US1040-Which schedule to use for Canada Farm & rental in

Slong · Post by **Slong** » Fri Mar 16, 2012 2:16 am

Someone please help me with my case. I am a dual citizen living in USA. I have for the first time Canadian farm income as well as farm rental income. I took care of non-resident taxes payable to Canada Revenue. I wonder in which schedule(s) or line(s) of US 1040 tax form I must show these incomes. I appreciate your help and many thanks in advance.

JGCA · Post by **JGCA** » Fri Mar 16, 2012 10:05 am

On your 1040 rental income goes on Sch E and Farming sch F.

You say you paid witholding tax to CRA I assume this was on the rental income based on 25% of the gross rent you now need to file a CND sec 216 T1 to report this to CRA and get credit on the actual tax paid on teh 1040. You also steted you had farming income this has to also be reported as farming business income to CRA on a seperate T1 pay tax to CRA then get credit for teh tax paid on your 1040, so you are not out of the woods yet you still have to file CND returns to complete your tax filing on your 1040.

Slong · Post by **Slong** » Fri Mar 16, 2012 3:42 pm

Thank you very much. I have a couple of questions...

Could you please let me know on which line or schedule of 1040 I report Canadian withholding tax.

I paid 25% Canadian withholding taxes, must I also file a Canadian tax return or elect Sec 216? My tax obligation is not over in Canada after paying maximum 25% withholding tax?

JGCA · Post by **JGCA** » Fri Mar 16, 2012 3:45 pm

As I said you have to file CND tax returns to calculate the tax owing not the tax witheld IRS will give you credit only for actual tax paid, the witholding is simply a prepayment its possible you will get a refund so this is not credited to you its the actual tax paid.

nelsona · Post by **nelsona** » Fri Mar 16, 2012 4:28 pm

You definitely want to file a 216 returmn as this will DRASTICALLY reduce your tax burden in canada.

You should also be looking at filing a NR06 in order to have your required withholding reduced so that you can have more of your income at your immediate disposal rather than CRA.

JGCA · Post by **JGCA** » Fri Mar 16, 2012 5:51 pm

Filing the sec 216 return will establish the actual tax owing in Canada which is then credited against the income tax payable on the 1040. Filing the NR6 will require you to pay the tax monthly and avoid late payment penlties and interest. In no way does this effect your 1040 which is credited for actual tax paid not witholding tax, you also indicated you had farming income that has to be filed to CRA on a seperate T1 which has nothing to do with teh sec 216 or NR6 election.

nelsona · Post by **nelsona** » Sat Mar 17, 2012 7:18 am

JG, point of clarification, one CAN use tax paid on 1116 rather than tax accrued, if one does not typically get a refund at tax time.

That way any payments made in the tax year, either for previous year or current year are creditable.

But, as a practice, it is MUCH simpler to use the tax accrued method, as it links both returns nicely.

JGCA · Post by **JGCA** » Sat Mar 17, 2012 10:07 am

Point noted, but what happens if one does this then asks for a refund at a latter date that is why I choose this method, but if one elects to pay 25% OF GROSS and never claims back a refund then you are correct it can be done this way for sure and CRA would be happy as usual to keep all that money and the IRS will have to reimburse the tax but it will never equal the IRS will never reimburse up to teh full amount so their is a loss.

nelsona · Post by **nelsona** » Sat Mar 17, 2012 10:37 am

Definitely!