Canadians spent 168 days working in California

QUESTION: Hello David,

Can we consider ourselves as California nonresidents for California tax purposes?

My husband and I are Canadians. In January 2006, we went to California because of my new job offer; I was on TN visa and my husband was on TD visa. After a few months we decided to come back to Canada. We came back in June, after 168 days in California. I still work for the same California employer, but my contract was changed to have me work from Canada (I am now paid in Canadian $ through a Canadian payroll, and I have Canadian taxes deducted).

Before 2006, we never lived in California.

We have read through Publication 1031 back and forth, but it did not help us...

Thank you,

david ingram replies:

As described, you are residents of Canada and your US income must be reported on your Canadian Tax return.

You will file a 1040NR and a California 540NR with schedule CA(NR) attached.

Then you will add up the US Federal Tax plus the US FICA plus the US MEDICARE plus the California income tax and claim those taxes as a foreign tax credit on line 431of your Canadian T1 return. You should get a dollar for dollar reduction in your Canadian income taxes for the taxes paid to the US and California.

You will have a heck of a time finding anyone locally to prepare the returns. We would, of course, be pleased to look after them for you by fax, snail mail, email or courier. That is what we do.