@astral101 see my notes on your Qs;
The 30k gross wages are for employment work for a Canadian company (work is done remotely within the U.S. but I am technically an employee of the Canadian company since I began that job when I was in Canada before relocating to the U.S.). My concern with "self-employment" that this may subject me to self-employment tax, no? If so, then I am still being taxed in Canada as an employee and then in the U.S. as self-employed, correct?
Per IRS rules, the income is generally sourced to where the work is performed. Thus the income you get for your work performed in the USA for a Canadian entity ( & for US purposes ) is US sourced. So for purposes of form 1116 ( to get Foreign Tax Credit ) you have to use form 1116 category of "Resourced by Treaty ". And YES it does expose you SECA ( 15.3 % of Schedule-C Net income ) , but because US and Canada have a Totalization agreement in place, you can choose to pay to ONE country only by providing a "Certification of Participation " to the country where you do not pay SECA. On Schedule-SE, you enter the exclusion clause .
You state below that I should enter the "net income" but form 1116 asks for the gross income, not net. Please explain.
I use the term Net because it is NET income on Schedule-C ( Schedule - C shows the gross income and also allowable expenses/ deductions and then computes the NET income ). So it is compatible with the instructions for Form 1116 ( the meaning of Gross for this form assumes income less expenses and this is what is doubly taxed by Canada and the US ).
The interest income is from Canadian banks. But TurboTax says on form 1116 "Do not enter any income already reported on Form 1099-INT" but I have also paid tax on this interest income. If I can't report it on form 1116, my foreign tax credit will be lower and I will be taxed again on this income in the U.S.
Interest income from Foreign sources is reported as interest income as part of your world income ( with NO 1099-INT ) -- you tell TurboTax that this is interest without a 1099-INT -- it will accept that data. On form 1116 , you select category " Passive" and report this income again as foreign sourced income and the taxes you paid/allocated to this income. Note that if this tax is equal or under the Safe Harbor threshold then you should use that rather than form 1116.
Does the above make sense ?
