I'm an American citizen who became a PR of Quebec in June of 2014.
I have a W2 from my American employer prior to becoming a Canadian resident.
After which I became 'self-employed' and contracted work to my previous employer. They have issued me a 1040 for the work occurring after the move.
My understanding was I would pay U.S. taxes (fed and state) on the W2 portion, and Canadian (fed and provincial) on the 1040. While filling out my forms though, it sounds like I need to report both W2 and 1040 earnings on each. I should be able to offset one foreign tax credits, but I still seem to be paying over double what I usually do. Also, it seems I may now be liable to pay U.S. self-employment taxes on my foreign earned income. Is that right?
Having lived in Canada for only half of the year, I do not believe I pass the bona-fide residence test (330 day). Will this matter if my Canadian tax liabilities are higher than U.S.? Should offset anyways, no?
Aside from general advice on my situation, can anyone recommend a reasonably priced tax accountant who handles Canada/Quebec and U.S. returns? I'm feeling over my head here.
1st year resident of Canada (Quebec)
Moderator: Mark T Serbinski CA CPA
-
tabarnouche
- Posts: 4
- Joined: Thu Apr 03, 2014 11:09 am
- Location: Canada
Hey tabarnouche,
I'm no expert on this, and I do not want to lead you down the wrong path, but have you looked into whether you can hold off on filing your US taxes until you have met the bona fide residence test? I have moved in the opposite direction (i.e. to the USA) but I recall reading this in Pub 54:
Extension of time to meet tests. You generally
cannot get an extension of more than 6
months. However, if you are outside the United
States and meet certain requirements, you may
be able to get a longer extension.
You can get an extension of more than 6
months to file your tax return if you need the
time to meet either the bona fide residence test
or the physical presence test to qualify for either
the foreign earned income exclusion or the foreign
housing exclusion or deduction. The tests,
the exclusions, and the deduction are explained
in chapter 4.
You should request an extension if all three
of the following apply.
1. You are a U.S. citizen or resident alien.
2. You expect to meet either the bona fide
residence test or the physical presence
test, but not until after your tax return is
due.
3. Your tax home is in a foreign country (or
countries) throughout your period of bona
fide residence or physical presence,
whichever applies.
If you are granted an extension, it generally
will be to 30 days beyond the date on which you
can reasonably expect to qualify for an exclusion
or deduction under either the bona fide
residence test or the physical presence test.
However, if you have moving expenses that are
for services performed in 2 years, you may be
granted an extension until after the end of the
second year.
I'm no expert on this, and I do not want to lead you down the wrong path, but have you looked into whether you can hold off on filing your US taxes until you have met the bona fide residence test? I have moved in the opposite direction (i.e. to the USA) but I recall reading this in Pub 54:
Extension of time to meet tests. You generally
cannot get an extension of more than 6
months. However, if you are outside the United
States and meet certain requirements, you may
be able to get a longer extension.
You can get an extension of more than 6
months to file your tax return if you need the
time to meet either the bona fide residence test
or the physical presence test to qualify for either
the foreign earned income exclusion or the foreign
housing exclusion or deduction. The tests,
the exclusions, and the deduction are explained
in chapter 4.
You should request an extension if all three
of the following apply.
1. You are a U.S. citizen or resident alien.
2. You expect to meet either the bona fide
residence test or the physical presence
test, but not until after your tax return is
due.
3. Your tax home is in a foreign country (or
countries) throughout your period of bona
fide residence or physical presence,
whichever applies.
If you are granted an extension, it generally
will be to 30 days beyond the date on which you
can reasonably expect to qualify for an exclusion
or deduction under either the bona fide
residence test or the physical presence test.
However, if you have moving expenses that are
for services performed in 2 years, you may be
granted an extension until after the end of the
second year.
First off, when you arrive in canada/qc, none of your previous income is reported to canada. Period.
For US, you still, because of your citizenship, report ALL worlld income for the year. You will get to exclude the Cdn wages using 2555, once you meet the PHYSICAL PRESENCE TEST (the bona fide test only applies to FULL year foreign residence, never in a moving year either way). This would happen sometime in June 2015.
While you could instead use 1116 to get a foreign tax credit, this is typically not a s useful as 2555, since the credit is never a 1 to 1 credit when you have income from both countries.
In 2015 and later, you will exclude Cdn wages using 2555 under the boa fide test.
For US, you still, because of your citizenship, report ALL worlld income for the year. You will get to exclude the Cdn wages using 2555, once you meet the PHYSICAL PRESENCE TEST (the bona fide test only applies to FULL year foreign residence, never in a moving year either way). This would happen sometime in June 2015.
While you could instead use 1116 to get a foreign tax credit, this is typically not a s useful as 2555, since the credit is never a 1 to 1 credit when you have income from both countries.
In 2015 and later, you will exclude Cdn wages using 2555 under the boa fide test.
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
-
jjourneyy22
- Posts: 5
- Joined: Thu Apr 09, 2015 4:59 am
Thank you for http://www.archeagegoldmall.com/ your sharing! It's useful for meï¼I found this information for a long time but it's doesn't work! I'm happy I can find this http://www.archeagegoldmall.com/ sharing of you !you are nice guys !