Income tax questions for TN worker, need advice.

[slamarre]

Hi,

Here is my situation. I worked from January 1st 2005 to November 27th for a Canadian (Quebec) company. I started on November 28th to work for a US employer. I got my TN on Nov 9th.

For my income tax of 2005, do i have to fill both US and CDN income tax?

Since i am a Candian resident, i do not have to pay US taxes right?

Could someone help me on what to do and what form to fill out on the US side?

Thanks.

[nelsona]

Since you are still living in Canada, you must report your US wages, along with all other income to canada and Quebec.

Of course, since you are working as an employee in US, you must pay taxes there too, but only on your wages. You will file a 1040NR at the end of the year.

There is one provision in the treaty, however, if you make less than $10,000 US in the year as an employee, you can exempt the federal IRS income tax. You do this by claiming the treaty exemption on 1040NR. This would apply only for 2005, as next year will hopefully make more than $10,000 and you will be a US tax resident. That still means you pay Social security tax and possibly state tax as well, starting in November 2005.

You will take a credit (first on the federal return, and the remainder on the QC return) for the US taxes that you paid.

<i>nelsona non grata... and non pro</i>

[danny]

you can credit the US tax on your cdn return for 2005 as well. if the income was under 10,000 and hence tax exempt then no credit of course

[nelsona]

As I explained, danny, exemption form IRS tax by the treaty does not exempt one from state tax on wages, nor does it exempt one from SS/Fica taxes, all of which would be eligible for foreign tax credit.

When I use the term "US taxes", I am referring to all US income taxes (IRS,state,local) as well as fica/SS.

<i>nelsona non grata... and non pro</i>

[danny]

thanks