1) What form I should use to file US tax, 1040?
2) what filing status I should use if 1040 be used, Single,Married filing separately ect?

Thank you very much
Frank

[nelsona]

You are pretty much commited to reporting your US income in Canada, since you are still resident there.

For US, you may use either a full-year 1040, in which case you must file jointly with spouse, reporting ALL world income on that 1040, and then using foreign tax credits, and by excluding your Cdn wages using form 2555.

Or you can file a 1040NR, or a dual-status return 1040NR with 1040 for second half of year.

You can never file as single, since you are married.

Your goal in filing your US tax, is to lower the tax to just below your Cdn tax.

[frank]

Thanks Nelsona

But my wife does not have US SSN or ITIN. She did not come to US with me, so she did not apply TD visa. How do I file joint return?

from you reply: "and then using foreign tax credits, and by excluding your Cdn wages using form 2555. "


does this means I don't need to pay tax in US for my Cdn wages?

[nelsona]

When you file, you will submit the required form W-7 and they will issue her the ITIN. She nends this even if you do not file jointly, since she can still be claimed as dependant.

The result of including Cdn income, and then excluding wages, or getting credit will probably result in *some* US tax on that income. However, it should reduce yopur overall taxrate to such an extent as to make this worthwhile.

[frank]

Thank you so much .

I still have following question:

1. Can I only file the income from July 16 2007 when I started working in US for US tax? Because I am not US citizen and stayed in US less than 183 days in 2007.

2. the reason I ask question 1 is that If I file all entire year income for both country, It seems I can not, Because I need US tax credits for filing Canada tax, and need Canada tax credit for filing US tax, both filing rely on each other tax credit. I can get only one done first.

3. If I file jointly to claim my wife and sons as dependent using 1040, Does my wife need to report her income? she does not work, only have some bank interest.

[nelsona]

1. You can, but may find that the tax rate is quite high. You would be filing a 1040NR.
2. You would get tax credits for use in bothe countries. Complicated but doable.
3. As i sais, if you file full-yar 1040 it must be joint, reporting all the couple's world income. Since spouse made little mone, I would guarantee that this is the best way to file. And you would get $1000 credit for your son.

[frank]

Thank you so much Nelsona .

1. if use 1040NR it is simpler. I want to use the easy way to do filing US tax. because my tax rate is decided finally by canada tax rate.

2. If filing 1040NR. this means I consider myself as onoresidence of US, but I still claim my wife and sons as dependants right?

3. Can use tax software to file 1040NR?

[nelsona]

1. 1040NR will be simpler. The trouble may be that the taxrate you get using 1040NR will be higher than your Cdn taxrate. If you live in Ontario, it most certainly will be higher.And if you max out your RRSP it will be higher. You do want to lower the US taxrate to below your Cdn rate.

2. Yes. They will need ITINs to be requested with the 1040NR with form W-7.

3. No