tax paid in us is not equal to foreign tax credit in canada?

stellal · Post by **stellal** » Fri Jan 17, 2014 1:27 pm

I just found that my husband paid 32K tax in us (including federal, social security, medicare, and state tax), when he filed Canada return in 2012, the foregin tax credit is changed to 26k instead of 32K, then I tried again with 2013 data, in 2013, he paid 25k tax in us, if he file Canada return, the foreign tax credit is changed to 17k and he would have to pay Canada another 8K, I used UFile software, is there any trick to solve this issue. We did not notice the change when we filed 2012 return.

nelsona · Post by **nelsona** » Fri Jan 17, 2014 2:26 pm

The foreign tax credit is limited to the tax he would have paid in canada on that income. So, you need to look at hgis Cdn return WITHOUT the credit first, ands then with the credit.

So how much Cdn tax does he owe without the foreign tax credit.

nelsona · Post by **nelsona** » Fri Jan 17, 2014 2:42 pm

don't forget that you are also getting fopreign tax credit against provincial tax on another line.

But the question rweally is why on earth is he filing a Cdn tax return at all, since he (and you left) in 2012!

nelsona · Post by **nelsona** » Fri Jan 17, 2014 2:46 pm

Also, if he has other Cdn income during the year, the US tax will not be used against the Cdn tax for that income.

See the problems of not properly and timely determining your tax residency?

stellal · Post by **stellal** » Fri Jan 17, 2014 4:26 pm

Take 2013 data, if dont put the foreign tax, he would pay Cdn 25K tax, then I put the foreign tax he paid as 25k, the software calculated foeign tax credit as 17k (T2209), so he must pay another 8k. Still did not figure out why.

Another sad thing is that I found we need pay 12k more tax in Us (OR) than in Canada (BC) although we always heard that US has less tax than Canada.

For long time I dont know why the payroll has less than we were in Canada, now I found that Canada has less tax than US.

nelsona · Post by **nelsona** » Fri Jan 17, 2014 4:42 pm

What was deducted on his paystub is meaningless in all this. What you need to look at is the final tax return, and how much tax he was asked for for the year.

I've given you 5 or 6 reasons why the tax is not being used up. You haven't told me which situation is his. Does he have a lot of Cdn income to report?

And again, why is he filing a Cdn tax return for 2013?

It sounds like you are not doing the taxes correctly in either country, which should not come as a surprise, since it is complex.

stellal · Post by **stellal** » Fri Jan 17, 2014 4:59 pm

The reason we filed 1040NR in 2011 and 2012 is that we had some mutual funds which had pretty much capital gains which we bought in 2009. We dont know how to calculate that and we dont want those capital gains be treated as interest.

I tried turbo tax yesterday and found that we can only get $500 refund in US, I tried the data in UFile to see how much tax we would pay if we were in Cdn and found that we would pay less tax in Cdn than in US.

nelsona · Post by **nelsona** » Sat Jan 18, 2014 5:26 pm

You are not doing his taxes correctly, plain and simple.