Cross border commuter tax filing question

shmuhahaha · Post by **shmuhahaha** » Wed Jan 08, 2014 7:28 pm

I'm a Canadian, my Wife is Non-Canadian and my kids are both US and Canadian citizens.
We moved to Windsor, Ontario from Michigan on Jan 1 of 2013 and we all reside in Windsor.
I still continue working with the same employer(employed 5 years +) by doing cross border commmute every day from Windsor to Detroit.

The following are my questions and I'd appreciate if someone can answer.
I tried to research the site's previous posts and unfortunately, I might have missed the similar topics.

1) What forms should I use to File US returns. (1040 or 1040NR). I've only W2. No T4 slips
2) Can I file Joint return with my Spouse even though she is not in the US? If not, what filing status can someone recommend please?
3) Can I claim child tax credit for my kids(as US Citizens) in the US return? Will it make a difference if I file with 1040 or 1040 NR?
4) I continue contributing to my employer's 401k plan. The employer also matches upto 5 percent. Should I also report my employer's matching amount too on my Canadian tax returns.
5) I spent about 500 dollars from my HSA(which I contributed until Dec 2012) for Medical expenses. Is this amount taxable since I used when primarily residing in Canada during 2013

I'd appreciate your feedback. Thanks a bunch!

shmuhahaha · Post by **shmuhahaha** » Wed Jan 08, 2014 7:32 pm

FYI..I work in US with TN status

nelsona · Post by **nelsona** » Thu Jan 09, 2014 2:22 am

1) 1040NR
2) You will use a special treat clause, to compile a "pro forma" 1040, joint return, to figure your taxrate, and then use this tax rate to calculate the tax on your US income only. it is article XXV(2) of the treaty desihgned specifically for married Cdns commuting to work in US.
3) Yes, this will reduce your 1040 taxrate, which will reduce your US tax.
4) no, 401(k) contributions are not taxable in Canada. There is a special form to file with CRA, so that merges any 401(k) and RRSP contributions.
5) no.

I wpuld not go crazt trying to reduce US tax, just as long as it is below yoru tax determined on your Cdn tax return.

shmuhahaha · Post by **shmuhahaha** » Thu Jan 09, 2014 11:14 am

Thanks a bunch, Nelsona as always :)

shmuhahaha · Post by **shmuhahaha** » Tue Mar 11, 2014 2:54 am

Hi Nelsona,

By doing a Proforma 1040 with article xxv provision, I see it reduced my US tax by 3000 for my 3 US citizen kids. However, since my Canadian tax owed is higher, it looks like that I might have to pay that 3000 dollars back to CRA. I'm thinking, in my case, why do I even have to use article xxv. Should doing a 1040 NR along without article xxv be sufficient itself? Please give me your feedback and thanks a bunch as usual .
P.S In my case, for example if my w2 tax withholding are 12000, then with Child tax credit, I get 3000 dollars back. This makes my US tax at 9000. So If my Canadian tax owed is 16000, then I will end up paying 7000 dollars to the CRA(as opposed to 4000 dollars with the 12000 US tax amount).

nelsona · Post by **nelsona** » Tue Mar 11, 2014 6:10 am

Of course, the treaty option is only useful if it benefits you overall. Be careful about using the w-2 withholding, as this is NOT your tax. The tax calculated on your 1040NR is your tax. I doubt that what was withheld is exactly what was calculated using 1040NR, so look that over.

I have always stated that reducing US tax may simply increase CDn tax. But in many if not most cases the 104NR married single rate is higher than what a married couple in Canada's rate may be especially if one is contributing aggressively to RRSP and/or spouse does not work.

But if the tax you accrue on 1040NR can all be used on your CDn return, then by all means just use 1040NR. My experience has been that at your income range, there is benefit.

shmuhahaha · Post by **shmuhahaha** » Tue Mar 11, 2014 10:52 am

Kewl!! You the best, Nelsona and Thanks!!! Pretty soon, I'm going to start a fan club for you..Just kidding :)

nelsona · Post by **nelsona** » Tue Mar 11, 2014 11:04 am

There should already be one, no? ;o)

MGeorge · Post by **MGeorge** » Tue Mar 11, 2014 3:05 pm

Yes - I recall there was a thread called the "nelsona appreciation society".

nelsona · Post by **nelsona** » Tue Mar 11, 2014 3:40 pm

All participants were rounded up and flogged.

shmuhahaha · Post by **shmuhahaha** » Thu Mar 27, 2014 9:50 am

LOL :)

shmuhahaha · Post by **shmuhahaha** » Sun Mar 08, 2015 12:35 pm

Hi,

Like I mentioned in my previous post, I work for a Detroit based company by commuting daily between Windsor and Detroit.
I'm planning to file 1040 NR by invoking article xxv(2) using form 8833

On my itemized deductions on Proforma 1040, I'm planning to claim my property tax, mortage interest and MI State tax(from W-2)
I own a home in Canada(with 98% ownership on my name and 2% ownership with my sister and dad(Note: 2% ownership with sister and dad done to
secure mortgage loan as they had good credit history and I didn't have established credit history back then). But I've been paying 100% mortage
and property tax on the home.

My question is

1) Am I allowed to include 100% for property tax and mortgage deductions(even though the annual mortgage and property tax statement is addressed to
all three of us)?

2) Since my property tax and mortgage interest are in Canadian dollars, Can I use the Bank of Canada exchange rate to Convert from Canadian to US
dollars?

Please advise and thanks as always!!

nelsona · Post by **nelsona** » Sun Mar 08, 2015 1:32 pm

You only get to deduct the taxes and interst you owe, not your generosity.

shmuhahaha · Post by **shmuhahaha** » Sun Mar 08, 2015 1:42 pm

Nelsona, Does that mean I can deduct the total property tax + mortgage interest I paid please, rt?

nelsona · Post by **nelsona** » Sun Mar 08, 2015 11:01 pm

Only 2% of the tax and interest. The rest is a gift you have made to your family, with no deduction.

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