reporting foreign income

[lanman2000]

Quick question... When reporting Canadian income on a US return do I report the Total wages? Adjusted income? Taxable income?

Same question going the other way... reporting US income on a Canadian return. Total income? AGI? Taxable income?

[nelsona]

Not quite clear on the question.

You report income as income on the appropriate line on each return. If there are deductions and/or credits to be taken, you report these on the approprite lines. There is no "lumping" or other manipulation done to your income before entering it on the returrn.

[lanman2000]

I will clarify:

1) I have US-source earned income and passive income that I need to enter on my Canadian return because they were earned/received while I was resident of Canada. In bringing over the earned income do I bring over the gross wages (Form W2 - Box 1)? In bringing over the passive income (bank interest) I know I just need to bring over the whole amount.

2) I have Canada-source earned income that I need to put on my US return b/c worldwide income is taxed in the US b/c I am a US Citizen. Do I bring over the gross wages from my T-4 slips (Box 14)? Do I need to do anything on the US return with respect to T4 boxes 20 (RPP) or 52(Pension) or 44(union dues)?

Then the question becomes how do I calculate the average tax rate on my US/California returns to know how much foreign tax paid to put on my Canadian return? Is it :
a) Total tax / Total Wages or
b) Total Tax / AGI or
c) Total Tax / Taxable Income

I'm thinking it's a).

If its b) then I assume I use the relevant AGI from federal or california since they are different amounts for me right?

[nelsona]

1). Your US wages would be the portion of box 1 that was recieved after arrival in canada, plus any 401(K) contribution you made after arrival.

2) Wages minus pension contributions. Any other deductions you have would be elsewhere.

The amount of US tax you can use is equal to the TOTAL US tax owed (first pass if using FTC, after feie if using feie, after using Cdn paid tax a deduction if using that) multiplied by:


total income on US return/US income reported on your Cdn return.


For wages, don't forget to do a separate similar calc for FICA.

Note of US tax: The total tax is the result after all the tax credits etc are included (ie. it is not a specifc line on the return: it is the bag of money that you would have given IRS). IRS sopmetimes calls some credits they give a "payment". CRA knows the difference.

[lanman2000]

Very clear now thanks.

As for your mention of FICA. Do you mean I am supposed to put a FTC on the canadian return for FICA paid on US wages earned while resident of Canada? If so, COOL. More credits! :)

[nelsona]

The proportion of fica that was associated with the US wwages you report on your Cdn return is eligible for FTC.

[lanman2000]

Got it. I can find the SS and Medicare amounts on that income's W2 right? (that income's W2 only includes income received while resident in Canada so no proportioning is needed I don't think...)

[lanman2000]

unfortunately/fortunately there was ZERO SS and medicare taken on that W2 b/c it was for a distribution from a nonqualified 457 (SS+Medicare was already paid on the income that was deferred into the plan)

[nelsona]

Se whay that income is considered a pension?

[lanman2000]

i don't understand what you're asking. (typos)

[nelsona]

Do you now see why that income is considered a pension and not wages?

[lanman2000]

yep :)

clear

could you please weigh in on the thread going b/w myself and richarooca titled "Claiming Canada credit for tax paid to US/Cal on Cal rental"? We need your expertise.