Canadian Resident worked in US on a Contract - income

My_question_is: Applicable to Another Jurisdiction or Multi-jurisdictions
Subject:        Canadian Resident worked in US on a Contract
Expert:         taxman at
Date:           Friday February 25, 2005
Time:           11:35 AM -0800
Dear Mr.David,
Thanks for all the tips and help that you provide to the needy. Here is the
situation i am in.
1. Worked in India till Apr 30 2004 earned Cnd $2850.
2. Migrated to Canada on May 14th 2004.
3. Got a contract for CND$5000 for a programing job to work from home with a
US employer from whom i got my H1 done in 2003.
4. Had to travel to US a couple of times for project needs, expences were
5. Completed my work and got paid $5000 in my Name into my US Bank account
as per the contract, no tax was withheld.
I am still staying in Canada as a resident from the date i immigrated except
for a short 1 or 2 days trips during project impementation 3 times.
Having explained my situation please let me know how should i file my taxes.
For the amount earned in India before migrating to Canada should i declare
it on my return? Is so how as asked below for the US income.
For the amount earned from US after immigrating to Canada
1. Should i declare them as foreign employment income or
2. Should i declare it as foreign income or
3. Should i say i am selfemployed since i was working from home.
I didn't work in Canada for any one and don't have any income from Canadian
source except for my wife's interest income from a Canadian bank.
Please help me by answering my questions.
david ingram replies:
The easiest (and legal) method of doing your tax return is to show yourself
as a resident for the whole year and report your world income.  I presume
that you lived off of savings because the earned income was not enough to
support you.
File a 2004 T-1 General and report your Indian and US income on a form
You can claim expenses although they will not do you any good because you
are not taxable anyway.  If you claim enough (office in the home, computer
depreciation, phone, etc.) expenses you can get your income below the $4,00o
for CPP and pay nothing.  If you do not claim expenses, you will owe $400 or
$500 for CPP which is not bad because it starts you on the way to a Canadian
Retirement Pension which also includes a disability and survivor's pension.
And this extra year counts towards your qualification.
For the USA, you should file a 1040NR to report the bit that you earned by
actually performing services in the USA.  However, since you will have
earned less than $10,000 as an employee and did not have a fixed base of
operations in the USA, you are exempt from tax under either Articles XIV or
XV of the US Canada Income Tax Convention which you can find the text for
You will find the place to exempt the US income in the middle of page 5
(right hand side) of the 1040NR.  The amount also goes on page 1 in a little
box by lines 21 and 22 as exempt under a Treaty.
If you need help, you are welcome to send the returns to us here in North
Vancouver. Because you are self-employed, your returns (yours and your
wife's) are not due until June 15th for Canada and because you are living
outside the USA, your US return is not due until June 15th either.
Answers to this and other similar  questions can be obtained free on Air
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