interest income on a canadian bank account

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yabahala
Posts: 10
Joined: Fri Oct 14, 2005 7:33 pm

interest income on a canadian bank account

Post by yabahala »

Hello,

My wife has a GIC (Guaranteed Investment Certificates) in a bank account in Canada, which is earning interest income. I am wondering if we need to report this income on our US tax returns and how? I am also wondering if she needs to file a return in Canada for this year to report this income.

Our situation is as follows: I've been working in the US for 4 years and she has been in the US for three years (working for two years and most she started school last year). The bank account is our only financial tie to Canada.

I have been a non-resident for four years. She was filling individual returns in Canada up to last year, but has since straightened out her status with revenue Canada and is now considered a non-resident. We both file jointly in the US and are considered US residents for tax purposes.

Regards,
yabahala
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

She is supposed to notify the bank that she is non-resident, and they will withhold 10% tax and remit this to CRA.

That is her only Cdn tax obligation.

For US, she has 2 choices:

She can also report the income YEARLY on her 1040, and can take credit for the Cdn tax on form 1116. (accrual method -- which is the only way canada accepts interst reporting)

Or, she can wait until the interest is actually paid to her (at the end of the GIC term). The is the "cash method" for reporting interest.
<i>nelsona non grata... and non pro</i>
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