When completing a T1 General for an Canada Citizen and after you enter there W2 income under Foreign income where do you enter there refunds and or amount that you paid to the IRS on your Canadian Tax return.
What form or line number.
Thanks
Someone who earns US income such as a W2, must report their US income to the IRS under their US social security number. When form they use to report this US income to the IRS depends on their US residency status.
Determining an Individual’s Tax Residency Status (IRS)
You will need to know the following:
- their residency starting and end dates in the US.
- number of days in the US in each calendar year with start and end dates
- various other info such a dates bank accounts held in the US, citizenship or residency status of spouse, etc.
This can be very complex.
If you are not a U.S. citizen, you are considered a nonresident of the United States for U.S. tax purposes unless you meet one of two tests. You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31).
Certain rules exist for determining your residency starting and ending dates.
In some cases, you are allowed to make elections which override the green card test and the substantial presence test, as follows:
- First-Year Choice To Be Treated as a Resident
- Nonresident Spouse Treated as a Resident
- Closer Connection To a Foreign Country
- Tax Treaties
You can be both a nonresident and a resident for U.S. tax purposes during the same tax year. This usually occurs in the year you arrive or depart from the United States. If so, you need to file a dual-status income tax return.
If you are a U.S. resident for tax purposes and need to establish your U.S. residency for the purpose of claiming a tax treaty benefit with a foreign country, refer to Certification of U.S. Residency for Tax Treaty Purposes.
Individuals Topics
Online Tools & Updates
International Taxpayers Videos
As far as reporting this foreign income in the year returning to Canada, you need to determine the following:
A - Did they permanently sever ties to Canada when leaving. If so, did they file and were they approved using an NR73.
B - Have they filed their tax residency upon their return using an NR74.
C - Or, did they maintain their Canadian Tax Residency status because they left Canada temporarily because they retained their ties and filed their Canadian tax returns while gone.
These will determine whether the T1 is a full 365 days or with a stub period with their entry date. This can be very complex. The CRA website and the Canadians leaving and returning to Canada website can be very helpful.
The W2 income if earned while a “FACTUAL” tax resident of Canada would be reported on Line 10400 - other employment income. In the past you needed to provide CRA with a paper copy of your IRS tax return plus the IRS assessment. This is often an IRS 1040-NR. This information may now be available to the CRA directly from the IRS per the current OECD tax data sharing. The federal foreign tax credit is claimed on line 40500 via a completed T2209. I would also check the Canada–US Tax Treaty for more details. I read each tax treaty in detail to verify my understanding. Then I call CRA and ask for a specialist in US-Canada and the ITSO specialty (International Tax Services Office).
International and non-resident taxes
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents-tax.html
CRA - Determining Residency Status
CRA - Leaving or entering Canada
CRA - Individuals Leaving Canada
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-**entering-canada-non-residents/leaving-canada-emigrants.html**
CRA - Individuals Re-entering Canada - Factual Residents who are temporarily outside of Canada
COMMENTS
It took me several days and watching a few US tax training videos to really nail my fist situation. After that it became fairly clear although the rules can change any time. For that reason I still verify each and every situation. Personally I work with an individual who is a Canadian tax preparer to file the IRS 1040 NR other other US tax return for dual citizens and for Canadians who earned income in the US. If the situation is very complex with US holding, US investments, and US businesses then I would consider referring them to a cross border tax specialist.
I also buy this resource:
Preparing Your Income Tax Returns, 2022 Edition for 2021 Returns
My client is a Canadian living in Canada but commutes to the USA everyday for employment income. My only question is does she have to report her USA refund on her Canadian tax return. If so which line number or form.
Tim Boufford
Boufford Tax Preparation
226-346-1158 (cell)
timboufford@cogeco.ca
This is kind of a weird question, so I hope I’m understanding things correctly. With that in mind:
If your client has a “Refund” of US W2 withholdings, that to me means that he/she will have filed a US 1040 or 1040NR. In which case you’d claim an FTC for actual US tax paid per the 1040/1040NR. Refund doesn’t matter, because you’re claiming the actual amount of US tax. (Not the W2 amount.)
Edit to add: This is hugely simplified. There’s a lot of other things that get reported/submitted when you’re doing cross-border stuff.
plus some other items possibly.
Expect a review as well.
Maybe you should refer the file to someone with experience in this area.
Haha yes that’s an understatement. I’ve added an edit to my original post.
My guess would be a review for sure. A full-time job W2 would likely accrue enough withholding tax to trigger CRA’s auto-review when the FTC is claimed on the T1. So copies of the 1040, the W2, and the IRS Assessment will be likely be needed in the future.
Hi,
I, E-filed an “Authorize a Representative” with the CRA on last Friday September 23rd. signed by a new client. The authorization was approved and confirmation number was received instantly. But when I log in CRA Rep. A Client, to my surprise, the access to the same client was denied with an Error message “Error #051” means I have no authorization to access this client. I tried to resubmit the same authorization, it was rejected with this message that I have already filed the Authorization and this authorization is in process. Till today, the Monday September 26, 2022, my access is being denied. Finally, I called the CRA and I was told by the CRA agent that the approval for “Authorize a Representative” takes minimum 3 working days. It had never have happened to me before this particular authorization as all the time in the past, the approval is always received immediately or rejected if in case, there was any discrepancy that any personal information of the authorizer didn’t match. Has anybody else come across or faced the similar situation as in this case. I shall appreciate if someone share his/her experience in this respect with me. Thanks,
You should make this a question/topic on its own, as it’s less likely to get missed, then.