Article XXV for Canadian Residents

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mithrandir
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Article XXV for Canadian Residents

Post by mithrandir » Tue Jan 27, 2015 11:05 am

[u]Case Study[/u]

David is married with Jenny

David - $80000 USD - W2 (US Employment Income)
Status - Canadian Resident with USA SSN

Jenny - $30000 USD - T4 (Canadian Employment Income converted to USD)
Status - Canadian Citizen/Resident without USA SSN/ITIN

Can David file 1040NR with Article XXV so that he can benefit from the File Married Jointly tax rate from the 1040?

I have been looking around but couldn't not find anything specific in details of what forms needs to be submitted to IRS.

Thank you.

nelsona
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Post by nelsona » Tue Jan 27, 2015 11:44 am

I have addressed this dozens of times on this forum. Please research.

In essence, you prepare a complete "pro forma" 1040, as if you both lived in US, and determine a tax RATE on this form. All the credits, deductions and exemptions are available to you EXCEPT foreign tax credit (you can use foreign tax deduction for Cdn tax actaully paid in 2014, and not refunded)

You then complete aa 1040NR and substitute the tax determined on 1040NR, by one using the rate you came up with on the fake 1040.

Please browse the forum for more details.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

mithrandir
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Post by mithrandir » Tue Jan 27, 2015 12:12 pm

Many thanks.

I have read a lot of post regarding that but I can't find concrete answers to the following

1) Spouse does not have SSN/ITIN - Is this ok?
2) Do we have to submit Spouse T4 as evidence of the joint income to IRS
3) Formula for calculating XXV

Use the following formula to figure the computation for Article XXV:
(Form 1040NR Taxable income/Form 1040 Taxable Income) X 1040 Tentative Tax = Tax

So what is the Form 1040NR Taxable income? Is it the Joint income or David's Income only?

nelsona
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Post by nelsona » Tue Jan 27, 2015 12:24 pm

These have all been aswered.

1040NR reports only US-source income, so why would anything other than david's wages (and perhaps some US-company dividends) appear on that form?

Your spouse needs an ITIN in any event, in order to be claimed as a Cdn dependent -- even on 1040NR. This is ubmitted when filing 1040NR with form W-7 (again, answered many times).

Please do not ask anymore questions until you have actually filed out both your 1040 and 1040NR.

Since this i sa "case study", please do the studying.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

mithrandir
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Post by mithrandir » Thu Feb 12, 2015 5:09 pm

Many thanks for the response!

So it this formula correct to determine the tax payable on 1040NR?

(Form 1040NR Taxable income/Form 1040 Taxable Income) X 1040 Tentative Tax = Tax

(80000 / (80000 + 30000)) * X 1040 Tentative Tax = Tax payable on 1040NR

nelsona
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Post by nelsona » Thu Feb 12, 2015 5:42 pm

The exact formula is:

1040NR [line 42] = 1040NR [line 41] * 1040 [line 44] / 1040 [line 43]
So, begin with 1040NR upto line line 41.
Begin 1040 to line 44.
Apply calculation above for 1040NR line 42, and complete 1040NR.

of course if the normal calculation of 1040NR line 42 is less than the result you get by using the 1040, simply use 1040NR without any adjustment.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

mithrandir
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Post by mithrandir » Thu Feb 12, 2015 5:58 pm

Hello,

If we do apply the formula then we will be paying lesser than the tentative tax of 1040.

Aren't we paying lesser tax compared to the residents in USA filing married jointly using 1040?

So what is the reason behind this formula??

nelsona
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Post by nelsona » Thu Feb 12, 2015 6:07 pm

The goal is not to pay less tha the tenataive tax on 1040. the tax calculated on 1040 is meaningless, it is the TAXRATE form 1040 which matters.

You should be paying less than a US couple because not all of your income is from US.

Re-read what i said in may previous post. "if the normal calculation of 1040NR line 42 is less than the result you get by using the 1040, simply use 1040NR without any adjustment.

Nothing about the tentative tax on 1040.

In fact, your "tentative" tax, is the one determined on 1040NR without the application of the treaty.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

faddii
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Post by faddii » Thu Sep 10, 2015 9:04 pm

Nelson,

Just need to clarify on you reply below

"in essence, you prepare a complete pro forma 1040, as if you both lived in US, and determine a tax RATE on this form."

Are you saying that mithrandir would use his and wife's combined income in the pro forma calculation since he is filing jointly?

Thanks.

nelsona
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Post by nelsona » Thu Sep 10, 2015 9:42 pm

Yes. One prepares a joint 1040 as if all income from both spouse's was coming from US.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

adeboloj
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Re: Article XXV for Canadian Residents

Post by adeboloj » Thu Feb 21, 2019 1:28 am

Sorry I am replying to this old post as I am doing some research for my 2018 tax filing:

1) Can we say there is no way to verify the joint income on pro forma 1040? since this is a fake form to determine the tax rate and more so you are not submitting spouse's T4 to IRS? I am only wondering how the other partner's income outside U.S is verified, if not verified then anyone can put a random figure for spouse income outside the U.S on the fake 1040?

2) My question is relating to the formular for tax payable on 1040NR for year 2018 as the formular here was for 1040 in year 2015, now the 1040 for 2018 stops at line 23...(estimated tax penalty)

nelsona
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Re: Article XXV for Canadian Residents

Post by nelsona » Fri Feb 22, 2019 1:58 pm

I don't answer questions that involve attempts to trick or deceive that tax authorities.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Fan8899
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Re: Article XXV for Canadian Residents

Post by Fan8899 » Fri Feb 22, 2019 2:02 pm

1) I believe IRS can ask you to send them Canadian T4 if they want to verify.
2) You are correct, 2018 1040 line no. will be different with 2015, due to 1040 form change for 2018.

adeboloj
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Re: Article XXV for Canadian Residents

Post by adeboloj » Fri Feb 22, 2019 3:43 pm

@Nelsona, No one is attempting to trick tax authorities, question was simply how is the T4 information along with all other documents verified to complete the fake 1040 known as the Proforma.
@Fan8899, thanks for your response.

adeboloj
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Re: Article XXV for Canadian Residents

Post by adeboloj » Sat Feb 23, 2019 2:19 am

is this accurate for year 2018?

1040NR[LINE 42] = 1040NR[LINE 41] * 1040[LINE 11] / 1040[LINE 10]

Complete 1040NR up till line 41, then complete 1040 up till line 11.
And this will be my xxv (2) 1040NR.

Thank you

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