Hello,
I am still trying to wrap my head around the situation in preparation for the tax filing. Scenario:
- I moved to California in Feb 01, 2008 as a J-1 research scholar (No Canadian income for the entire 2008)
- My W-2 Box 1 is about $40,000 USD with federal, state, social security and medicare tax withheld
- My wife moved to California in Apr 15, 2008 as a J-2. She made approximately $15,000 CAD when she was still in Canada.
- My wife also made just over $6000 USD after the move to USA (received W-2)
My understanding is that we need to each file 1040NR (plus the California State one). What is the best way to go about it? What is this tax treaty exemption that I kept hearing about?
Also, what about the medicare tax? I read that J1 visa is not supposed to have the medicare tax withheld, correct?
Any pointers will be greatly appreciated. Thank you very much.
Andy
Canadian couple filing for US tax for the first time (J-visa
Moderator: Mark T Serbinski CA CPA
Well, remember that when you file a 1040NR, you only report US-sourced income, but that is not 'exempted' income, it is merely not reported.
Since you do not indicate that your research money came froma Cdn school, it is not exempt.
Your wife's US income however, IS exempt, by treaty, because it was less than US$10K. This is by Article XV(2)(a).
All your world income for both of you should be reported in canada.
Social security and medicre tax: It would appeare that YOU were incorrectly withheld SS and Medicare tax. IRS Pub 519 outlines how to get this back.
I believe your wife's income is NOT exempt from Medicare tax, since the employemnt in question was not the original reason for getting j-2 (your j-1 was). You should look into this when figuring out your SS and medicare situation.
In canada, you can use the final fed income tax, any final state tax and any correctly withheld ss and medicare tax as credits on your returns. From what you posted, it would appear that you can claim all the income tax and your spouse would claim only state income tax her SS and medicare tax (since she was not liable for any fed income tax).
Since you do not indicate that your research money came froma Cdn school, it is not exempt.
Your wife's US income however, IS exempt, by treaty, because it was less than US$10K. This is by Article XV(2)(a).
All your world income for both of you should be reported in canada.
Social security and medicre tax: It would appeare that YOU were incorrectly withheld SS and Medicare tax. IRS Pub 519 outlines how to get this back.
I believe your wife's income is NOT exempt from Medicare tax, since the employemnt in question was not the original reason for getting j-2 (your j-1 was). You should look into this when figuring out your SS and medicare situation.
In canada, you can use the final fed income tax, any final state tax and any correctly withheld ss and medicare tax as credits on your returns. From what you posted, it would appear that you can claim all the income tax and your spouse would claim only state income tax her SS and medicare tax (since she was not liable for any fed income 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
To touch back on the treaty exemption part...
It's been established that I am (my income from US is) NOT eligible for the exemption, that's fine.
But for my wife, I am still a little bit confused. She worked as a part-time Physical Therapist Aide at a private clinic. As mentioned, she made just over $6000 throughout 2008. In Article XV(2b) of the treaty, it says
"the recipient is present in the other Contracting State for a period or periods [b]not exceeding in the aggregate 183 days [/b]in that year and the remuneration is not borne by an employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State."
Her stay is at a total of 240 days. Does that mean she is indeed NOT eligible for the exemption? Or am I reading the language/treaty wrong? Thanks ahead
It's been established that I am (my income from US is) NOT eligible for the exemption, that's fine.
But for my wife, I am still a little bit confused. She worked as a part-time Physical Therapist Aide at a private clinic. As mentioned, she made just over $6000 throughout 2008. In Article XV(2b) of the treaty, it says
"the recipient is present in the other Contracting State for a period or periods [b]not exceeding in the aggregate 183 days [/b]in that year and the remuneration is not borne by an employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State."
Her stay is at a total of 240 days. Does that mean she is indeed NOT eligible for the exemption? Or am I reading the language/treaty wrong? Thanks ahead
I'm taking the position that since she is on J status, her days of presence don't count (just like yours don't) and thus she isn't 'present' for the requisite time.
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, you are reading the article incorrectly.
The exemption is XV.2(a) OR XV.2(b).
you are looking at paragraph (a). I said she qualifies under (a):
"such remuneration does not exceed ten thousand dollars ($10,000) in the
currency of that other State"
No mention of days here.
The exemption is XV.2(a) OR XV.2(b).
you are looking at paragraph (a). I said she qualifies under (a):
"such remuneration does not exceed ten thousand dollars ($10,000) in the
currency of that other State"
No mention of days here.
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