Telecommuting from Canada for a US Based company - Help!

JGCA · Post by **JGCA** » Wed Jan 18, 2012 8:59 pm

COntributing to a Roth while resident in US is fine but do not expect any tax savings in Canada or US on this since it is not deductible.

nelsona · Post by **nelsona** » Sun Jan 22, 2012 1:41 am

rsargent.

This is fine. The tax savings are of course long term, JC.

rsargant · Post by **rsargant** » Wed Jan 25, 2012 8:57 pm

Thanks. I apologize for posting this as a reply to a completely unrelated thread.

One thing has me concerned . Dual status filers are subject to "married filing separately" rates but are they also subject to other married filing separately limitations? There seems to be a ridiculously low AGI limit to be elgible for a roth contribution for married filing separately. (10 K if you "lived with your spouse during the year").

Would that be an issue if say, you earned 20 K if income while U.S resident, made the contribution, left and then filed dual status for that year?

nelsona · Post by **nelsona** » Wed Jan 25, 2012 11:55 pm

From left field. Cdns should never file dual-status. they should file full year MFJ, even in first or last year of residence , so I'm not really looking at dual-status limits, but they are punitive.

rsargant · Post by **rsargant** » Thu Jan 26, 2012 9:34 pm

Understood however I believe that filing dual status for 2012 will lower my wife's tax payable on a roth conversion made before departing significantly. Reason being that it will be her only U.S income for the year. The alternative is filing MFJ and reporting everything we make for the year but that seems to push the conversion dollars to a much higher marginal rate.

I'm curious why CDNs should generally file a full year MFJ in last year of residence. I am thinking of a "typical" scenario where a CDN leaves their U.S job, receives no further U.S income, moves back to canada and then takes a CDN job. Wouldn't dual status often result in lower tax burden on the income earned while U.S resident before departing because it isolates that U.S income in the lower tax brackets ? Fewer deductions/exemptions are available but you can still come out ahead (at least I think you can)

I definitely see that it is far SIMPLER to file a full year 1040 though :)

nelsona · Post by **nelsona** » Fri Jan 27, 2012 8:32 am

One always has the choice -- and would be wise to try both depending on their situation.

Remember though that a Cdn ca in these situations can always use 2555 to exclude Cdn wages, and can use 1116 to credit Cdn taxes.

Also, be careful that there a re certain limits on dual-status returns, particularly becasue of MFS requirement.

But it is *possible* that one witha US income that is just below an MFS tax bracket jump would somehow earn enough money in the rest of the year to jump 2 brackets, with the spouse jumping one bracket, but that is pretty slim.

Remember: you will be paying your US tax based on MFS rates on 1040NR

rsargant · Post by **rsargant** » Fri Jan 27, 2012 8:59 pm

Good info.. thanks.

I was originally excited about using 2555 to exclude. I did that in my first year of residence. However, I've since read that U.S sourced income (roth conversion in this case) is stacked and taxed "above" the foreign income so I'd STILL wind up paying more U.S tax on the conversion. The excluded foreign eats up the low tax brackets and the conversion dollars would start in the 25% bracket.

With dual status and limited deductions , the conversion almost fits entirely within the 15% MFS bracket. Hence my view that in my case, dual status is the way to go .

It is entirely based on my interpretation of the "stacking" rule for FIE which I understand is relatively recent change (2006)

nelsona · Post by **nelsona** » Fri Jan 27, 2012 11:26 pm

Your interpretation of the stacking rule in not quite accurate. the foreign wages are spread between the exempt poertion and the taxable portion. Your US income will be taxed at the effective rate, not the top marginal rate.

It used to be that the US income was taxed at the bottom rate, which was to good to be true.

As I said, you will do your return both ways and see.

rsargant · Post by **rsargant** » Sat Jan 28, 2012 7:18 am

I see. So the tax rate you pay on the income earned "above" the excluded amount is the same as the effective rate that you would pay on everything had you not used the exclusion ?

Did I get that right?

nelsona · Post by **nelsona** » Sat Jan 28, 2012 7:20 am

Pretty much

rsargant · Post by **rsargant** » Sat Jan 28, 2012 1:54 pm

Thank you.

Regarding my original query about the Roth contribution, I think I could just make a traditional non-deductible contribution and then convert to roth immediately. There are no MFS limits in effect on roth conversions (only contributions). Better safe then sorry I guess..

If I go that route, then I believe I can file any way I want without a problem.

amazing man! · Post by **amazing man!** » Tue Feb 07, 2012 6:04 pm

I'm pretty much in Zakarin's position, with a slight variation. I'm Canadian and have been offered a job with a US company with no office in Canada. The terms of the offer is such that I can stay in Canada but have to work in the US Monday to Friday. Since this will result in spending more than 180 days per year in the US
1. do I still need to file a returns in Canada?
2. Will I need a TN visa? ( I will be in Canada for weekends)
3. Any advise generally on steps I need to take to stay within the law regarding both tax and immigration?

Will appreciate your help. thanks in advance.