1040 XXV(1) with 8833

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nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

1040 XXV(1) with 8833

Post by nirvana_1959 »

I have been filing 1040NR so far. For 2020 I fall (around 15 days) below 183 days on SPT. However, I decided to file 1040 MFJ with 8833 XXV(1) (one for me and one for my wife). I have couple of "questions”... Thanks!

Question 1: Form 8833 details (feedback please):

1.Enter the specific treaty position relied on:
a Treaty country: Canada
b Article(s): XXV (Non-discrimination)

2.List the Internal Revenue Code provision(s) overruled ...: I.R.C. § 871 -- Tax on nonresident alien

5.Is the taxpayer disclosing a treaty-based return position ..... Yes
If “Yes,” enter the specific subsection(s)... Subsection 1

6. I am taking the treaty based position per Article XXV(1) which allows me to file 1040 MFJ.

Question 2: Mailing address (use the same address where I have mailed 1040NR so far ?):

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

After digging deeper I realized 8833 is optional 301.6114-1(c) subsection (1)(iv). So answer to 5 is "No", However, I am going to submit it any way to make my treaty based filing explicit.

For the rest any assistance will be much appreciated.
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

@nelsona: Good morning! Could you please have a quick look ? Thanks!
nelsona
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Re: 1040 XXV(1) with 8833

Post by nelsona »

Why do you feel you need to file 1040? Have you moved to US? If not continue to file 1040NR, and if you feel it will reduce your overall taxation, use XXV(2) instead of (1). That is what most people in that situation do.

As to 8833, almost no one who would ask here would actually NEED 8833. I suggest submitting it simoply to let IRS know what you are doing.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nirvana_1959
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Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

Hi nelsona,

My wife has no income. So, standard deduction using "real" 1040 (using XXV(1)) saves me 2K over 1040NR/1040 proforma (XXV(3))..
nelsona
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Re: 1040 XXV(1) with 8833

Post by nelsona »

If your wife has no income, then your 1040 and your 1040 proforma would be identical, no?

You would still have all the benefits of 1040, child tax credit, etc.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

nelsona wrote:
> If your wife has no income, then your 1040 and your 1040 proforma would be
> identical, no?
>
> You would still have all the benefits of 1040, child tax credit, etc.

Hi Nelson,

Yes, 1040 proforma and 1040 are identical. However, the 1040NR tax is higher (please see below).
=====================
XXV(1) 1040 MFJ

US Income 100,000
Standard Deduction 24,800
Taxable Income 75,200
Tax Rate 10.80%
Tax 8,124
=============


XXV(3) 1040 MFJ Proforma

US Income 100,000
Standard Deduction 24,800
Itemized Deduction
Taxable Income 75,200
Tax Rate 10.80% (from 1040 Proforma)
Tax 8,124
==================



XXV(3) 1040NR MFS

US Income 100,000
Standard Deduction
Itemized Deduction 5,000
Taxable Income 95,000
Tax Rate 10.80%
Tax 10,263
==============
nelsona
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Re: 1040 XXV(1) with 8833

Post by nelsona »

When you apply the treaty, you do not use the taxrate on 1040NR, you use the one determined on 1040 MFJ, and apply it to the US INCOME. That is the whole point of the XXV(3).
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

nelsona wrote:
> When you apply the treaty, you do not use the taxrate on 1040NR, you use
> the one determined on 1040 MFJ, and apply it to the US INCOME. That is the
> whole point of the XXV(3).

Hi Nelson,

Yes, the tax rates are same. However, the difference is due to "standard deduction" on the 1040 XXV(1) and "itemized deduction" on 1040NR XXV(3).

if I am allowed to take full standard deduction (i.e., $24,800 for me and my wife) on 1040NR XXV(3) then I will go with that option. Much better for me and a lot less of paper work :-).

Please advise..
nelsona
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Re: 1040 XXV(1) with 8833

Post by nelsona »

Ah yes, now I remember writing a thread a couple of years back, where now that Tr*mp raised the standard deduction (which as you correctly point out cannot be used on 1040 pro forma) so high that using itemized deductions (even if including Cdn taxes paid) would not exceed it, one is pretty much left to use just 1040, which Cdns are certainly allowed to do.

But, remember, that saving $2000 in US tax, only makes you pay $2000 more to Canada.

the goal of using XXV(4) is merely to lower your 1040NR tax, to a number lower than your Cdn tax, which it does, even in your case.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

Good point!

I have plenty of room in RRSP. I have to contribute (roughly) $4000 USD equivalent to save $2000 USD taxes to USA. I expect to pay at the most 20% tax when I withdraw from RRSP which still gives me a saving of 30% yielding $1200 USD gain (under this scenario). So, IMO is worth it.

Thanks for your feedback Nelson! Thousands of people here have benefited from your invaluable insights!
Travel-ER-NURSE
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Re: 1040 XXV(1) with 8833

Post by Travel-ER-NURSE »

Wow, I certainly did! Have been running simulations on tax softwares as I'm in the exact same situation and it's driving me crazy. I just have one question, if OP allows me to hijack his thread, with the 1040NR I do not need to claim in the US the small income from a rented house in Canada but if I go with 1040 I would have to, is that right?
Thank you!
nelsona
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Re: 1040 XXV(1) with 8833

Post by nelsona »

Correct. 1040 implies reporting WORLD income, just as you would on your Cdn resident return.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nirvana_1959
Posts: 62
Joined: Fri Mar 18, 2016 9:17 am

Re: 1040 XXV(1) with 8833

Post by nirvana_1959 »

@Travel-ER-NURSE: Feel free :-).

1040NR (non-resident): Pay tax on US source income only (I think this is pretty much universal)
1040 (resident): Pay tax on all the (worldwide) income (I think this is also universal)

Note: US treats citizens as "residents" for tax purposes immaterial of where they reside
Travel-ER-NURSE
Posts: 7
Joined: Sat Jan 09, 2021 12:25 pm

Re: 1040 XXV(1) with 8833

Post by Travel-ER-NURSE »

Thank you both!
I know this is a childish question but I'm trying to break away from my current accountant that has been lying on my forms about the number of days I spend in the US for work. So, I know the 1040NR has be be filed in paper form but if I'm filing the 1040 can I use a software like TurboTax?
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