Self-Employed taxes for American in Canada

empericman · Post by **empericman** » Mon Mar 10, 2008 6:32 pm

I am a PR in Canada, living and running a small business in Canada.

As a US citizen, I completed a 1040 & Schedule C & Schedule SE as I used to in the US. I completed a 2555 with the exact same information as the Schedule C, thus eliminating my taxable income (it is well below ~$80K).

My question is how can I avoid the SE taxes, as I already paid CR for CPP? The publications I've read aren't specific enough to do this right, as they say FEIE has nothing to do with payroll taxes and just give a general warning that a tax treaty might exist. I know there is a tax treaty but I have no idea how to claim such a thing.

Paying a specialized tax professional doesn't make sense, as my income is so low I would rather just pay the $1500 to the US to be safe.

nelsona · Post by **nelsona** » Mon Mar 10, 2008 10:08 pm

Its not the tax treaty you need. It is a letter saying you pay CPP. CPT 56 I believe, from CRA.

nelsona · Post by **nelsona** » Mon Mar 10, 2008 10:09 pm

Certificate of coverage.

nelsona · Post by **nelsona** » Mon Mar 10, 2008 10:12 pm

If you have children, you should be using 1116 rather than 2555, to take advantage of the child credit.

BTW, 2555 dors not always reduce income tax to zero.

empericman · Post by **empericman** » Tue Mar 11, 2008 12:43 am

We do not have children, but I am not claiming any dependents. My wife does not have an ITIN and does not have any of the documents to complete a W-7. We are waiting on her passport.

I have just left the spouse SS blank on the form and hope I can revise it later, if necessary. Since my individual deduction is more than enough to cover my AGI, I don't need her deduction.

I suspect the certificate of coverage will take too long to receive, so I'll just pay for SS credits from both countries this year. In the future, it looks like I'll just not complete a Schedule SE and include a copy of the certificate with my US taxes?

nelsona · Post by **nelsona** » Tue Mar 11, 2008 7:50 am

You will of course need to fill scehdule SE, in order to determine your NET income from self-employment.

You still will owe income tax on that income (or have to exclude it).

All that the letter does is allow to to ZERO the self-employment tax portion of that income.

empericman · Post by **empericman** » Tue Mar 11, 2008 8:12 am

Thank you for your help.

Yes, I was just thinking Schedule C gives my net income and SE is the self-employment tax portion.

nelsona · Post by **nelsona** » Tue Mar 11, 2008 9:50 am

Ah, you are correct.