I am currently employed in Canada and being transferred to the US on an L-1a and will be employed in the US by the US parent of my firm. I currently have a residence in the US and will maintain my residence in Canada. I expect to be physically in the US less than 183 days/yr. As my family (wife/kids) will stay in Canada, my Residence will continue to be in Canada. So I will be deducted at Source in the US for Federal and State (NY), along with US Social taxes (estimated at $13,1K/yr). I understand that both US Federal/State Income taxes are tax credits which will be applied to my CAD Tax return.
Are the US Social Security and Medicade (all Social taxes) 100% eligible as tax credits against my CAD Federal and Ontario tax filing ?
thank you
US Social Security and CAD/Ontario Tax Credits
Moderator: Mark T Serbinski CA CPA
Yes, US fed/state/FICA can all be used as credits on your Cdn return (feds first, then whatever left provincially). Just to clarify however, the fed/state income tax is the amounts determined on your tax returns, not what is withheld. The withheld FICA will be eligible.
Most people in your situation file what is known as a treaty XXV(2) 1040NR, to reduce the IRS tax on those wages. but more on that at another time.
And just remember that by treaty, the number of days you are in US is not crucial, since you are an employee of a US firm. The treaty will still allow you to file as a US non-resident if you maintain overwhelming ties in Canada (which seems to be the case here), so no need to be too careful about counting days. That is more for contractors and those working for Cdn firms (in which case it is not solely the calendar year that you must watch, but ANY 365-day rolling period)
Most people in your situation file what is known as a treaty XXV(2) 1040NR, to reduce the IRS tax on those wages. but more on that at another time.
And just remember that by treaty, the number of days you are in US is not crucial, since you are an employee of a US firm. The treaty will still allow you to file as a US non-resident if you maintain overwhelming ties in Canada (which seems to be the case here), so no need to be too careful about counting days. That is more for contractors and those working for Cdn firms (in which case it is not solely the calendar year that you must watch, but ANY 365-day rolling period)
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