what's the best way to file U.S. tax?

jay · Post by **jay** » Fri Mar 07, 2008 12:20 am

My wife and I both have Canada income before moving and U.S. income after moving. My wife moved to U.S. from Mar, 2007. I moved to U.S. in Oct 2007, so I have very low U.S. income. Should we file U.S. tax jointly or separately? And should we file U.S. tax as full year residents or part year residents, or U.S. non-residents? And I have a incorporated company in Canada, do I have to close it if I want to be Canada non-resident this year? TIA

nelsona · Post by **nelsona** » Fri Mar 07, 2008 6:26 am

For US taxes, to file as full-year residents, you MUST file jointly.
Your wife must file some form of 1040, either part-year filing singly or full-year joint.
If your wife files part-year 1040, then you can file you have the choice of filing part-year 1040, or simply filing 1040NR.

My guess is that the best course for you is to file jointly full-year 1040, then use 2555 or 1116 for your Cdn wages, and 1116 for the rest.

You are both non-residents since October. Your wife *could* be considered non-resident since March, if she stayed in US in a rented/bought home and did not visit Canada very much. No need to do anything about the corp.

jay · Post by **jay** » Fri Mar 07, 2008 12:05 pm

Tanks. It's really helpful!

jay · Post by **jay** » Thu Mar 13, 2008 2:04 am

nelsona, I am using turbotax to prepare the tax. my understanding is that I should add 2 US W-2 income and 2 Canadian come in form 1040. And put 2 Canadian income as credit in Form 2555. Is it correct? But turbotax seems only allow me to enter W-2 income. How can I add Canadian income? Thanks a lot.

nelsona · Post by **nelsona** » Thu Mar 13, 2008 4:45 am

You will need to add this manually. OR You may need to 'fake' a w-2. Be careful if you do this since it may then think you owe SS tax.

I don't like to answer software-specifc issues.

jay · Post by **jay** » Fri Mar 14, 2008 2:13 pm

Hi nelsona. One more question. 1. After I filled form 2555 to exclude Canada wages, can I still put my CPP contribution and income tax deduct in form 1116? 2. I got some T5 regarding my CANADA saving interest. Obviously, I haven't pay any tax yet. So I can't put these in form 1116 as well. But I have to including it in my world income to pay tax in US. Then how I get it credit back when I file tax in Canada? Thanks a lot!

jay · Post by **jay** » Fri Mar 14, 2008 3:19 pm

Never mind. I saw your previous post answered this already

jay · Post by **jay** » Mon Mar 17, 2008 9:43 am

Hi nelsona, after reading so many post. I'm getting confused. I had RRSP contribute, but I didn't and no plan to withdraw it. Should I still include it in Form 8891?

nelsona · Post by **nelsona** » Mon Mar 17, 2008 10:11 am

anytime you file 1040 you MUST report RRSPs on 8891 regardless of what you do with the RRSP

hp · Post by hp » Mon Mar 17, 2008 11:01 am

Hi Nelsona, correct me if I am wrong.
1. I can't use form 1116 to get foreign credit tax back for RRSP account.
2. If I bought mutual fund in RRSP account and didn't sell it. I only need to pay dividend if it has.
3. I put my foreign interest in form td f 90-22.1 and take foreign credit back in form 1116. But it seems I didn't take all the money back, just a portion of total amount, is it correct? I thought it would be exactly same amount I put in tdf 90-22.1

nelsona · Post by **nelsona** » Mon Mar 17, 2008 11:14 am

1. I don't under stand your question. What cdn tax did you pay on your RRSP?
2. You would only owe tax to IRS if you collapsed your RRSP, or if you elected not to use the deferral on form 8891.

3. the TD form has NOTHING to do with taxes. It merely reports the existence of foreign accounts. The term 'interest' on form TD.. has to do with controil of the account, not interst as in money paid as interest.

You need to go back and read some threads on RRSP, Form 8891 and TD form.

hp · Post by hp » Mon Mar 17, 2008 3:13 pm

Nelsona, Sorry to confuse you. I was wrong. Actually I left Canada in March 2007, but I didn't inform my bank. So I still got T5. Anyway I will file 1040 whole year in US and file world income to Canada as well. I put all Canadian interest (from T5) in Schedule B, and file form 1116 as well. But the credit I got is less than the amount I put in schedule B. Is it correct? I searched all the threads regarding form 1116 still get confused. Thanks in advance

nelsona · Post by **nelsona** » Tue Mar 18, 2008 5:41 am

Technically, you are not permitted to file world income to canada since you are no longer resident.

You must file a departure return. Please follow the instruction on the emigrant guide.

You need to send a note to CRA with a separate check for the 10% you owe on the interest.

The credit you will calculate on 1116 will ALWAYS be less than or equal to the tax you paid in canada on that ammount.

hp · Post by hp » Tue Mar 18, 2008 9:16 am

nelsona, Thanks a lot. For my case do you mean when I fill schedule B I should put 90% of interest in "Interest Amount(Box 1)" and 10% of interest in "Foreign Tax Paid(Box 6)" ? Thanks.

nelsona · Post by **nelsona** » Tue Mar 18, 2008 10:00 am

No. You put ALL interest that was earned. You can't deduct the tax from the interest. then you put the tax on 1116.

Your tax wioll not be 10%. It will be 10% of what was earned as non-resident (the part that you are going to send by check to CRA) and the regular Cdn/Prov tax on the part that was earned while resident in canada (calculated as a fraction of your tax on your Cdn departure return).