Are there any undocumented issues to be aware of claiming the child tax credit on 1040-NR in a "return to canada" dual status year?
My wife's only U.S income for 2012 is an IRA distribution related to a Roth conversion. She is not a U.S citizen but our children are US citizens.
I think I can claim our children as dependents on her return along with the child tax credit. This will reduce the tax owing to nearly zero.
This seems way to good to be true so I'm asking the question.
Claiming child tax credit on 1040-NR
Moderator: Mark T Serbinski CA CPA
I'll think about the tax credit, but the roth conversion and 1040-NR raises a BIG red flag: she is not supposed to convert to Roth while a Cdn resuident. This breaks the roth in canada's eys and makes it forever immediately taxable.
Are you sure she wans't dual status. ie. she did the conversion BEFORE becoming Cdn resident, for the part year she was in US? I hopw so for your sake.
Another point, If she did this conversion as a Cdn resident, it is taxable in Canada too, so saving IRS tax meraly makes her Cdb tax more.
Are you sure she wans't dual status. ie. she did the conversion BEFORE becoming Cdn resident, for the part year she was in US? I hopw so for your sake.
Another point, If she did this conversion as a Cdn resident, it is taxable in Canada too, so saving IRS tax meraly makes her Cdb tax more.
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
You can claim the child tax credit on 1040NR.
However, make sure that you report the year correctly, ie. with a dual-status return, 1040 for the first part of the year, and 1040NR for the remainder (and calculate the tax on 1040NR).
Hopefully, the Roth conversion goes on the 1040, since that how it would be reported if it was done correctly (ie. before leaving).
However, make sure that you report the year correctly, ie. with a dual-status return, 1040 for the first part of the year, and 1040NR for the remainder (and calculate the tax on 1040NR).
Hopefully, the Roth conversion goes on the 1040, since that how it would be reported if it was done correctly (ie. before leaving).
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
There is a new form that one needs to include with their 1040 (whatever version of 1040) that 'qualifies' the children for the credit. make sure this is added, since you are not using software.
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
Thanks very much for the help! Yes, the roth conversion was made well before she became Canadian resident and would go on the 1040. I was very careful about that part of it.
This is great news. She's able to claim 3 exemptions (for herself and our 2 US citizen children) and 2 child tax credits giving her a near "free" Roth conversion.
One last question if you don't mind. Would moving expenses back to Canada be deductible on one of our returns? Either the 1040 or 1040-NR portion. That also seems to good to be true.
This is great news. She's able to claim 3 exemptions (for herself and our 2 US citizen children) and 2 child tax credits giving her a near "free" Roth conversion.
One last question if you don't mind. Would moving expenses back to Canada be deductible on one of our returns? Either the 1040 or 1040-NR portion. That also seems to good to be true.
No, moving expenses out of US cannot be claimed on 1040NR. She is not reporting the Cdn income, after all.
How are you filing for 2012 in Us. You may need the exemptions more than she does.
How are you filing for 2012 in Us. You may need the exemptions more than she does.
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
Thanks for the clarification on the moving expenses.
My plan was to file dual-status as well. My U.S income (before leaving) is about 1/2 of my wife's Roth conversion so the thinking was to claim the exemptions and child tax credit on her return where they are worth the most to us.
Some points of confusion remain for me. I continued to work for my U.S employer remotely who switched me to a Canadian payroll when I moved on 03/01. A few more questions if you'll bear with me
1) Despite a seemingly "common sense" direct connection to a U.S source, my Canadian payroll income (T4) received since moving is technically still considered Canadian sourced and therefore not reportable on 1040-NR. Is that correct?
2) I travelled to the U.S for ~ 20 days total between 03/01-12/31 for meetings/planning/etc with my employer. What implications does that have (if any) on U.S taxation of my CDN income.
3) Will I use the treaty to file dual status since I went back to U.S after residency termination date of 03/01 or do pure IRS regs cover this.
My plan was to file dual-status as well. My U.S income (before leaving) is about 1/2 of my wife's Roth conversion so the thinking was to claim the exemptions and child tax credit on her return where they are worth the most to us.
Some points of confusion remain for me. I continued to work for my U.S employer remotely who switched me to a Canadian payroll when I moved on 03/01. A few more questions if you'll bear with me
1) Despite a seemingly "common sense" direct connection to a U.S source, my Canadian payroll income (T4) received since moving is technically still considered Canadian sourced and therefore not reportable on 1040-NR. Is that correct?
2) I travelled to the U.S for ~ 20 days total between 03/01-12/31 for meetings/planning/etc with my employer. What implications does that have (if any) on U.S taxation of my CDN income.
3) Will I use the treaty to file dual status since I went back to U.S after residency termination date of 03/01 or do pure IRS regs cover this.
1. correct
2. no effect
3. no treaty req'd. you established a tax home in canada when you returned there.
I'm sure you've looked at filing full year MFJ 1040? which which would probably be less US tax than 2 1040NRs. Is the extra reporting for resp etc scaring you off?
2. no effect
3. no treaty req'd. you established a tax home in canada when you returned there.
I'm sure you've looked at filing full year MFJ 1040? which which would probably be less US tax than 2 1040NRs. Is the extra reporting for resp etc scaring you off?
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
I have looked at it. The RESP is a pain but the primary reason I'm avoiding full year 1040 is that the taxes seem much higher. I've been using TurboTax to experiment.
If we use the Foreign Income Exclusion, my wife's Roth conversion and my U.S income pre-move get hit by that horrible stacking rule and taxed at a high effective rate. If I use FTC, our combined AGI kills off other deductions and credits. The maximum allowed FTC credit is also much lower then CDN tax paid because 40% of the AGI is not foreign income (Roth conversion + my U.S income pre-move).
Based on your other feedback, I've estimated that filing dual status will save us nearly 10K in taxes. Once again, seems to good be true given the generally accepted advice of filing full year. I am worried I've made an error in the analysis but can't see anything.
If we use the Foreign Income Exclusion, my wife's Roth conversion and my U.S income pre-move get hit by that horrible stacking rule and taxed at a high effective rate. If I use FTC, our combined AGI kills off other deductions and credits. The maximum allowed FTC credit is also much lower then CDN tax paid because 40% of the AGI is not foreign income (Roth conversion + my U.S income pre-move).
Based on your other feedback, I've estimated that filing dual status will save us nearly 10K in taxes. Once again, seems to good be true given the generally accepted advice of filing full year. I am worried I've made an error in the analysis but can't see anything.
Well, I'm back with another question. Still filing dual status.
My 1040 statement includes ordinary W2 employment income that I received prior to moving back to Canada. That amount is transferred to my 1040-NR as Wages/Salaries Tips.
If I were to claim the exemptions & child tax credit for our U.S citizen children on the 1040-NR, can I also claim the child & dependent care credit for expenses incurred after physically moving on the 1040-NR?
There are two issues I'm not clear on:
1) Form 2441 (Child & Dependent Care Expenses) instructions say that Married Filing Separately filers can't claim the credit unless they lived apart from spouse in the last 6 months. Would that same rule apply to married NR filers who MUST file separately thereby disallowing the credit?
2) The credit requires earned income, which I do have but the expenses weren't technically incurred to earn that income. Does that mean its disallowed?
My 1040 statement includes ordinary W2 employment income that I received prior to moving back to Canada. That amount is transferred to my 1040-NR as Wages/Salaries Tips.
If I were to claim the exemptions & child tax credit for our U.S citizen children on the 1040-NR, can I also claim the child & dependent care credit for expenses incurred after physically moving on the 1040-NR?
There are two issues I'm not clear on:
1) Form 2441 (Child & Dependent Care Expenses) instructions say that Married Filing Separately filers can't claim the credit unless they lived apart from spouse in the last 6 months. Would that same rule apply to married NR filers who MUST file separately thereby disallowing the credit?
2) The credit requires earned income, which I do have but the expenses weren't technically incurred to earn that income. Does that mean its disallowed?
1. you can't claim. You wouldn't be saving any taxes anyway.
2. The expenses must be for the period in which you are reporting wages or looking for work. You both need to be working to claim.
I wouldn't bother reducing 1040NR taxes any further, you are merely increasing your Cdn tax.
2. The expenses must be for the period in which you are reporting wages or looking for work. You both need to be working to claim.
I wouldn't bother reducing 1040NR taxes any further, you are merely increasing your Cdn tax.
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