Canada Income

[spanel]

I have a US resident that worked in Canada. His w2 does not reflect this income. He received a T4 from them however that reflects the Canada income. $3X,XXX earnings, 13,XXX taxes w/h

Does any of this go on his 1040?
Does he have to file a Canada tax return?

Thanks!!

Chris

[Burke]

The taxes withheld in Canada which are reported on T4 are in Canadian dollars. Yes, he will have to file a Canadian return. You can file Form 1116 for foreign tax credit once you know what the tax liability is. Last time I filed one of these, Canada also allowed credit for the US tax, so it is reciprocal. Need to review US/CA tax treaty. IRS Pub 597. If he is going to do this work again, I would advise him to complete the proper forms to avoid withholding in Canada.

[spanel]

So they need to file a Canada Return 1st.
All the income goes on the US 1040 also? Where is this listed and I have to convert it to US dollars correct?
Then I do a foreign tax paid credit on 1116?

Chris

[Lion]

It depends on your software how you enter it. Do you have an entry form for foreign income? Or, do you convert to US dollars first and then put in the usual places, wages, SE, investment, etc.?

[ATSMAN]

If he is going to do this work again, I would advise him to complete the proper forms to avoid withholding in Canada.

I believe that only works if you are working for a US company and are non resident in Canada. If you work and live in Canada and you are a US citizen, they must withhold Canadian taxes and you use Form 1116 to claim a credit on US tax return.

[Burke]

So they need to file a Canada Return 1st.
All the income goes on the US 1040 also? Where is this listed and I have to convert it to US dollars correct?
Then I do a foreign tax paid credit on 1116?Chris

My TP was a US citizen who lived and worked in Canada. However, a large part of his income was from investments in the US so no Canadian tax was withheld on that. I always converted everything Canadian to USD first, using an average over the taxable year in question. I input wages from T-4 in my software using form W-2 as I recall. After my TP retired, I used input for Form 1099R (for private pension which I think was T-4A?) And yes, for your TP, a Canadian NR return will have to be filed due to withholding to obtain any refund or determine tax due. My Canadian counterpart who did my TP's Canadian return, always waited until the US return was done to file there. But he would give me the tax liability on the income reportable in Canada to compute 1116. Another client was a US citizen who worked as an independent contractor for a US company in Canada one or two weeks out of the year, but lived in the US. He signed papers to avoid Canadian withholding, and was paid directly by Canada in US dollars. He reported the income on his US return. No 1116 needed.