First off, great forum and has been quite helpful.
I am Canadian and moved (transferred) to the US in Aug 2011, however early on in the year I had been travelling for meetings and such fairly regularly and it ended up totaling 9 weeks in the US for business.
Working on form 2555-EZ I understood I was supposed to work out and subtract wages earned for those weeks from my foreign total. So now I'm confused about form 1116 (I was trying both to see which was better), does the wage that I report on 1116 also have to be reduced by the amount earned while in the US for meetings? If not can I use 2555 for the bulk and then claim the part I subtracted to reduce the remaining Canadian tax paid (on the subtracted amount)?
Sorry, not sure how clear that was so for example:
T4 was $50k. 9 weeks on business reduces that by $10k, so $40k is what I can exclude on line 17 of 2555-EZ.
- can I now claim the missing 10k and its tax share on a 1116?
- if I forgo form 2555, can I put the entire 50k on the 1116 or does it also need to be reduced to income earned standing on Canadian soil?
Post 5 in [url=http://forums.serbinski.com/viewtopic.php?t=6321] this thread [/url] mentions I may be able to deem US-sourced income as Canadian, unfortunately the linked content is over my head.
Anyone else done this?
Thanks
2555/1116 Canadian income earned on business trips in US
Moderator: Mark T Serbinski CA CPA
Any income that you exclude on 2555, cannot be used on 1116, nor can its associated tax.
It is questionable if you can use 2555 at all if you were in US more than 30 days in the first part of 2011, so I might be focussing on 1116 for everything. You needed to establish physical presence test in canada of 330 days in the 12-months before you moved.
You might just be a better candidate for filing 1040NR (using treaty to say you were non-resident for first part of year.
It is questionable if you can use 2555 at all if you were in US more than 30 days in the first part of 2011, so I might be focussing on 1116 for everything. You needed to establish physical presence test in canada of 330 days in the 12-months before you moved.
You might just be a better candidate for filing 1040NR (using treaty to say you were non-resident for first part of year.
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
hmmm, I figured I was ok for 2555 under the bona fide residence test and thus didn't need to worry about the physical presence part. I'll have to reread that.
I wasn't looking to use the excluded income from 2555 on 1116, rather it was the income that I wasn't able to exclude due to being in the US on business. If I go for everything on 1116 can I use all Canadian wages or do I also need to subtract a portion for the time I was in the US on business? The 1116 instructions don't specify like the 2555 does...
I had previously discounted 1040NR due to being physically present for more than 183 days total (even though I moved at the end of August). Maybe I misunderstood. I think filing dual status and only paying on income after I moved would net me the best refund anyway. Do I need to indicate in some way how I'm claiming to be exempt from the 183 days?
I wasn't looking to use the excluded income from 2555 on 1116, rather it was the income that I wasn't able to exclude due to being in the US on business. If I go for everything on 1116 can I use all Canadian wages or do I also need to subtract a portion for the time I was in the US on business? The 1116 instructions don't specify like the 2555 does...
I had previously discounted 1040NR due to being physically present for more than 183 days total (even though I moved at the end of August). Maybe I misunderstood. I think filing dual status and only paying on income after I moved would net me the best refund anyway. Do I need to indicate in some way how I'm claiming to be exempt from the 183 days?
The bona fide test applies only to FULL calendar years.
You would indicate your treaty position as non-resident for the first part of year either on an 8833 attached to your partial 1040, or, better, within the information portion of your 1040NR (that you file as dual status)
You are correct that your US-basedin come is neither eligible for 2555 nor for the initial general income 1116. It would be eligible for the re-sourced 1116, if you file full year. more complicated.
You would indicate your treaty position as non-resident for the first part of year either on an 8833 attached to your partial 1040, or, better, within the information portion of your 1040NR (that you file as dual status)
You are correct that your US-basedin come is neither eligible for 2555 nor for the initial general income 1116. It would be eligible for the re-sourced 1116, if you file full year. more complicated.
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
Thank you nelsona, this is very helpful information. I am however still confused about a couple items:
- Reading pub 519, it states that for determining residency start date for substantial presence (I was in the US for 60 days before I moved, giving me a total of 195 days for 2011) I would use the first day I was present but I could exclude the first 10 days. If I exclude the first 10 days, that would put me at March 30th for my residency start. After which point I need to declare all world income for my regular 1040. Since I can't use 2555 to exclude, I would then use 1116 to reduce the taxes for my cdn wages April-August. Am I understand that correct? All in all this doesn't seem much better than just declaring full year residency since I miss out on the standard deduction and instead have to do an itemized one.
The best/easiest outcome for me would me would be to have my US residence begin the same day my Canadian residence ended, but the way I'm reading that it doesn't seem that would be case.
- If US sourced income - while in the US for meetings, paid by my cdn employer no different than if I was in Canada - isn't eligible for reduction through 1116, doesn't that mean I'm being double taxed on the same income since I paid cdn taxes on this already? I gather there must be a treaty between Canada and the US to stop this - is this the re-sourced 1116 you mentioned and is it just as simple as doing a second 1116 to account for the re-sourced income?
Anyone's input on this would be very appreciated. Thanks.
- Reading pub 519, it states that for determining residency start date for substantial presence (I was in the US for 60 days before I moved, giving me a total of 195 days for 2011) I would use the first day I was present but I could exclude the first 10 days. If I exclude the first 10 days, that would put me at March 30th for my residency start. After which point I need to declare all world income for my regular 1040. Since I can't use 2555 to exclude, I would then use 1116 to reduce the taxes for my cdn wages April-August. Am I understand that correct? All in all this doesn't seem much better than just declaring full year residency since I miss out on the standard deduction and instead have to do an itemized one.
The best/easiest outcome for me would me would be to have my US residence begin the same day my Canadian residence ended, but the way I'm reading that it doesn't seem that would be case.
- If US sourced income - while in the US for meetings, paid by my cdn employer no different than if I was in Canada - isn't eligible for reduction through 1116, doesn't that mean I'm being double taxed on the same income since I paid cdn taxes on this already? I gather there must be a treaty between Canada and the US to stop this - is this the re-sourced 1116 you mentioned and is it just as simple as doing a second 1116 to account for the re-sourced income?
Anyone's input on this would be very appreciated. Thanks.
Much of 519 can be ignored if you apply the treaty, and treat your self as Cdn resident until you moved. This supercedes Subsatntial presence Test etc.
You are in an unenvianble position of having spent a lot of time in US and
earned income there long before you moved.
This makes that money US-sourced, and US-reportable.
I've told you what I would do.
You are in an unenvianble position of having spent a lot of time in US and
earned income there long before you moved.
This makes that money US-sourced, and US-reportable.
I've told you what I would do.
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
Yeah, if I had known all the tax implications (and known I was moving) beforehand I would have skipped a few visits or pushed for some meetings in Canada. Oh well, it is what it is.
Thanks for you help and for confirming, the last thing I want is the IRS pissed off at me. I'll take your advice and finish up these taxes. Next year will be so much easier.
Thanks for you help and for confirming, the last thing I want is the IRS pissed off at me. I'll take your advice and finish up these taxes. Next year will be so much easier.