Reporting Income from US Tax Return on CDN Tax Return

[cndnheat]

My wife is American and works over in Michigan. She files "Married Filing Separately" in the US.

When I do her Canadian tax return:

1. Do I use the amount from line 22 on the 1040 as her income for Canadian tax purposes, or do I use the "Gross Pay" amount from her W-2 Earnings Summary?

2. To apply the tax credits in Canada, do I add up all of the taxes paid from the W2s (Medicare, Social Security, Federal Income Tax, State Income Tax) and report all of that, or am I only entitled to report the total tax payments on line 71 of the Fed return minus the overpayment, if any, on line 72? Does the same apply to the State tax?

What I have done so far, is taken the "Gross Income" figure, and then added up all of the taxes paid from the W2 and used those figures. I then deduct any US refund from that to reflect the actual total tax paid in the USA, although that isn't reflected on the 1040 - it is only reflected if you add up the figures on the W2s. Is that the correct method?

It is turning out that she ends up owing over $3500 in taxes in Canada and that just doesn't seem to make sense when her standard deductions in the USA are over $7000, after her refund....

Is there something that is commonly done "wrong" on the Canadian Tax Return by noobs like me that causes this to happen? I'm using Quick Tax and Turbo Tax to figure all of this out, and I don't necessarily trust software over the advice of a professional.

Can anyone help me out here?

Thanks!

[nelsona]

1. You need to assign each type of US income to each category on the Cdn return. So for wages, you need to report the wahes from her wage box on w-3 PLUS any 401(K)/403 contributions she made. You will get to deduct the 401)k) later.

2. For tax, she can claim onlt the FICA from her W-2. Her fed and state taxes can only come off her return. The quickext way to do this is buy taking your witholding, plus or minus what you owe/get refunded.

as you can see, her deductions in US are of little value. She needs to be genrating Cdn deictions, like RRSP to reduce her Cdn tax liability.


I don't know what she makes, but $3500 extra in Ontario seens a littel high. Her tax credit should wipe out all Cdn federal tax, and what's left should do serious damage to her provivila tax. You are using software, right?

[cndnheat]

Thanks for your response, nelsona. It clears things up somewhat,

Can she claim FICA in the 2008 Tax Year as well? Or did that start in the 2009 Tax Year when the 401K write-off started?

I'm doing her 2008 returns now and I am using software - correct. I'm assuming I might have to "intervene"?

[cndnheat]

I forgot this as well -

When calculating the FICA write-off, do I add the FICA amount to the "Foreign Taxes paid" or is there somewhere else on the T-1 that I put this?

Thanks!

[nelsona]

Not sure what "FICA write-off" means.

FICA has always been considered eligible for foreign tax credit. It is a foreign tax, creditable only in the year it was paid, against the Cdn/Prov tax owed .

There is a specific form for 401(k) deduction thet needs to be filed, if one is doing a 401(k).