Hey Guys,
I'm a Canadian working in the US for a US company. My TN ends March 07 and I will be heading home. I kept my residence in Canada. My house, my furnishings, vehicles etc etc are all in Canada. So I know that means filing two tax returns....no biggie. My taxes are very simple.
My Questions.
I'm getting a $29/hr per diem (max per diem in my area) here in the US which is non taxable so my taxable income is only $55,909 USD as of Dec 1st. I've paid in taxes $10,364 fed, $2,316 state, and $4277.04 FICA. I know that if I made the same amount of money in Canada this year, my taxes would be less than this incl. UI and CPP. So I'm curious in how this tax thing will work? (obviously I'm going to have to get a knowledgeable accountant). I thought the US was supposed to tax less than Canada. Sorry, I'm sidetracking.
So.....I do my US taxes and I get a return....
1. What do they do with the FICA. Will I get all of the FICA back when I pay my US taxes seeing as I'm Canadian, which I use toward my UI and CPP?
Then...l file my Canadian return.....
2. I'll need to repay Canada the difference between their tax rate and the US correct?
3. I'll need to repay UI, CPP and Ontario Health correct?
4. When I do my Canadian taxes, I claim my fiance as commonlaw and have done this the last 2 years. She never worked in 2007 so can I claim all her expenses against my income....when she was with me in the US and in Canada i.e. massage theropy, prescriptions etc. etc. If not can we hold them until 2008 when she's working again and claim them in that tax year.
5. Are my moving expense claimable to the job in the US?
6. Both my fiance and I took continuing education courses in the US and in Canada. Are they all tax deductable in Canada?
7. Will I have to do a US/Canada return in 2008 where I will have worked only 2 months plus in that year. My work visa ends the first week of March.
8. Are there any other deductions I may not know about, that I can claim that might be obvious.
Canadian Taxes after working in US
Moderator: Mark T Serbinski CA CPA
1. no. Thanks for contributing. Your US income will not be eligible for CPP payments. Its part of an agreement between the 2. You can't fund your own EI. Now, if you managed to collect 6 quarters of work, which you proabaly do if you earn about $8000 in 2008.(assuming you only worked in US in 2007), you will get some SS when you retire.
2. You will be able to use the FICA as tax when you figure your Cdn tax return. You will also be able to use the fed and state tax you calculate on your 2007 US return as a credit. You do not use the withheld tax from your paycheck. Looking at your numbers, you should expect a HUGE federal refund.
3. No, no, and yes.
4. Her medical expense can be claimed on your Cdn return. Medical expenses can only be claimed in a 12-month period ending in the tax year (that period can end jan 01, dec 31 or any day in between), so you want to lump these together as best you can.
5. Your moving expenses out of canada are not usually deductible on your Cdn return, for one thing, technically you did not move, and for another CRA usually denies claims for moving outside canada. unless you are a student. You could try but it will likely be denied. You would have more luck claiming the move back.
5. Yes, going down. No, coming back to canada unless you file a full tax retunr in 2008.
6. Proabaly. and in US too.
7. Of course. You will have the choice of file full 1040, or Non-resident. You will choose the one which yields lowest US tax.
8. Since you will be buying software to do both your Cdn anbd US returns, just follow the interviews. Your US tax return will probably be the most difficult, since this is your first filing. I would suggest you file a full-year return. I doubt that you will be wanting to spend the $2000 for a accountant to prepare your returns.
Rememebr, don't fool yourself into thinking that you only hneed to report your US income on your 1040. You need to report all income for the year. this will then entitle you to all the deductions and credits that all americans get.
2. You will be able to use the FICA as tax when you figure your Cdn tax return. You will also be able to use the fed and state tax you calculate on your 2007 US return as a credit. You do not use the withheld tax from your paycheck. Looking at your numbers, you should expect a HUGE federal refund.
3. No, no, and yes.
4. Her medical expense can be claimed on your Cdn return. Medical expenses can only be claimed in a 12-month period ending in the tax year (that period can end jan 01, dec 31 or any day in between), so you want to lump these together as best you can.
5. Your moving expenses out of canada are not usually deductible on your Cdn return, for one thing, technically you did not move, and for another CRA usually denies claims for moving outside canada. unless you are a student. You could try but it will likely be denied. You would have more luck claiming the move back.
5. Yes, going down. No, coming back to canada unless you file a full tax retunr in 2008.
6. Proabaly. and in US too.
7. Of course. You will have the choice of file full 1040, or Non-resident. You will choose the one which yields lowest US tax.
8. Since you will be buying software to do both your Cdn anbd US returns, just follow the interviews. Your US tax return will probably be the most difficult, since this is your first filing. I would suggest you file a full-year return. I doubt that you will be wanting to spend the $2000 for a accountant to prepare your returns.
Rememebr, don't fool yourself into thinking that you only hneed to report your US income on your 1040. You need to report all income for the year. this will then entitle you to all the deductions and credits that all americans get.
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
Response
"Rememebr, don't fool yourself into thinking that you only hneed to report your US income on your 1040. You need to report all income for the year. this will then entitle you to all the deductions and credits that all americans get."
Sorry....I'm pretty mentally challenged with this tax thing.
First off so I understand....is the 1040 the american tax forms?
What do you mean, full 1040?
On your statement above...does that mean I should be claiming my T4 income I made before I headed to the US in 2007 as well. So its Cdn income plus US income. Will I not need these T4's for my Cdn return?
One of things I did was pay in extra on my US taxes from each pay cheque because I was scared about the tax free per diem and didn't understand it. I know my W2 will only show my income after the tax deduction was removed. I wasn't sure what Canada sees and what they try and tax.
"Rememebr, don't fool yourself into thinking that you only hneed to report your US income on your 1040. You need to report all income for the year. this will then entitle you to all the deductions and credits that all americans get."
Sorry....I'm pretty mentally challenged with this tax thing.
First off so I understand....is the 1040 the american tax forms?
What do you mean, full 1040?
On your statement above...does that mean I should be claiming my T4 income I made before I headed to the US in 2007 as well. So its Cdn income plus US income. Will I not need these T4's for my Cdn return?
One of things I did was pay in extra on my US taxes from each pay cheque because I was scared about the tax free per diem and didn't understand it. I know my W2 will only show my income after the tax deduction was removed. I wasn't sure what Canada sees and what they try and tax.
As someone who was not resident in US in 2006, you have a couple of choices in how to file in 2007 (There is an IRS Pub. 519 that covers this). You can either file part-year 1040 or full-year 1040. The full year 1040 gets you better deductions (more so if you are married, which you are NOT for US purposes), but to file this you need to report ALL your income, and then exclude the Cdn wages. Doing this will not mean you pay US tax on your Cdn income, so don't worry. Wjhat it will do is probably lower your US tax on your US income. and it will allow you to use the standard software packages out there without any problems.
One thing you will find in US tax space is that IRS doesn't want receipts for anything other than your W-2. They won't want your T4, and even if they did, you've heard of making a copy? It is canada that will want a copy of your W-2 and your 1040, in order to make sure that you are claiming the right tax credit on your Cdn return.
One thing you will find in US tax space is that IRS doesn't want receipts for anything other than your W-2. They won't want your T4, and even if they did, you've heard of making a copy? It is canada that will want a copy of your W-2 and your 1040, in order to make sure that you are claiming the right tax credit on your Cdn return.
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