Dual citizen Canada-US, live in US. I have both a w2 (US) and t4 (CDN job) How do I declare correct foreign amount if TurboTax assumes all $$ to be foreign earned?

[carsonschafer]

Turbo Tax wrongly assumes that all my income is foreign, including my w2 and self-employed side hustle. Why can't I make these clear distinctions in the software?

[rjs]

Are you claiming the foreign earned income exclusion or the foreign tax credit?

Do you have three sources of income? You mentioned a W-2, a T4, and self-employment. Where do you actually do the work for each source of income? A W-2 could be foreign income if you work outside the U.S. for a U.S. company. Do you do the work for the Canadian employer in Canada or in the U.S.? Where do you do the self-employment work ("side hustle")?

Where exactly do you see that TurboTax is assuming that all of your income is foreign income?

Are you using TurboTax Online or the desktop TurboTax software installed on your computer? Which edition are you using (Basic, Deluxe, Premier, etc.)?

[carsonschafer]

Thanks for your reply!

BTW I live in LA County, with the fires in January, the tax deadline was extended till October (in case you were wondering why I'm this late!).

I was attempting to claim the foreign earned income exclusion.

Yes I had 3 streams of income last year (2024). I worked a

1) self-employed venture that is local to California

2) part-time position that gave me a w-2 (also in California)

Then, in June of 2024 I quit my w-2 job when I was hired for:

3) a remote full-time position with a company based in Canada (which sent me a T4, their w-2 equivalent I guess). For this work, I was hired remotely, so I still lived in the US the entire time. I was eligible for this position as a Canada-US dual Citizen.

Note that I never lived outside of my resident country (US) in 2024, so Turbotax's two tests to determine foreign income exclusion (physical presence & bonafide residence) didn't seem to fit in my situation based on what I read in their descriptions. Unless I read them incorrectly.

When I tried to declare my foreign income from the Canadian T4 I noticed that it was wrongly lumping the other two US sources (w-2 and self-employed) into that amount, drastically changing my taxes owed amount.

I'm using Turbo Tax on a desktop, and just basic at this point.

Thank you, any advice would be appreciated!

[rjs]

The foreign earned income exclusion only applies to income that you earn for working outside the United States. Since you worked only in the U.S., none of your income is foreign earned income.

Your reading of the physical presence and bonafide residence tests is correct. You do not meet either test, so you do not qualify for the foreign earned income exclusion.

The income from the company in Canada is U.S. income, even though the employer is located in Canada. It doesn't matter where the employer is located. What matters is where you actually work.

The Canadian company is not reporting your income correctly. Employing you to work in the U.S. makes them a U.S. employer. They should have given you a W-2 (and withheld U.S. income tax and FICA taxes). They probably don't want to bother with that, especially if you are their only U.S. employee. I'm not sure what you should do about this. Wait a day or two and see if anyone else replies to this thread. If you don't get any better answer here, you might want to consult a local tax professional.

[carsonschafer]

Wow, thanks for this response. 

It seems like I fell through a crack with foreign earned income then. I very well could be the only US employee for this Canadian company although I know they have several contract workers, but not full-time. Are there big implications for the Canadian company labelling themselves as a US company in order to send me an amended w-2? Hopefully there's someone else in this situation who can chime in. I'll also plan to call the CRA & IRS and see what I find out.

Thanks for your help!