Taxes where will I pay? - American moving to Canada while continuing to work part time in the USA
QUESTION:
I am a US citizen who is moving to Canada with my partner who is also a US
citizen. My partner has accepted a job in Canada, I am going to continue to
work for my current US employer 50% of the time in Canada and 50% of the
time in US. I will be in Canada most weekends. I am moving to Canada in
late June 2004. Am I correct to assume that for the first year where I will
be in Canada less than 1/2 of the year I will not need to file Canadian
taxes? After the 1st year first year, I presume I will? Is this correct.
david ingram replies:
Completely wrong. When you come to Canada as the spouse, common law spouse,
conjugal partner or same sex partner of a Canadian Immigrant or worker, you
will show your date of entry on page one of the T-1 General tax return.
Any income earned anywhere in the world becomes taxable to Canada from that
point.
You will report your world income on your US 1040 first.
Then you will figure out how much of that income was earned while performing
services in Canada.
You will pay tax to Canada FIRST on the income earned in Canada. You will
claim a foreign tax credit on your US return by filling in form 1116 and
attaching a copy of the Canadian return to your US return.
On the Canadian return, you will ignore the earnings before you came to
Canada but will report everything after. You will claim a foreign tax
credit in Canada by putting the US earnings on line 104 and line 433, You
will figure out the tax, social Security, Medicare and any state tax paid on
the US portion of the earnings after coming to Canada and put that tax on
line 431 of the Canadian return to claim your foreign tax credit in Canada.
An alternate method would be to file US form 2350 (available at www.irs.gov)
next February, March or April. This form would extend the filing deadline
for your 2005 return until January 2007 by having you qualify as a bona fide
resident of Canada for an entire calendar year. When you do this, you
become eligible to exempt up to $219.18 US of earnings per day for the money
earned in Canada ($80,000 / 365).
You will need help with the returns and I would be glad to help you.
I am a US citizen who is moving to Canada with my partner who is also a US
citizen. My partner has accepted a job in Canada, I am going to continue to
work for my current US employer 50% of the time in Canada and 50% of the
time in US. I will be in Canada most weekends. I am moving to Canada in
late June 2004. Am I correct to assume that for the first year where I will
be in Canada less than 1/2 of the year I will not need to file Canadian
taxes? After the 1st year first year, I presume I will? Is this correct.
david ingram replies:
Completely wrong. When you come to Canada as the spouse, common law spouse,
conjugal partner or same sex partner of a Canadian Immigrant or worker, you
will show your date of entry on page one of the T-1 General tax return.
Any income earned anywhere in the world becomes taxable to Canada from that
point.
You will report your world income on your US 1040 first.
Then you will figure out how much of that income was earned while performing
services in Canada.
You will pay tax to Canada FIRST on the income earned in Canada. You will
claim a foreign tax credit on your US return by filling in form 1116 and
attaching a copy of the Canadian return to your US return.
On the Canadian return, you will ignore the earnings before you came to
Canada but will report everything after. You will claim a foreign tax
credit in Canada by putting the US earnings on line 104 and line 433, You
will figure out the tax, social Security, Medicare and any state tax paid on
the US portion of the earnings after coming to Canada and put that tax on
line 431 of the Canadian return to claim your foreign tax credit in Canada.
An alternate method would be to file US form 2350 (available at www.irs.gov)
next February, March or April. This form would extend the filing deadline
for your 2005 return until January 2007 by having you qualify as a bona fide
resident of Canada for an entire calendar year. When you do this, you
become eligible to exempt up to $219.18 US of earnings per day for the money
earned in Canada ($80,000 / 365).
You will need help with the returns and I would be glad to help you.
What's Related