T4 Income after departing Canada

hasmir · Post by **hasmir** » Wed Aug 23, 2017 12:44 am

My Wife and I are Canadians and left Canada in 2015 to work in the US. We filed a departure tax return for year 2015.

In fact, my wife quit her Canadian job in mid-Dec 2015 and her last salary and benefits were paid by the Canadian employer in Jan 2016. Now, we noticed that we have received a T4 form for the year 2016 for this very last payment. There has been a substantial tax withholding on this last payment (about 50%) and I think we should receive a return. I appreciate your input about how to file a tax return for such an income after departure from Canada.

nelsona · Post by **nelsona** » Wed Aug 23, 2017 9:10 am

If the income is less than $10K, it is tax-exempt in Canada, so you file a non-resident tax return, include the income etc, like you would any other T4 slip, and then exclude the income on line 256, which, assuming you have no other reportable Cdn income, will reduce the tax owed to zero, and you will get a full refund of the tax withheld, and probably any CPP premiums too.

The income is of course, fully taxable on your US and state return. You will pay full tax there.

How did you file I nUS in 2015?. If you filed part-year 1040, tehn some of the Cdn income from 2015 should also have been on that US return.

hasmir · Post by **hasmir** » Wed Aug 23, 2017 12:47 pm

Thanks Nelsna. For 2015 we filed a married filing jointly 1040 and excluded the Canadian income using the form 2555. We also filed a departure tax return for 2015 in Canada.

What if the income (gross) reported in the T4, we received for 2016, is more than $10K CDN? How will the tax be calculated?

nelsona · Post by **nelsona** » Wed Aug 23, 2017 1:57 pm

Good job using 2555.

Then, if the amount is greater than 10K, using the settings provided in your software for non-residents, do as above, don't exempt the income on line 256. Software will do the rest. She will likely be considered (just for the purpose of the tax return) as residing in the province where she worked and produce a return .

Then you can use any fed and prov calculated (ie, not refunded) and any CPP and EI as a credit on your US return, using 1116, once you include all the wages.