Claiming child tax credit on 1040-NR

rsargant · Post by **rsargant** » Mon Jan 14, 2013 7:09 pm

I figured that was the case but I appreciate the expert opinion. One more to go..

I received some U.S source income in March (after establishing Canadian residency) before my payroll was changed. This income will be reportable to Canada and I'll take a foreign tax credit for the U.S tax paid on that income.

My question is: How do I figure the U.S tax paid on that income?. I'm sure punching in the U.S withholding on that income as the credit amount isn't correct.

My guess is that I should determine my effective U.S tax rate on all ordinary income (which includes income prior to March) and apply that rate to the income received in March. The result of that calculation would be claimed as a foreign tax credit on my CDN return. Is this the right procedure?

nelsona · Post by **nelsona** » Mon Jan 14, 2013 10:46 pm

You prorate the tax calculated on your US return (and state return) as well as the FICA, and use it on your Cdn return.

Prorate the amount over the total income reported on your 1040 (or 1040NR in your case) times the total tax you pay on 1040NR.

rsargant · Post by **rsargant** » Tue Jan 15, 2013 8:26 am

Makes sense. Thanks again.

rsargant · Post by **rsargant** » Thu Jan 31, 2013 11:57 pm

It's been suggested to me that I must report the CDN income received during my ~30 days in U.S on 1040-NR. The explanation given is that I received that income for/while working in U.S so it is taxable by U.S despite CDN source.

This is a reporting headache. I was hoping that I'd never have to report the CDN source income (received from U.S employer through Canadian payroll) on 1040-NR. I travel to the U.S for work very infrequently BUT I enter under TN status (primarily to just avoid border hassles).

So is this advice correct or not? It definitely seems like a very confusing grey area. i read something about a $10,000 exemption available under Article XV(2) but I'm not sure if that applies to my scenario.

nelsona · Post by **nelsona** » Fri Feb 01, 2013 10:19 am

At worse, you report the income and use the 10K exclusion (but only if it was less than 10K).

Who is making this suggestion?

nelsona · Post by **nelsona** » Fri Feb 01, 2013 10:24 am

To be clear, the total US-sourced remuneration from this employer must be less than 10k for the treaty provision to apply.

How are you normally being paid. It sounds like you are on a Cdn payroll. If that is the case, then you are not being paid by a US employer, thus there should be no reason to report any of this income (unless you were to exceed 183 day in the year.
I assume this is income after you left US and are living in Canada

rsargant · Post by **rsargant** » Sat Feb 02, 2013 10:30 am

This is what I thought but I've been told otherwise.

It's coming from an accountant at a firm in Toronto that specializes in cross-border taxation. My dad uses them and arranged for me to give them a call for some advice on this one issue because I find it really confusing.

I am paid on a Canadian payroll created for me by the U.S company so I could live & work in Canada as an Employee. 99% of the work is done in Canada. I occasionally enter the U.S to visit the employers office . The core purpose of the trip is catch-up, consult, plan..etc not DO the work. I just enter on TN status for those trips so I don't get hassled. The income in question was received during the 1040-NR period.

I don't really get it. Having to report the income means that if anytime a Canadian company sends an employee to the U.S as a business visitor and compensates them for making the trip, the compensation is taxable in U.S. Can that possibly be correct? My issue might be entering under TN status implies I'm doing productive work in U.S (even though I'm really not) and therefore its taxable?

nelsona · Post by **nelsona** » Sat Feb 02, 2013 5:43 pm

Can that possibly be correct?

No its not correct. In fact the treaty gives large leeway (but not complete exemption) for Cdn employees working in US for CDn employer, which is what you are unlless you were tehre a long time.

Even if you were working for a US employer, you could work and earn $10K without paying any US fed tax.

The fact it was a partial residency year does complicate matters, but still does not make it taxable.

Trouble is, canada will view your income as Cdn-sourced, and could deny foreign tax credit if you claim the income.

rsargant · Post by **rsargant** » Sat Feb 02, 2013 10:22 pm

I'm not going to report it then. I will answer everything accurately on 1040 nr schedule OI regarding travel and visa status..etc and wait for irs to complain if necessary.

rsargant · Post by **rsargant** » Fri Mar 29, 2013 3:21 pm

Just about ready to file my U.S dual status return. I have one stupid question about the 8891 that probably doesn't even matter but I'm asking anyway.

Should I attach it to the 1040 "statement"/resident portion or the 1040-NR "return".

nelsona · Post by **nelsona** » Fri Mar 29, 2013 4:51 pm

I would. The RRSP was still taxable in 2012, so you continued to need to defer.

rsargant · Post by **rsargant** » Sun Apr 28, 2013 4:29 pm

I'm filing my Canadian taxes on Monday. I just wanted to confirm that there are no CRA reporting requirements or "elections" required for continued tax deferral of my 401K income as a Canadian resident.

I filed the special election required for Roth already but just wanted to double check the 401K before mailing my return.

nelsona · Post by **nelsona** » Mon Apr 29, 2013 6:27 am

Correct. Only 401(k) contributions have specail reporting in order to make them tax deductible.

rsargant · Post by **rsargant** » Sat Jun 08, 2013 6:24 am

Any thoughts on this discussion that suggests one does not have to file FBAR in a dual status departure year IF they are present for less then 183 days?

http://www.justanswer.com/tax/6j158-dua ... -fbar.html

The "U.S Person" definition originates from http://www.irs.gov/irm/part4/irm_04-026-016.html

The reasoning seems logical enough but I'm wondering what your thoughts are.