My wife is Canadian and moved to the US on a TN visa in September 2005. At that time she severed all residential ties with Canada. Since then she has worked in the US and filed US tax returns (not Canadian ones). In 2007 she was paid a retroactive wage adjustment from her old employer in Canada for income earned over 2002-2004 when she was still living there. She received a T4 and R1 from her Canadian employer.
Does she need to file a Canadian tax return for 2007? If so does she need to report her "worldwide income" as well as my income given we filed jointly as a married couple for the 2007 tax year in the US? If a Canadian return is not necessary then do we need to file an amended US return for this additional income?
Do we need to file a Canadian tax return?
Moderator: Mark T Serbinski CA CPA
Unless there is a specific understanding with CRA (like there was when the public sector gender bias issue was settled) then the incoem is considerd 2007 income.
It is 2007 income for US purposes. She would report it as wages.
If treated as 2007 income for canada, then she needs to file a NON-RESIDENT return, on which she declares ONLY those wages. If the wages are lessthan $10,000 she can exclude it on line 256, based on the US/Can treaty.
She would calculate any Cdn non-resident tax owed, and report the wages on her US return, and use form 1116 for tax credit.
It is 2007 income for US purposes. She would report it as wages.
If treated as 2007 income for canada, then she needs to file a NON-RESIDENT return, on which she declares ONLY those wages. If the wages are lessthan $10,000 she can exclude it on line 256, based on the US/Can treaty.
She would calculate any Cdn non-resident tax owed, and report the wages on her US return, and use form 1116 for tax credit.
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
And yes, if you did not include the wages on your joint return you MUST amend your 1040 to add it,m and pay tax on it, subject to any credit for Cdn tax.
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
Thanks for the info. So how do we determine if this is considered as income for Canada or the US? My understanding is that it is considered income in the country in which you ordinarily reside (which for us is the US) irrespective of source. If this is the case does it mean we therefore don't file a Canadian return and only amend our US return? Also the wages amount on her T4 slip is CDN $800. How does this affect things?
Not quite sure what your question is.
The source of the income is obviously Cdn. It was 'earned' in canada and paid by a Cdn company. It is therefore reportable as income in canada, subject to the $10,00 limit she can exclude.
Your spouse however ALSO lives in US, and thus is required to report her WORLD income to IRS (and to her state, btw).
So, it is considered income in both countries, just like any other income she would earn/receive from canada while living in US.
Think of this income as if she took a small job in canada for 2 weeks.
Since the income is reportable in canada (and I assume some Cdn tax was withheld), she neds to file the return, if only to get the tax back. Since it is less than $10,000, she should exclude it on ther return, and she definitely will get ALL the Cdn tax back. She should not assume that the Cdn tax withheld, if any, is her fianl Cdn tax obligation. It could be more, less, or zero. She can only determine that by filing a non-resident return.
This is pretty starightforward stuff.
But regardless of what she does for canada, she still has to report the income in US, as part of her responsibility of filing a 1040.
You need to amend your Fed and State returns.
The source of the income is obviously Cdn. It was 'earned' in canada and paid by a Cdn company. It is therefore reportable as income in canada, subject to the $10,00 limit she can exclude.
Your spouse however ALSO lives in US, and thus is required to report her WORLD income to IRS (and to her state, btw).
So, it is considered income in both countries, just like any other income she would earn/receive from canada while living in US.
Think of this income as if she took a small job in canada for 2 weeks.
Since the income is reportable in canada (and I assume some Cdn tax was withheld), she neds to file the return, if only to get the tax back. Since it is less than $10,000, she should exclude it on ther return, and she definitely will get ALL the Cdn tax back. She should not assume that the Cdn tax withheld, if any, is her fianl Cdn tax obligation. It could be more, less, or zero. She can only determine that by filing a non-resident return.
This is pretty starightforward stuff.
But regardless of what she does for canada, she still has to report the income in US, as part of her responsibility of filing a 1040.
You need to amend your Fed and State returns.
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