Part-time side job in Canada with T4 (2 month) and full year of W2 in the US

[aradwan2]

Hi,

I am Canadian and green card holder. 

I live and work full time in the US and have received W2 from my employer for 2023. 

I also worked in Canada for two month in 2023 and received T4 (I live in border city and could move easily but worked mostly remotely).

For tax reporting, it seems clear to me on the Canadian side, as I was not resident of Canada and so I will only report the Canadian income on T4 to CRA. 

My questions is mostly on the IRS side. How to report this T4 income? Should I include it as a self-employment job? Should I put the gross or after-tax income? Could you please give me some help?

Thank you!

[DaveF1006]

Yes, and here is how to enter the T4 income into your tax return.

1. Open your return in TurboTax 
2. Click on Wages & Income 
3. Scroll down to All Income
4. Scroll down to Less Common Income 
5. Scroll down to Miscellaneous Income, 1099-A, 1099-C 
6. Click start 
7. Scroll down to Other reportable income 
8. Answer yes Enter description Call it T4 income from Canada and then enter the amount. Enter the net amount of the income.

[aradwan2]

Thank you so much for the quick reply.

I wonder if I can put the gross income and find anyway of taking a credit of the tax paid to Canada? 
If it won’t make a big difference (in tax liability) can I just choose to report the net (after tax) income to IRS?

thank you for your help.

[Vanessa A]

Yes, you can take a credit for taxes paid to Canada,

No, you cannot just enter the net (after tax) amount. 

The IRS wants to see your calculations on how you came up with the numbers.  Same principal as when you enter your income for self employment from the in the US.  You have to enter your income and expenses, not just your income after your expenses.

So to report your income from your T4 and claim a deduction for your taxes paid, you can select the following:

• Federal
• Income
• Foreign Earned Income and Exclusion under Less Common Income
• When asked what forms was your income reported on, select A statement from my foreign employer
• Enter the income, hit continue

After you enter the foreign income, you can then go to complete form 1116 to claim the foreign tax credit. To do this select the following:

• Deductions and Credits
• Foreign Taxes under Estimates and Other Taxes Paid
• Continue through answering the questions appropriately until you get to the "Do you want the deduction or the Credit"
  • If you are not itemizing your return, you will want to take the credit.
• Continue through to claim your deduction or credit

@aradwan2

[aradwan2]

Thank you for your help.

I followed your steps but I don’t see any tax credit applied. Could you please help?

I get this message:

Excess Foreign Tax Credit

You have an excess credit that can be carried forward for up to ten years to reduce your taxes. In some cases, you may also need to carry back this credit amount to last year by amending last year's return to claim an additional refund.

[DaveF1006]

This means that the tax credit could not be applied this year but you may carryback the credit to last year's return or carry it forward to the next ten years. Here may be the reason why your credit wasn't applied this year.

The IRS limits the foreign tax credit you can claim to the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income. The excess limit is created when the U.S. taxes on that foreign income are greater than the foreign taxes paid.