Non-Resident Tax Return for Canada

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mikem
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Joined: Sun May 20, 2007 12:42 pm

Non-Resident Tax Return for Canada

Post by mikem » Fri Feb 21, 2014 8:25 pm

Wife & I have lived in the US since March 2012. We spent all of 2013 living in the US and I was expecting to file only US returns this year, but she just received a T4 from Canada for around $1,000 in income. She did not actually work during 2013 & this appears to have been maternity leave benefits from her last job in Canada.

For 2013, would I simply file a Canadian NR return for her alone, then add the income from the T4 to our US return as foreign income? I fired up TurboTax and completed a NR return for her and it's saying she's owed around $111 refund. She paid $74 in CDN taxes, $21 in CPP, $14 in EI... so it looks like she ends up getting all that refunded.

Does this sound accurate? I don't need to file an NR return for myself as well do I? I had no income at all from Canada in 2013... 2012 we filed an exit return to Canada.

Thanks.

nelsona
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Post by nelsona » Mon Feb 24, 2014 3:51 pm

It's actually better than that. This is considered wages, and since the wages are less than $10K, she can and should sxclude the amount on line 256. This will get her all her withholding plus EI and CPP back.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nquery
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Post by nquery » Tue Feb 25, 2014 8:02 pm

My wife (and I) are in a very similar situation. We moved to the US in 2012 and she had remaining maternity benefits in 2013. She had $9215 in benefits and 25% non-resident withholding tax.

However we didn't use line 256 to exclude the amount. We filed her as a non-resident electing under section 217 and was able to claim full personal deduction (no other world income) and got all of the withholding tax back.

I was not aware of the line 256 deduction ... I do see this in the non-resident guide for line 256:

[i]Non-residents and non-residents electing under
section 217 – You can claim a deduction for Canadian-source income you reported on your return if it is tax-free in Canada because of a tax treaty. If you do not know whether any part of the foreign income is tax free, contact us.[/i]

I am curious - is non-resident income < $10,000 (as per your response) tax-free because of the treaty something? I don't see that anywhere. Under what rule is the OP allowed to deduct the full amount on line 256?

nquery
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Joined: Tue Feb 14, 2012 7:27 pm

Post by nquery » Tue Feb 25, 2014 8:10 pm

I guess you must be using the $10,000 rule in the Tax Treaty for employment income in the other country (Canada) ... interesting.

I guess this method is "better" than section 217 for income < $10k because it doesn't matter how much other money one earned in their resident country (the US in this case). Section 217 only worked well for my wife because she didn't have any other world income and could thus qualify for full deductions.

nelsona
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Post by nelsona » Tue Feb 25, 2014 11:45 pm

Hold on. Maternity benefits paid by the employer are considered wages under the treaty, and are subject to the treaty exclusion. Look at the employment clause XV(2).

Mat benefits paid by Govt are not wages, and are subject either to flat tax or can be recalculated using a 217 election.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nquery
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Joined: Tue Feb 14, 2012 7:27 pm

Post by nquery » Wed Feb 26, 2014 12:17 am

Ah yes i see. Didn't realize these were employer mat benefits vs EI. Should have caught that with the CPP and EI deductions. Thanks for the clarification.

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