How do I report my Canadian refund on U.S. return

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larklab
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How do I report my Canadian refund on U.S. return

Post by larklab » Thu Jun 19, 2014 12:37 pm

I am a U.S. PR employed by a Canadian employer.

I completed my Canadian 2013 taxes and filed and extension for my U.S. taxes. The Canadian government gave me tax refund for 2013. The time has come to start estimating my what I owe the U.S. (if anything) - how do I account for the refund (some of which is due to straight up being taxed too much at the time of payment, as opposed to deductions)?

If this has been discussed before, can someone point me to a url. I've searched, but haven't done well.

Thanks!

MGeorge
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Post by MGeorge » Thu Jun 19, 2014 1:13 pm

Hello,

Your refund on your Canadian return should be accounted for when you figure your foreign tax credit on your US return.

For your Canadian source income, some amount would have with withheld, let's say they withheld $20,000 of tax. If your refund was $2,000, then you would figure your foreign tax credit on your US return to be $18,000, since this is your total Canadian tax liability. Refund or no refund, what matters is how much tax you paid on that income. Remember, if there were amounts deducted for CPP and EI these may also be used as foreign tax credits on your US form 1116 as "general limit" category. I hope this helps.

nelsona
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Post by nelsona » Thu Jun 19, 2014 1:47 pm

To clarify,
the CPP and EI would be used against the Cdn wages reported on your 1040 (yes, wages are general limit income for FTC purpses).

This would only be if one uses 1116 against wages, of course, rather than 2555. If one uses 2555 to exclude wages, then none of the income tax related to those wages, nor EI and CPP are ceditable on 1116.
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nelsona
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Post by nelsona » Thu Jun 19, 2014 1:48 pm

But, in case you are wondering, tax refunds from CRA are not treated the same as tax refunds, say, form your state, which are reported as income on your subsequent year's 1040.
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larklab
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Post by larklab » Tue Oct 07, 2014 11:49 pm

I'm staring at form 1116 right now and have trouble figuring out where to report the amount I was refunded. Is this a reduction?

nelsona
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Post by nelsona » Wed Oct 08, 2014 9:49 am

Your refund is a non-entity, as I said before. Your TAXES are what was calculated on your Cdn tax return. What you overpaid earlier and were refunded doesnt matter.

You made $XX and were taxed $YY on your return. Forget the refund.
Split $YY among the various types of income you had: passive and general limit.
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larklab
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Post by larklab » Wed Oct 08, 2014 11:22 am

Thanks nelsona.

What I'm trying to figure out is where to I write $YY on form 1116 (and potentially elsewhere on the return). I don't know where it belongs.

nelsona
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Post by nelsona » Wed Oct 08, 2014 11:35 am

In goes in Part II Foreign taxes paid or accrued. I don't help with filling forms, so that is all I will say about that.

You do need to split the $YY between passive (interest, etc) 1116, and geenral limit (wages) 1116, assuming you di not use form 2555.

You are using tax software, of course, right? This seems a bit over your head to be doing by hand. Software will guide you through.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Post by nelsona » Wed Oct 08, 2014 11:37 am

btw, filing for extension doesn't mean trying to understand your taxes in October. You've had 9 months to clear this up.
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Phil Hogan, CA
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Post by Phil Hogan, CA » Wed Oct 08, 2014 10:33 pm

That's the problem with extensions....give people a reason to put off filing.

Phil
Phil Hogan, CA, CPA (Colorado)
Canadian and US Income Tax
http://www.hutcheson.ca/about-us/philip-hogan/
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