Looking for help - moved back to Canada from the US in 2020 and need help using TurboTax

[col127]

Hey everyone,

I was living in Georgia for most of 2020, until the end of October and then I moved back to Canada.

I was full-time employed by an employer while living in the Georgia prior to moving back.

I started my own business in Canada and had income in Dec 2020. I understand I'll need to report that income on my 2020 US Tax Return with TurboTax - but prior to adding my own business income in Canada to my return, I was owed about $2527 in Federal and $302 in State as a refund. I had an income of $25,000 in December, and that made my Federal Tax due $5,824 and State tax due of $1,116.

How could there be approximately increase of $8300 in federal tax and $1400 in State tax in an amount of $25000 ? I must be filling this out wrong somehow?? Thanks for any help.

[MaryK4]

If you are a U.S. citizen, you must pay tax on their worldwide income.  Be cause it was self-employment, you would still be required to pay the self-employment tax (social security and Medicare).

If you paid taxes on the income in Canada, you will have to complete the Foreign Earned Income Credit information.  See Filing IRS Form 1116 to Claim the Foreign Tax Credit - TurboTax.

[col127]

Hi Mary!

I'm a dual citizen - US and Canada.

I will be paying tax on the income from Canada when I file my 2020 Tax Return - so how do I avoid being taxed on it again on the US side? I know there's a tax treaty to prevent double taxation. Thanks so much 🙂

[MaryK4]

When I first answered that was in my mind because you said "moved back".  You would be able to exclude both the income and employment taxes.  There is a link How to show I will pay zero SS taxes due to totalization agreement using self-employed online? that shows how to change in TurboTax with desktop version, but you cannot efile it this way. 

I will research more and tag you if I can find a solution that will report it correctly AND allow efile.

@col127

[col127]

I was looking through TurboTax and was going to put in the amount in earned in Canada in the foreign earned income & exclusion section - but as I've gone through the prompts, it says I don't qualify for the Bona-Fide residency test and then it says it removes Form 2555. Does that mean the income I reported is removed? Or does it mean I"m still being taxed on the foreign income? It's not very clear.

[MaryK4]

The Foreign Earned Income Exclusion does not apply because you moved to Canada in November 2020.  You must be 

• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year; or

• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months..