Can these incomes be exempted from US or Canada taxes?

nelsona · Post by **nelsona** » Tue Aug 28, 2012 11:19 am

Not sure what JG was trying to say, but let me correct my last post:

You would get credit for QC tax paid (as calculated on your QC return), only if you report Cdn income on your full-year 1040 (you have the choice to file full year in US in your fist year regardless of when you arrived in US) and you use the foreign tax credit method (Form 1116) instead of the foreign earned income method (FOrm 2555).

If you file a part-year US return, then there should not be any CDn income to report, and thus no QC (or Cdn) tax to take credit for.

JGCA · Post by **JGCA** » Tue Aug 28, 2012 11:58 am

Sorry for the mix up i WAS ON THE FIRST PAGE somehow looking at the last feed and answered that question about SINGLE and HEAD of household which apparently have already been answererd, so Nelsona my response was on that item, I guess when a thread is 3 pages long looking at the boottom of first page is NOT recommended, sorry for the mix up it was my error.

newbie12345 · Post by **newbie12345** » Tue Aug 28, 2012 3:00 pm

Hi There,

I am wondering if there is any benefit to report as whole year US resident.
Yes, you could declare whole year deduction amount.

On the other side, the tax you paid to canada is not one dollar tax mapping to one dollar tax credit (it is different in U.S. You have to go through the 1116 form to decide how many foreign tax credit your canadian tax could be converted to and how much foreign tax credit could be used in U.S. You might not be able to use all amount of the tax credit to deduct your tax. )

I would suggest you do an other tax return for partial resident of the year (start from the date you moved accross the border.) in this way, you don't report the income earn in canada before you moved and don't decare tax credit for tax you paid for that part of the income. You still report your canadian income accurred after you move, also you still declare the canadian tax you paid for the income occured after you move.

Compare the two tax return. You might end up pay less as part year resident

JGCA · Post by **JGCA** » Tue Aug 28, 2012 4:13 pm

You should always try both methods to see which one yields you the best overal tax savings, but in my opinion if you are married filing a full 1040 MFJ with the 116 tax credits should yield the best scenario, but again try it as a partial year resident also with no CND income to see what is best. Regardless of how you file in the US you should still file as departing resident of Canada in year you leave based on the province of residence before you left if you are saying you are no longer a CND resident.

nelsona · Post by **nelsona** » Tue Aug 28, 2012 4:13 pm

newbie, the reason for filing a full year return is to get the better married filing jointly taxrate, as well as allowing for the standard deduction, which is quite generous for a new resident, since they are unlikley to have a mortgage and paid property tax.

If one does not file a full year return, both those advantages disappear.
Besides, if one uses FEIE instead of FTC, then there is no worry about the 'mapping' of tax credits, the wages are simply excluded.

Also, becaase of the rules on when the part-year return would start, it is quite likely that one would have to report Cdn income from before the move even if one filed part-year.

Don't you think we've run these scenarios over the years to come up with this advice? That is why we say IF you file full year.

newbie12345 · Post by **newbie12345** » Tue Aug 28, 2012 5:34 pm

Breton06, I am sorry that I might give you wrong information.

Nelsona,
This is the first time I heard about this FEIE. Do you mind to give me some advice about my senario as well?

For year 2005, I moved from canada to U.S. in april. After april, my canadian employer kept me on their payroll until June.

I file joinly with my husband as whole year resident.
During the OVDI, I revised my year 2005 tax return to include my canadian source income.

CRA clearly state to me that I am resident of canada until April.

For tax year 2005 I have:
1. canadian employment income earned when I was resident of canada
2. canadian employement income earned after I moved out of canada
3. canadian interest income, etc.

I am wondering for if income #1 could be treated as FEIE and still have income #2 and income #3 as FTC?

Thanks a lot in advance!

nelsona · Post by **nelsona** » Tue Aug 28, 2012 9:39 pm

Yes.

But it is too late now to change your 2005 tax return to claim an exemption or credit.

newbie12345 · Post by **newbie12345** » Wed Aug 29, 2012 3:38 pm

Hi Nelsona,

Thanks a lot for the information.

I am wondering why it is too late?

The canadian source income is not in my original tax return for year 2005.

I joint OVDI and my agent file an amended return for year 2005 to report
my canadian source income last year. They include the income one and claim
foreign tax credit for it. (which cost me much more tax than exclude the income 1).

You mean it is too late since my agent claim tax credit for the wage income in the initial amended return so that IRS consider me choose not to exclue the income 1 and would not allowed me to make an modification?

thanks in advance!

nelsona · Post by **nelsona** » Wed Aug 29, 2012 4:17 pm

Generally, you have 3 years to claim any credit or exemption. Reporting income is a differnt story.
You can try if you wish. The FTC might be granted. i doubt the FEIE will.

breton06 · Post by **breton06** » Wed Aug 29, 2012 11:18 pm

So many clear infos on this forum...

I'm wondering where to declare the parental leave income I recieved from the Canadian (Quebec) government. In TurboTax, there is a section for paid family leave, but I would need a 1099-G form, which I don't have, of course... Should I declare it with the other Canadian income from my Canadian employer?

nelsona · Post by **nelsona** » Thu Aug 30, 2012 7:06 am

Just because you don't have the specific US form does not mean it does not go on the specific line, after all you enter Cdn wages on the age line and you don't have a W-2.

If the income meets the definition, it goes on that line, regardless of the form you have.

JGCA · Post by **JGCA** » Thu Aug 30, 2012 10:16 am

wage not age.

nelsona · Post by **nelsona** » Thu Aug 30, 2012 4:51 pm

Really, JC? Really?

JGCA · Post by **JGCA** » Fri Aug 31, 2012 1:00 pm

I know its not really nice of me, but funny when you do it its ok!

nelsona · Post by **nelsona** » Fri Aug 31, 2012 6:01 pm

There is a difference between a typo that can be misinterpreted and one that can't. There is only a 'wage line' not an 'age line' on 1040.

However there is a big differnce between a 183 day threshold and a 193 day. THAT needs clarification.

I don't correct you evertime you spell 'the' as 'teh', but there must be 100's of times.

Fis this typo: smartsas