American / Canadian married Filing separately

Bigern · Post by **Bigern** » Tue Apr 05, 2011 9:31 pm

Hello, Here are the facts:
I am an American Citizen living in Boston Ma, She is a Canadian Citizen living in Toronto.
We were married on Nov. 12 2010.

She lives and works in Toronto, I live and work in Boston.

She has not earned any income in the USA.

I am filing married separately to non resident alien

Question: Do I need an ITIN for her? or can I just put "NRA "(non resident alien)

Is there anything else the IRS requires?

THANKS FOR THE HELP!

nelsona · Post by **nelsona** » Wed Apr 06, 2011 6:05 am

You can do as you say.

However it would likely benefit you to file jointly, reporting all her income on your 1040, and then taking foreign income exclusions (2555) and/or foreign tax credit (1116). She will ow no tax in US on her income,and you will benefit from lower tax on your income.

She will need an ITIN at some point, so why not get it now when filing joint 1040.

Bigern · Post by **Bigern** » Wed Apr 06, 2011 10:13 am

Thanks for the help, I understand your suggestion to file jointly, however I will be moving to Canada this year and she has already completed her Canadian taxes so filing separately is the only easy option at this point.

That being said, can you confirm that she does not need to file form 1040NR with the IRS? or anything, for that matter, with IRS?

thanks again

nelsona · Post by **nelsona** » Wed Apr 06, 2011 4:21 pm

Hopw she filed in canada has nothing to do with how she files in US -- nothing would change on her Cdn retur (they don't have joint filing).

You are much better off filing joint 1040 -- even when in canada, but DEFINITELY when you are still in US.

gpf1024 · Post by **gpf1024** » Wed Apr 13, 2011 12:58 pm

How do you claim Foreign Tax Credit on canadian return if you file jointly in US? Since canadian return does not have joint filing option, what amount do you claim on each spouse's return?

nelsona · Post by **nelsona** » Wed Apr 13, 2011 1:04 pm

You prorate the US tax by the US incoem you reported on 1040. then whatever you report on your Cdn return, you use that ratio for the tax.

Ex: your repot $1000 on your joint 1040, and pay $20 tax. On HIS Cdn return he reported $40 of US income on his Cdn , he gets to claim $8 of US tax.

What foreign income are you reporting on your Cdn return?

gpf1024 · Post by **gpf1024** » Wed Apr 13, 2011 5:31 pm

The situation is a bit complex (for me at least), but the forums here have been very helpful. Thanks for all the effort you have put into sharing the knowledge.

Both my spouse and I are Canadians and have spent all of 2010 in US. We moved to US in 2009, planning to stay for 3-4 years max.

We are renting our home in Canada, but other than that, all the income is US-sourced.

I have a W2 from a US employer, and minor self-employment income for work done for a Canadian company (work performed in US).

My spouse only has self-employment income for work done for a Canadian company (all work performed in US).

The plan is to file 1040 MFJ in US (+ California state return) claiming tax paid on the rental income in Canada as FTC, and with your latest answer we will pro-rate the tax paid in US based on our individual incomes and use it on the Canadian return as FTC.

We didn't file departure returns in 2009 in Canada (we filed standard returns) as we did not want to deal with deemed disposition of our home, etc. I expect the difference in tax between California and Alberta to be minimal (if any) so there shouldn't be much extra we have to pay in Canada vs claiming NR status in Canada.

Does the FTC from US apply to Alberta tax as well?

nelsona · Post by **nelsona** » Thu Apr 14, 2011 5:57 am

You are not residents of canada, and should correct your 2009 return and make iyt a departure return. Your house would not be subject to deemed disposition.
It is not a choice you have, you left, your are an emigrant in 2009, and non-resident in 2010.

You need to be having the renat money tax sent monthly to CRA. You also of course need to be reporting the rent on your US returns.

gpf1024 · Post by **gpf1024** » Thu Apr 14, 2011 10:33 am

We still have close ties to Canada, e.g. we visit family every couple of months, have active bank accounts and credit cards, drivers licenses, health care, etc. Based on CRA's NR test we wouldn't quite pass it and we confirmed it with CRA over the phone.

Now the biggest challenge is getting the FTC figured out correctly on both US and Canadian returns as rent income is Canada-sourced and everything else is US sourced.

nelsona · Post by **nelsona** » Thu Apr 14, 2011 12:06 pm

CRA "confirmation" means nothing. The ties you mention are secondary, and your DL and medical are likely invalid in any event since you are not spending the requisite time in canada. CRA will turna around and deem you departed as soon as you submit a couple of FTC claims.

nelsona · Post by **nelsona** » Thu Apr 14, 2011 12:11 pm

Your DL and heatl care are proabaly invlaid due to not living in canada the requisite amount of time.