Hi,
To report U.S employment income on Canadian tax return, what is the income and tax paid I need to report. As there are medicare taxes and social security taxes are paid from the income do I need to subtract them from the income ?. Similarly, for the taxes paid, just add the federal and state taxes ?. Also do I need to take this from the W2 or 1040 ?. Please advise if there is a formula.
Thanks,
Canada return - U.S income - Medicare ,Social Security taxes
Moderator: Mark T Serbinski CA CPA
The US taxes that you can use on your Cdn return are from your 1040 (and state 1040), and your fica tax.
You must prorate the final taxes (and fica) by the amount you are reporting in Canada.
Quick example. You made $100K in US wages, of which $50K was from April to September (your departure date). You US tax bill (on 1040) was $9000, your state tax was $3000, and your FICA was $5000.
You would report $50,000 wages from US on your Cdn return ,and you would use the $50K on you foreign tax credit calculation. Since that was 1/2 what you earned for the Year in US, you get to claim 1/2 of the fed tax 1/2 of the stae tax, and 1/2 of the fica on the foreign tax credit line (so, 4500+1500+2500=8500).
You must prorate the final taxes (and fica) by the amount you are reporting in Canada.
Quick example. You made $100K in US wages, of which $50K was from April to September (your departure date). You US tax bill (on 1040) was $9000, your state tax was $3000, and your FICA was $5000.
You would report $50,000 wages from US on your Cdn return ,and you would use the $50K on you foreign tax credit calculation. Since that was 1/2 what you earned for the Year in US, you get to claim 1/2 of the fed tax 1/2 of the stae tax, and 1/2 of the fica on the foreign tax credit line (so, 4500+1500+2500=8500).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
U.S income has to be reported on both Federal return and Quebec return. While I can claim U.S tax credit on the federal return, the tax software doesn't claim the credit on the Quebec return. Hence, it comes up with a huge provincial tax bill.
I am still debating if the U.S source income is exempt from Canadian taxes, due to residency tie breaker rules and ARTICLE XV of the treaty. U.S considers me a resident as soon as I take up full time employment there and start residing there. After the date of departure in Canada, my U.S source income should not be taxed in Canada, per this article.
Thanks for your advice.
I am still debating if the U.S source income is exempt from Canadian taxes, due to residency tie breaker rules and ARTICLE XV of the treaty. U.S considers me a resident as soon as I take up full time employment there and start residing there. After the date of departure in Canada, my U.S source income should not be taxed in Canada, per this article.
Thanks for your advice.
That is asoftware issue, any remaining tax that is not used on the fed return can be used on the qc return. Contact the software company on this issue.
Rememeber that you also have to indicate on your QC return what income is foreign
Rememeber that you also have to indicate on your QC return what income is foreign
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best