ok, I'm starting to catch the drift...
another question (of course :oops: )
Would I enter my property rental net income (loss) from Canada as foreign income or as rental income US (schedule E) using Bank of Canada exchange rate?
Canadian TN commuting to US - how to file next year?
Moderator: Mark T Serbinski CA CPA
Everything you report to IRS is in $US, and in the category that it would be if it was from US. Rental income and expenses go on Schedule E (don't forget that you MUST depreciate property on your 1040, unlike Canada).
Tyen, you designate what is foreign for the purposes of getting any foreign tax credit, or for using the foreign earned income exclusion (on Cdn wages only).
Tyen, you designate what is foreign for the purposes of getting any foreign tax credit, or for using the foreign earned income exclusion (on Cdn wages only).
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[quote="nelsona"](don't forget that you MUST depreciate property on your 1040, unlike Canada).
Yes, I just discovered this! We do not normally declare this on our Canadian taxes. Our property tax statement does not segregate assessed value ratio of land to building. I used 75% building. Is this fair?
I was running the #'s comparing 1040NR with 1040 just to see when I ran across this:
"Generally, you are treated as present in the United States on any day that you are physically present in the country at any time during the day.
However, there are exceptions to this rule. In general, do not count the following as days of presence in the United States for the substantial presence test.
• Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico."
http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
I don't doubt you nelsona :D but I just wonder if I might be likely to get audited as my husband and I have been filing as NR for the past 5 years. Is there some type of documetation I should be keeping or will need?
Thanks a million for your help!
Yes, I just discovered this! We do not normally declare this on our Canadian taxes. Our property tax statement does not segregate assessed value ratio of land to building. I used 75% building. Is this fair?
I was running the #'s comparing 1040NR with 1040 just to see when I ran across this:
"Generally, you are treated as present in the United States on any day that you are physically present in the country at any time during the day.
However, there are exceptions to this rule. In general, do not count the following as days of presence in the United States for the substantial presence test.
• Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico."
http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
I don't doubt you nelsona :D but I just wonder if I might be likely to get audited as my husband and I have been filing as NR for the past 5 years. Is there some type of documetation I should be keeping or will need?
Thanks a million for your help!
Filing a 1040NR, when you could have (but were not required to) actually was a favour to IRS, so I wouldn't worrry about it.
All the paragraph you mentionned states that Cdn commuters don't have to worry about the SPT and needin gto file 1040.
As to depreciation, I'm sure you can figure it out. Rememebr, your elecytion to fiel 1040 is optional each year (unless you move to US), so when you sell your rental property, you will likely find it worth NOT filing 1040 to avoid higher cap gains in US.
All the paragraph you mentionned states that Cdn commuters don't have to worry about the SPT and needin gto file 1040.
As to depreciation, I'm sure you can figure it out. Rememebr, your elecytion to fiel 1040 is optional each year (unless you move to US), so when you sell your rental property, you will likely find it worth NOT filing 1040 to avoid higher cap gains in US.
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[b][i]Tyen, you designate what is foreign for the purposes of getting any foreign tax credit, or for using the foreign earned income exclusion (on Cdn wages only).[/i][/b]
Does this mean I do not need to include my husbands Canadian earned wages? Do I need to fill out a form to exclude this or do I need to include the income and then get a foreign tax credit? Sorry, I'm a bit confused on this.
Also, for RRSP's I thought I read in another post that I do not need to include capital gains but just dividends paid. Is this correct?
Does this mean I do not need to include my husbands Canadian earned wages? Do I need to fill out a form to exclude this or do I need to include the income and then get a foreign tax credit? Sorry, I'm a bit confused on this.
Also, for RRSP's I thought I read in another post that I do not need to include capital gains but just dividends paid. Is this correct?
If you file a 1040, you must report ALL income, worldwide on it. If you file a joint 1040, that alos includes spouse's income.
Any foreign wages that either spouse earnes which qualifies for Form 2555 exclusion, can THEN be excluded, or one can apply the foreign tax credit/dedution rules. All other foreign taxes on any other foreign income can only be handled by foerign tax credit/deduction.
No RRSP income is to be reported, regardless of type, so long as your use the election on form 8891. Otherwise all income is reportable and taxable in US.
The distinction between cap gains and dividends applies to non-RRSP accounts (and only to US-source income), and applies only if you file a 1040NR.
Any foreign wages that either spouse earnes which qualifies for Form 2555 exclusion, can THEN be excluded, or one can apply the foreign tax credit/dedution rules. All other foreign taxes on any other foreign income can only be handled by foerign tax credit/deduction.
No RRSP income is to be reported, regardless of type, so long as your use the election on form 8891. Otherwise all income is reportable and taxable in US.
The distinction between cap gains and dividends applies to non-RRSP accounts (and only to US-source income), and applies only if you file a 1040NR.
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nelsona, my co-worker inquired with his Internal Revenue Agent friend about my situation and he stated:
"Attached is Publication 519 which describes your scenario. Base on
> the scenario, she cannot file Form 1040 and claim itemized
> deductions for home etc. There are two rules to be considered a
> resident alien 1)Green Card test (pg 4) and 2) Substantial presence
> test. See page 4 - Days commuting to the US do not meet the
> substantial presence test. See flow-chart on pg 5. Base on your
> scenario, she does not qualify to file Form 1040. Pg 6 again
> states commuting does not meet the substantial presence test."
I'm really worried about filing this way. Has anyone been questioned by the IRS on this and if so, how did they 'fix' it? I just want to make sure that if I do this, I can justify why.
"Attached is Publication 519 which describes your scenario. Base on
> the scenario, she cannot file Form 1040 and claim itemized
> deductions for home etc. There are two rules to be considered a
> resident alien 1)Green Card test (pg 4) and 2) Substantial presence
> test. See page 4 - Days commuting to the US do not meet the
> substantial presence test. See flow-chart on pg 5. Base on your
> scenario, she does not qualify to file Form 1040. Pg 6 again
> states commuting does not meet the substantial presence test."
I'm really worried about filing this way. Has anyone been questioned by the IRS on this and if so, how did they 'fix' it? I just want to make sure that if I do this, I can justify why.
I neglected to mention one very important option that you have (and that your hubby had when working in US).
Since you are/were commuting to work in US, both of you could avail yourselves of Article XXV(4) of the treaty, which, in effect, allows you to 'prepare' a 1040 like we've been outlining above, calculate an effective tax-rate, and then submit a 1040NR, reporting the US wages (and any other US income) ONLY, and paying Fed tax at the rate determined in the 'pro forma' 1040.
In short, you were to prepare a joint return, reporting $120,000 total income, and worked out the total Fed tax was $20,000.
You would then file a 1040NR for your self, reporting only your US wages, say $60,000, and pay $10,000 fed tax, regardless of how much higher the 1040NR tax ended up.
There are many windsorites using this technique to lower their overall US tax bill. it is especially useful whre the other spouse is not working or has very little income.
You could BOTH use this for years where you were both commuting to work in US.
Since you are/were commuting to work in US, both of you could avail yourselves of Article XXV(4) of the treaty, which, in effect, allows you to 'prepare' a 1040 like we've been outlining above, calculate an effective tax-rate, and then submit a 1040NR, reporting the US wages (and any other US income) ONLY, and paying Fed tax at the rate determined in the 'pro forma' 1040.
In short, you were to prepare a joint return, reporting $120,000 total income, and worked out the total Fed tax was $20,000.
You would then file a 1040NR for your self, reporting only your US wages, say $60,000, and pay $10,000 fed tax, regardless of how much higher the 1040NR tax ended up.
There are many windsorites using this technique to lower their overall US tax bill. it is especially useful whre the other spouse is not working or has very little income.
You could BOTH use this for years where you were both commuting to work in US.
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This would have the advantage, say, in years when you make a lot of other types of income, to worrry abou reporting it in US and dealing with two-way foreign tax credits, etc.
As I said earlier, it's not worth getting TOO agressive in reducing your US tax, as it will merely be eaten up by Ontario, but you have several strategies available to reduce your US tax burden sufficently to ensure that you are able to take full; advantage of any Cdn tax breaks.
As I said earlier, it's not worth getting TOO agressive in reducing your US tax, as it will merely be eaten up by Ontario, but you have several strategies available to reduce your US tax burden sufficently to ensure that you are able to take full; advantage of any Cdn tax breaks.
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By the strict rules of the child tax credit, if your children are not living in US, your children are supposed to be US citizens or GC-holders (and have an SSN), but several have applied for the credit and received it, even though their child was NOT a citizen, and was living in Canada.
The citizenship part is easily dismissed bty the non-discrimination clause of the trwaty. However the SSN requirement (which may have been relaxed for 2206 and beyond) is not easily overcome.
I would apply for it, so long as you are filing a 1040, and reporting all world income jointly, and not excluding anything with form 2555.
You would also include it if you were making the 'pro forma' 1040 for the 1040NR I discussed above.
The citizenship part is easily dismissed bty the non-discrimination clause of the trwaty. However the SSN requirement (which may have been relaxed for 2206 and beyond) is not easily overcome.
I would apply for it, so long as you are filing a 1040, and reporting all world income jointly, and not excluding anything with form 2555.
You would also include it if you were making the 'pro forma' 1040 for the 1040NR I discussed above.
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You would need to check with the individual schools. They will know whether or not the schhool is on the "US-eligible" list, as they will have been informing and assisting their US-born students to get these credits.
Ask about US FSA-eligibility. They should know right away.
Ask about US FSA-eligibility. They should know right away.
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