US citizen Newly weds woriking and living in Canada -

My_question_is: Applicable to both US and Canada
Subject:        Newly weds, multi-nationals
Expert:         [email protected]
Date:           Sunday March 04, 2007
Time:           01:08 PM -0500


Hello, we are both US citizens, working/residing in Canada on Temporary Work Permits.  We were married August 12 2006.  For all of 2006, I lived and worked in Canada, working for an American company, paid in USD into my USA bank account.  HRSDC is not involved in my pay becuase I do not want to be paid in CAD into a Canadian account because I have too many ACH's set up through my USA account (auto loan, insurance payments, etc).  USA Federal, State and Local taxes were witheld from my paychecks; I maintain a USA address for my paystubs and taxes. 

My wife moved to Canada and began work for a Canadian company August 28, 2006; she is paid in CAD into our TD account (obviously she will pay Canada taxes).  She worked in the USA before we were married and also must file with USA for that time period.

We have several questions:
1.  Do I pay USA or Canada taxes?  Both?
2.  Are we required to file joint taxes?  How do we file joint if I am paying USA tax and she is paying Canada?  
3.  Do you prepare USA and Canada taxes?

david ingram replies;

1.    I do not want to be rude BUT YOU have made a BIG mistake having US federal, state, FICA and Medicare taxres withheld. In fact, the Human Resources and Payroll people at your employer should be severely reprimanded for allowing you to continue in such a precarious position tax wise.  If you don't or didn't know better, they should have.  Canada is a soveriegn nation and when you got your work permit and worked in Canda you were subject to Canada's federal and provincial income tax laws first and should have been paying CPP and EI and federal and provincial income taxes, NOT US TAXES OF ANY KIND.  YOUR EMPLOYER IS LIABLE FOR CANADIAN penalties for failing to make the dedcutions.  In my opinion (and I have seen it many times) they should reverse it all now and file amended T4 slips for Canda and amended W2 slips for the US.  I do not know what state you have had withheld but I assume that your payroll people are intelligent enough that they would deduct New York state tax if if you were living and working in New York and not Colorado or North Dakota taxes because you happened to have a mailing address there.  Believe it or not, The same thing applies to Canada, even more so.

You do NOT owe any state tax, will not owe any Federal Taxes (because of foreign earned income exemptions and foreign tax credits) and should not be paying FICA and Medicare if you are not living and working in the US when you ARE living in and working in Canda which has both an Income Tax Treaty AND a Social Security Treaty with the US.  The tax Treaty makes you taxable in Canada first and the Social Security Treaty makes you pay Social Security taxes in Canada FIRST unless your company wirtes to the Canada Pension Plan department, explains that you have been transferred to Canada temporarily (for five years or less) and get written permission from the Canada Pension Plan people to exempt you from CPP. . 

YOU DO OWE CANADA INCOME TAX and will have to pay it before getting any refund from the US anbd therefore will likely have a cash flow problem.

Your wife also owes Canada its income tax first.

THEN, because you are US citizens you must report the income to the US again.  You then have two choices with regard to calculating any US tax liability.  You have been in Caanda for an entire year so you can exempt up to $82,400
on form 2555.  That's the end of it at less than $82,400.  If your income is over $82,400, you can either file form 1116 and claim a foreign tax credit which should be enough to wipe out any US tax or a combination of form 2555 and 1116 which is almost always enouhgh to wipe out every cent of US tax. 

Ditto for your wife although if she has not been in Canda for the full year of 2006, she may want to file form 2350 first to extend her US filing date to Jan 2008 so that she can qualify for form 2555.  OR, she might just file form 1116 and claim the foreign tax credit.
2.   You are NOT paying US tax she Canadian.  You are both paying Caandian Tax.  You can file a joint return or individual returns as MFS (married filing separately).  It is likley easier to file MFS for the purposes of claiming the exemptions and yours is a  tough return because you will owe about $5,000 more overall if you cannot get the W2 reversed into a T4 slip. GOTO and read the Oct 95 newsletter in the top left hand box and the US/Canada Taxation section in teh second box down on the right hand side for 30 pages or so more information about what has to be done for your returns.

3.   We do US Caanda Tax returns by fax, email (pdf files only), snail mail or courier. See below.

david ingram wrote:
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office)
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included."
Be ALERT,  the world needs more "lerts"
David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone. 
This from "ask an income trusts tax and immigration expert" from or or David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention

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