QUESTION: My husband and I are US citizens, working in xxxxxxx at xxxxxxxx xxxxx. Our pay checks have Canadian Pension taken out of them as well as disability insurance, can we recoup the pension??? and I was informed that we cannot access payment if one of us became disabled? Should we not be paying these deductions?? Our work permits are for 3 years (ending Feb 2011), and we were also informed that our SIN #'s will expire on that date as well. We are currently residing in Abbotsford 604-xxx-xxxx.Thanks so much and I await to hear from you.......
The U.S. taxes on citizenship first and
residency or physical presence second. If you have another tax home,
and are just an extensive visitor in the States, you can escape U.S.
tax on your income from other countries. However, if you renounce your
other tax home or become a "green card" holder or are in the U.S. for
more than 183 days in one year, you are subject to U.S. income tax on
your world income.
The U.S. taxes its citizens and green card holders wherever they are and no matter what they are doing. The U.S. taxes its citizens in Canada and they will tax them in the North Sea. The U.S. will add on the benefit of housing allowances, car allowances, servants, and education allowances for people who have not been in the U.S. for twenty years but who are still U.S. citizens. If you want the benefit of U.S. Citizenship, you pays your taxes.) The first $82,400 U.S. of income earned from personal services (as opposed to capital) is exempt if you have been out of the country for a full calendar year in one test or for 330 out of 365 days in another test using a fiscal year (form 2555).
However, being "exempt" does NOT mean that
you do not have to file a tax return. You must still file your U.S.
1040, report the Canadian Earnings in U.S. dollars and claim the "up to
$82,400 U.S." by filing a form 2555 with the 1040. If you have
investment, [INCLUDING AMOUNTS EARNED WITHIN YOUR CANADIAN RRSP],
rental, royalty, or any income other than from services, you must also
report the income in U.S. dollars. Since you will have
paid tax to Canada first, you will file a Form 1116 with the 1040 to
claim your foreign tax credit. A separate Form 1116 must be filed for
each kind of income, i.e. rental, pension, dividends, etc.
The RRSP earnings may be exempted under
ARTICLE XXIX.5 of the U.S. / CANADA Income Tax Treaty 1980 - file form
Social security (FICA) taxes usually do not
have to be paid to the U.S. under Article XXIX.4 of the U.S./CANADA
Income Tax treaty or Article V of the CANADA / U.S. Social Security
Agreement. (I sure hope all this is impressing you).
Therefore, a U.S. citizen living in Canada
who had a rental house, a job, an RRSP, some dividends and some capital
gains from the sale of stock would file his or her Canadian return
first and then file a U.S. return with these forms:
* 1040 - is the basic return for a citizen or
resident of the U.S. or landed immigrant of the U.S. (commonly
called a "green card" holder).
the U.S. (commonly
called a "green card" holder).
* Schedule A - to claim itemized deductions
* Schedule B - to report the dividend income
* Schedule D - to report the capital gains
* Schedule E - to report the rental income
* 4562 - to report depreciation on the rental
* 1116 - (maybe two foreign tax credit forms)
- one for any income from services over $82,400 - one for
the rental, capital gains, and dividend income and another for the
* 1116(AMT) - two more forms to calculate the
foreign tax credit for Alternative Minimum Tax purposes
* 2555 - to exempt up to $82,400 (2006) U.S.
of earnings from services - Note that this ran from $70,000 to $80,000
* 6251 - Alternative Minimum tax form
* 1161 AMT - AMT foreign tax credit
* FICA (Social Security) exemption - to
exempt income from U.S. FICA
* 8891 - RRSP election forms to exempt income
earned within the RRSP from current U.S. income tax until withdrawal
* TDF 90-22.1 form(s) - to report foreign
bank accounts including Canadian RRSP accounts which are considered
"foreign trusts" - failure to file this form can result in up to
a $500,000 fine PLUS up to five years in jail
He or she might also have to file either of
the following two specialty forms when he or she owns shares in
* 5471 form - If you are a U.S. citizen and
5% or more owner of a Canadian corporation. Failure to
file this form can create fines of $10,000 every 30 days up to $50,000
CEN-TA Cross Border Services - Tax, Visas, Immigration