You fill 1040 in US for the first year.
You fill Cdn income tax claiming foreign tax credit.
Do you need to attach any forms, any pages from the US income tax to the Canadian income tax?
Thank you.
Canadian departure income tax - attach anything from 1040?
Moderator: Mark T Serbinski CA CPA
If you are claiming foreign tax credit in Canada, you must attach your 1040 and W-2.
I would question why you would need to be reporting US income on your departure return, however.
I would question why you would need to be reporting US income on your departure return, however.
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
Nelson, I still need to verify, but I believe, according to the US rules, I am a tax resident since my first visit to the US in January. According to Canadian rules, my "final" departure is in August. While being already in US I received income thru Canadian company till August and income from US after August.nelsona wrote:If you are claiming foreign tax credit in Canada, you must attach your 1040 and W-2.
I would question why you would need to be reporting US income on your departure return, however.
So, I believe, I need to fill US income tax including ALL income since January.
I need to fill Canadian income tax with income from Canadian company for the time till August. Don't I credit in Canada taxes paid in US (including those I paid in US for mentioned Canadian income)?
You've got it backwards.ususer wrote:Nelson, I still need to verify, but I believe, according to the US rules, I am a tax resident since my first visit to the US in January. According to Canadian rules, my "final" departure is in August. While being already in US I received income thru Canadian company till August and income from US after August.nelsona wrote:If you are claiming foreign tax credit in Canada, you must attach your 1040 and W-2.
I would question why you would need to be reporting US income on your departure return, however.
So, I believe, I need to fill US income tax including ALL income since January.
I need to fill Canadian income tax with income from Canadian company for the time till August. Don't I credit in Canada taxes paid in US (including those I paid in US for mentioned Canadian income)?
You say your Canadian return reports Canadian source income until August. Canadian gets to tax you on this income, because it is Canadian source (employment income?). But the same income is also on your US return, so you claim the Canadian tax on your US return as a foreign tax credit (or use the foreign earned income exclusion, if applicable).
Carson, first of all thank you for responding here and in other posts.
The thing is that I *resided* in US for the whole year, not in Canada.
Means I am US tax resident for the whole year.
Also, "Canadian" income was "other employment income", not the T4.
I read on this forum the opposite - first pay US tax in full, then - claim foreign credit in Canada. What am I missing here and what's the difference - where you pay in full and where you claim foreign income?
Thanks,
Melinda
The thing is that I *resided* in US for the whole year, not in Canada.
Means I am US tax resident for the whole year.
Also, "Canadian" income was "other employment income", not the T4.
I read on this forum the opposite - first pay US tax in full, then - claim foreign credit in Canada. What am I missing here and what's the difference - where you pay in full and where you claim foreign income?
Thanks,
Melinda
The principal for Claiming foreign tax credit on your Cdn return is that the income MUST be from foreign sources.
if you did not report any US income, you are not entitled to claim any froeign tax credit.
Why would canada give up tax money on Cdn source income just because another country also taxed it?!
as carson sez, the placeto get double tax relief is on your 1040, not your t1.
In reading your other posts, however, its seems that you should either be declaring your departure date earlier in the year, or ALSO declaring your US income eaned between Jan and August on your Cdn return. Doing this, if you have to, would get you into the unenviable position of having to do the double foreign tax credit dance, which you seem so intent on doing, but would best be avoided: it will cost you tax and accounting money -- and headaches.
if you did not report any US income, you are not entitled to claim any froeign tax credit.
Why would canada give up tax money on Cdn source income just because another country also taxed it?!
as carson sez, the placeto get double tax relief is on your 1040, not your t1.
In reading your other posts, however, its seems that you should either be declaring your departure date earlier in the year, or ALSO declaring your US income eaned between Jan and August on your Cdn return. Doing this, if you have to, would get you into the unenviable position of having to do the double foreign tax credit dance, which you seem so intent on doing, but would best be avoided: it will cost you tax and accounting money -- and headaches.
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
Nelson, thanks for clarification! I did not have US income between January and August, only from Canadian company, so Canadian tax will be as usual then.
I understand I need to claim foreign tax credit on 1040 using one of three options:
1 - Form 1116,
2 - Form 2555,
3 - by itemizing deductions (according to TurboTax help)
From other postings here I see that filling 1116 seems the easiest.
Please correct me if I am wrong. Did anyone use the third option?
.
Also, I don't see a special entry on 1040 for "foreign INCOME" - do I just add it to the US income on 1040 (if this is same type of income)?
Do I need to attach anything from Canadian return to the US return? ie how does IRS know that taxes WERE paid in Canada?
Again, many thanks for your help
I understand I need to claim foreign tax credit on 1040 using one of three options:
1 - Form 1116,
2 - Form 2555,
3 - by itemizing deductions (according to TurboTax help)
From other postings here I see that filling 1116 seems the easiest.
Please correct me if I am wrong. Did anyone use the third option?
.
Also, I don't see a special entry on 1040 for "foreign INCOME" - do I just add it to the US income on 1040 (if this is same type of income)?
Do I need to attach anything from Canadian return to the US return? ie how does IRS know that taxes WERE paid in Canada?
Again, many thanks for your help
The "easiest' is 2555, since you exclude the income altogether, if you qualify.
1116 is quite complex as it requires you divide your foreign income and tax into several categories, and then limit the credit by you effective US rate. This usually results in a lot of unused Cdn taxes to carryforward unused.
The deduction is also quite simple, but becuae it is a deduction rater that a credsit or exclusion, it is., except in flat tax xases, the least beneficial, and allows no carryover.
In 99% of cases, using 2555 to exempt your Cdn wages (only) yeilds the lowest US tax.
1116 is quite complex as it requires you divide your foreign income and tax into several categories, and then limit the credit by you effective US rate. This usually results in a lot of unused Cdn taxes to carryforward unused.
The deduction is also quite simple, but becuae it is a deduction rater that a credsit or exclusion, it is., except in flat tax xases, the least beneficial, and allows no carryover.
In 99% of cases, using 2555 to exempt your Cdn wages (only) yeilds the lowest US 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
By 'wages' I mean earned income, which can include employment income ans self-employment income. but not cap gains, pension, etc.
these are not typicallly reported on the same lines on T1 or 1040, but may both be eligible for 255 exclusion.
please read the instructions for 2555 to determine what income is eligible for exclusion, and whether you meet the eligibility criteria.
these are not typicallly reported on the same lines on T1 or 1040, but may both be eligible for 255 exclusion.
please read the instructions for 2555 to determine what income is eligible for exclusion, and whether you meet the eligibility criteria.
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
Nelson, sorry for bothering you too much, you seem to know things better than any professional. Do you know the answers to these questions
ususer wrote:I don't see a special entry on 1040 for "foreign INCOME" - do I just add it to the US income on 1040 (if this is same type of income)?
Do I need to attach anything from Canadian return to the US return? ie how does IRS know that taxes WERE paid in Canada?
The IRS is not so 'receipt-mad' as CRA. Very little is ever sent with a 1040.
If they quaestion your claim, they will ask you. the only receipts the IRS wants you to send (and that is only with a paper 1040) are W-2s and those with US tax withheld.
The 1040 doesn't differentiate what is foreign and US income (nor does the T1 by the way), you indicate it by claiming foreign tax credit on 1116 or by excluding it by 2555. Wages go on the wage line, interst on the interst line, etc.
Surely you read this in the 1040 instructions.... there is nothing hidden in what we are telling you.
If they quaestion your claim, they will ask you. the only receipts the IRS wants you to send (and that is only with a paper 1040) are W-2s and those with US tax withheld.
The 1040 doesn't differentiate what is foreign and US income (nor does the T1 by the way), you indicate it by claiming foreign tax credit on 1116 or by excluding it by 2555. Wages go on the wage line, interst on the interst line, etc.
Surely you read this in the 1040 instructions.... there is nothing hidden in what we are telling you.
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
Nelson, first of all, thank you! I followed your advises, I spent plenty of time reading the rules, but I don't see how I can use 2555 because of its Physical Presence Test.
My situation is - that while working for a Canadian company from January 2005 till August 2005 I lived in US. (In most "2555" cases - US tax residents live in Canada while working for a Canadian company.)
As far as I understand, there are at least three dates that should not mismatch.
1 - Date first entered US - January 2005 (so I declaring full tax year on 1040, not dual)
2 - Date finished working for Canadian company and started working for US company - August 2005
3 - Date of Canadian non-residence declaration - need to select
Are you sure that 2555 can be used?
My situation is - that while working for a Canadian company from January 2005 till August 2005 I lived in US. (In most "2555" cases - US tax residents live in Canada while working for a Canadian company.)
As far as I understand, there are at least three dates that should not mismatch.
1 - Date first entered US - January 2005 (so I declaring full tax year on 1040, not dual)
2 - Date finished working for Canadian company and started working for US company - August 2005
3 - Date of Canadian non-residence declaration - need to select
Are you sure that 2555 can be used?
The answers to questions -- particulary by those asking several questions --are GENERAL. Note that I said that you could use 2555 if you qualify.
if you don't, then you can't.
You will need to use one of the other options I outlined.
if you don't, then you can't.
You will need to use one of the other options I outlined.
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
My accounter told me 3 yrs ago in a similar situation that 1116 doesn't work well because if you use 1116 then on 1040 you will not be able to write off business expenses from foreign income if foreign income is business income.
The 1116 credit you receive is not 100% credit but only part of it in the first year. He came to better numbers by treating it as a regular US income. Another choice you have is just show that you resided in Canada (this may be not the best thing to do).
The 1116 credit you receive is not 100% credit but only part of it in the first year. He came to better numbers by treating it as a regular US income. Another choice you have is just show that you resided in Canada (this may be not the best thing to do).