Real quick question. I`m a Canadian resident and commute to the US. I started working late in 2015 and made less than $10K. After I completed my 1040NR, state and local taxes and took a foreign tax credit in Canada, I happened to come across this forum and read that I may be able to use the treaty to exempt this income in the US because it`s less than $10K. I was just about to mail everything off to the IRS and CRA, but now I’m confused.
If I send everything as is, will this be a problem with CRA? Will they have a problem giving me a foreign tax credit for this because really I should have used the treaty and only paid tax on this income in Canada? In other words, is the treaty mandatory in this case, or can I choose not to use it? Just seems that CRA would be pissed that they can`t collect any tax on this income just because I choose not to follow the treaty. I can't seem to find the answer on this forum. Can anyone help with this?
Is treaty mandatory if earn less than $10K?
Moderator: Mark T Serbinski CA CPA
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Freddie813
- Posts: 3
- Joined: Thu Mar 10, 2016 7:56 pm
Yes, they can deny your claim if they make the connection. CRA only wants to credit what was properly owed.
It is so simple to claim the exemption on 1040NR, I would do it now rather than have to amend all these returns later.
You can still claim state and local tax from your state tax return, as well as SS and Medicare tax.
It is so simple to claim the exemption on 1040NR, I would do it now rather than have to amend all these returns later.
You can still claim state and local tax from your state tax return, as well as SS and Medicare 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
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Freddie813
- Posts: 3
- Joined: Thu Mar 10, 2016 7:56 pm
Thank you so much!!!!! I literally lost sleep over this last night. So I did some more research on this forum and my best guess is I use Article XV (Paragraph 2a), put it on page 5 in table at the very bottom, include the amount on line 22 and exclude this amount on line 23. This sound about right?
1040NR instructions mentioned 8833, is this necessary for this or no?
1040NR instructions mentioned 8833, is this necessary for this or no?
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Freddie813
- Posts: 3
- Joined: Thu Mar 10, 2016 7:56 pm
Ok great, thanks for confirming. I changed the returns and it turns out that I will not pay any additional tax on this income in Canada (even after reducing the foreign tax credits by the federal amount from the 1040NR); and will now get back an extra $400 on US side.
The only thing I have to pay on the Canadian side is the $300 Ontario health premium; which is originally what I had to pay. I was actually playing with the numbers and even if my foreign tax was reduced to zero, I would still pay no additional tax in Canada; just the $300. I guess this is because my income is so low. I only have $15k of Canadian wages and about $8K from US. Or perhaps it's because I was forced to use my tuition before using foreign tax credits.
In any event, thank you so much for this.
The only thing I have to pay on the Canadian side is the $300 Ontario health premium; which is originally what I had to pay. I was actually playing with the numbers and even if my foreign tax was reduced to zero, I would still pay no additional tax in Canada; just the $300. I guess this is because my income is so low. I only have $15k of Canadian wages and about $8K from US. Or perhaps it's because I was forced to use my tuition before using foreign tax credits.
In any event, thank you so much for this.