Income earned in US while resident of Canada

Livonian · Post by **Livonian** » Sat Nov 28, 2009 9:38 pm

How do I report spousal income on 1040 which was earned while working remotely from Canada for a US employer while we were residents of Canada.

The issue is that income was earned in US while in Canada and now the spouse is in on dependent visa.

Do we use 2555 or 1116 or both for claiming credit for this income?

We are Canadian citizen and I am on work visa.
Thanks

nelsona · Post by **nelsona** » Sat Nov 28, 2009 9:57 pm

How was she paid? As a CDn employee, as a Cdn contractor, or as a US employee (incorrectely)?

Livonian · Post by **Livonian** » Sat Nov 28, 2009 11:52 pm

It was a short period contract which was periodically renewed as a new contract before end of previous contract.

The employer has similar contracts for employees spread all over world including Canada and Europe. Since visa is required for work only while within USA, there was no need of work since contract was performed from outside of US.

nelsona · Post by **nelsona** » Sun Nov 29, 2009 8:45 am

That didn't qyite answwer the question, I didn't ask about visa. I'm asking about how she was paid and what taxes where withheld.

Livonian · Post by **Livonian** » Sun Nov 29, 2009 2:21 pm

No taxes were withheld. She was paid as a contractor.

nelsona · Post by **nelsona** » Sun Nov 29, 2009 3:54 pm

So, then it comes down as to how you both will file your US taxes for the year.

If you file a full year 1040, reporting all world income for the entire year, then her contract income is reported, but can be excluded using 2555 (it is considered income earned in canada).

If you file as part-year residents, the that money earned before arrival is not reported on the 1040NR.

Usually the full year report, with Cdn wages excluded by 2555 is teh best approach.