US Canada Taxes w2 box 1 vs box 5

[johncanada70]

Hello,

I am US/Cdn citizen and live in Canada. I commute into Seattle from Vancouver every week where I have an apartment. I need to file in the US & Canada. I just got my W2 and there is a 20% difference between box 1 vs box 2 on the w2. This is because my employer offers a 401K, lets me defer income and provides a 25% match.

I have no RRSP room in Canada. I figure the effective rate rate difference between the USA and Canada will be 15%.

My question is how will Canada look at my total income box 1 or box 5 or something in between.

[nelsona]

You report as wages box 1 PLUS items in box 12 which are designated by the letters D, E, F and/or S. This usually equals your income for Medicare purposes (box 5), but just in case it doesn't....

You then take your 401(K) etc contributions, and determine how much you can deduct from our Cdn return by using form RC268. Your statement that you have no RRSP room may mean you get little or no deduction for your 401(k) contributions in Canada.

https://www.canada.ca/en/revenue-agency ... rc268.html

[johncanada70]

Thanks so just these codes (D, E, F and/or S), not codes like C, DD & V which refer to health care costs, stock options (included in box 1), group life, etc?

[nelsona]

What did I say?

[johncanada70]

OK got it thanks.

Now I have 2 jobs in the USA, one of which is part time and for teaching night classes (very small), they have a 401a. On their w2 nothing made it into box 12 although they have forced employee contributions and employer matches. Do I need to fill out RC268 twice

[nelsona]

If you need to determine what amounts you and the employer contributed to your 401(a), ask them for clarification, as well as if this is a defined benefit or a money purchase plan. These amounts do not appear in box 12 (it might be in box 14).

For RC268 you will only file one form, adding up the various contributions and incomes.

Tip: If you find that your actual RRSP contributions are reducing the amount of 401(k) etc you can claim, consider leaving those RRSP contributions as UNDEDUCTED for the time being, until you can use them. you can carry forward undeducted RRSP contributions until some future year when you don't have these US pension contributions. and don't make anymore RRSP contributions until you can use them. RRSP contributions made in the same year as US pension contributions are also liable to be considered an over-contributions, which you may have to withdraw or face penalty.

[johncanada70]

Let me know if I'm on the right track

-Complete US taxes
-Convert USA income, taxes paid to Canadian @ 2017 BOC rate (1.29) use W2 box 1 plus 401K contribution from box 12.
-Complete Cdn federal return, apply RRSP, apply basic credits in schedule 1 (300, 363) and calculate taxes line 43.
-Apply foreign tax credit (fed, state, medicare, social security, local) against up to total federal tax. If difference is greater pay no federal tax and calculate provincial
-Calculate provincial taxes (with basic personal credit) apply unused foreign tax from federal on provincial tax.
-RRSP calculations, employer contributions to 401K and 401a basically serve as a pension adjustment and decrease 2018 RRSP room.

[nelsona]

Yes.

Applying RRSP, means calculating your eligible amounts from the RC that we discussed, then applying actual RRSP contributions to any leftover room (if any).

The Cdn software will take care of the foreign tax credits correctly.

[johncanada70]

guess chain of events is

-calculate wife's cdn return
-calculate our joint usa return, she is green card holder, I make substantially more than her
-file my cdn return

All day care expenses, etc would be on her cdn return?

[nelsona]

You do bothnCdn and Us return before applying any foreign tax credits, then you apply FTC to both. Using the us tax and cdn tax as calculated without the FTC.