US Source income while on business in US (Meals, lodging)

[Ingtar17]

I'm a Dual US/CAN citizen living in Canada. I went to the US for 2 days for a business trip. The way I read the instruction forms, it appears I am to include any reimbursements for meals and lodging as US source income (along with my 2 days of pay). Is this really true? It seems really odd to say that this is income for me since it is really just repayment of out of pocket expenses due to my trip. This will be my only US source income so the personal amount will take care of it this year, but in future years I will likely be in the States a lot more for business. Do I claim all this as itemized expenses in future years? Am I on the right track?

Thanks,
Ingtar

[nelsona]

Not quite.

You include them in income only if the W-2 or 1099 issued to you includes than as income. Otherwise you neither include them as income, nor claim them as an expense.

If the reimbursement is included on your income form, then you BOTH include the income and claim the expense as a deduction.

[nelsona]

Some companies will simply cut a separate check for expenses. Then it becomes separte form you contract income.

[Ingtar17]

Well, I'm not really a contractor. I'm a full time employee who just happened to go on a business trip. As I am employed in Canada, they wouln't be issuing a W2 or 1099 to me, but rather a Canadian T4 (or are you saying the IRS would issue one of those forms to me? - Sorry if that is an ignorant question - I am unfamiliar with those forms as I've lived in Canada almost all my life). They did actually cut me a cheque to pay me back so it is 'separate' as you say. In this case, is it considered 'Income' again (and claimed as an expense)?

Thanks,
Ingtar

[nelsona]

If you were on a business trip, you won't report anything in US.

Your expenses will be reimbursed by your firm, but not added to your T4. My answer above applies exactly the same to Cdn taxes.

[Ingtar17]

Thanks. And what about my real salary on those days? Is that considered US source income? The instructions in form 2555ez say that Income earned in the United States on business is not Foreign Earned Income. I assumed that meant it was US Source. Is this correct or is it also not reported (seems odd not to report it at all)

Thanks,
Ingtar

[nelsona]

2555, in fact US taxes in general don't apply to you. Why the concern?

The treaty will determine when you need to pay US taxes: after spending more than 183 days in any 12-month period, as well as a couple of other conditions.

Come bac here whn you've reached about 175 days and we can look deeper.

Until then, its as if you are working in kamloops or fredericton.

[cfn2007]

It looks like Ingtar 17 is a dual citizen, so US taxes are certainly relevant. Not sure if that changes the answer or not regarding the 2555???

[nelsona]

Yikes. I missed that.

I'll review later.

[nelsona]

Ingtar,

You will simply prorate the number of days you work in US as the protion of your T4 that is US-sourced, and this will be your US-source wages. You cannot exclude these by 2555 as you say, but I would suggest that, if you have kids, you should not have been using 2555 in any eent, as you have been giving up $1000/kid refund.

Again, the expenses won't be included on your T4, so are not part of this discussion.

You need to be sure that you reduce your US tax, since none of the US tax will be considered eligible for credit on your Cdn return, by treaty. There are re-sourcing rules that will apply to you.

[nelsona]

I would need to look deeper, but I'm not convinced that the treaty doesn'r still protect you from US taxation (yes, you need to report); this income may still be considered Cdn-source by treaty, since you are a Cdn resident and the business income is shorrt-term.