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First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

Dear Experts, 

I moved to California since Oct 2019. I worked as employee in Canada until Sept. Now I am not working in US. My husband has filed his tax return to both IRS and CRA for a few years as Married and Separate. For 2019, we want to file as Married and Joined to IRS. Questions,

1) In our case, my husband will file to IRS first and I will file to CRA first, how should we do this?

2) How do I claim my Canadian income and tax credit to IRS?

3) I have property income from Canada, and I have paid non-resident tax to CRA for the month of Nov and Dec 2019, how should I claim this part of income and paid tax to IRS?

Big thanks in advance!

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9 Replies
LinaJ2020
Expert Alumni

First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

We do not cover tax filing for Canada on this platform.  You would need to seek assistance over TurboTax Canada.  To file with Canada, click here https://turbotax.intuit.ca/tax-software/index.jsp

 

If you are US citizens and residents, you are required to report worldwide income including the Canadian portion on your US tax return. If you pay taxes on the same foreign income to both the Canadian government and the IRS, you may qualify for a foreign tax credit on Form 1116. See foreign tax credit

 

You would need to include any income generated from your business property as part of your worldwide income.  With the same rule applied as mentioned above, if you pay taxes to CRA on the same income, you may be able to claim a tax credit on Form 1116. 

 

To claim a foreign tax credit, here are the steps:

 

In TurboTax online,

  • Open up your TurboTax account and select Pick up where you left off
  • At the right upper corner, in the search box, type in "foreign tax credit" and Enter
  • Select Jump to foreign tax credit
  • Follow prompts

To report a foreign earned income, here are the steps:

  • At the right upper corner, in the search box, type in foreign income and Enter 
  • Select Jump to foreign income 
  • Follow prompts to enter info

If you are not a US citizen or resident, please write back for further assistance. 

 

 

 

 

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First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

Thank you LinaJ2020!

I have a couple of further questions regarding to rental income and TurboTax.

We use TurboTax for filling in tax return as married and joint. I feel very confused when answering questions, is 'YOU" means my husband or both of us? I do not see anywhere to ask for my income / deduction / financial accounts. Is this normal or just because I do not have SSN yet?

For rental income sourced from Canada, please confirm if my understanding correct:

As for 2019, my husband still need to file worldwide income tax return to CRA using foreign tax credit, so he will fill in schedule E for rental income and expense when filing to IRS. But for 2020, he only need to file Tax return to CRA for Canadian sourced income, so will not fill schedule E, instead, will take foreign tax credit when filing to IRS. This means the rental income part is not reported consistence to either CRA or IRS. It is weird, isn't?

KarenJ2
Expert Alumni

First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

If you have checked that you want to file married filing jointly in TurboTax, the program should ask you for your income and deductions.  You will need to enter your SSN before filing.

 

We cannot answer your questions regarding filing your tax return for to CRA for either 2019 or 2020.  Please contact TurboTax in Canada with your Canadian questions.  To file with Canada, click here https://turbotax.intuit.ca/tax-software/index.jsp  Canadian tax experts can often answer questions regarding US/Canada tax issues.

 

As US tax residents, you need to declare your worldwide income for calendar year 2019 on your US tax return.  If you have rental income and expenses to claim on your property in Canada, you need to enter the income and expenses in TurboTax US.

 

If you have a gain on your rental income for US taxes, you can claim a foreign tax credit on your US tax return for the foreign taxes you paid in Canada on this rental income.

 

If you are US tax residents for 2020, you will need to declare your worldwide income for calendar year 2020 on your US tax return, including any income from Canada.  You can also use foreign tax credits on your US tax return to help offset double taxation.

 

 

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First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

Yeah, I am trying to include worldwide income in TurobTax but nowhere I can put in my foreign employment income. I tried Form 2555 which does not look right as the SSN shows my husband's, not my fake one ([social security number removed]). And Canada employer does not have Employer's Tax ID number. I put income sourced from Canada and tax paid to Canada in form 1116(line 1a and ling 8r), which has no impact to tax return result. Is it correct?

 

Does joint tax return mean everything links to one person? 

LinaJ2020
Expert Alumni

First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

Let me verify this information before I proceed to provide you with an answer:

 

Are you both a US citizen or resident?  like a permanent resident

What do you mean by a fake social security number? 

 

@9month9wine

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First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

No, neither my husband nor I are citizen or permanent resident. My husband is resident alien (he has income in US and file return for years) and I am non-resident alien (not meet the green card test or the substantial presence test). TurboTax suggest filing status as married and jointly. But I do not see anywhere require my foreign income/tax.

 

Regarding to fake SSN, TurboTax suggest to put in a dummy one in order for the software to work. When filing return, I will cross off this dummy SSN number after print it out. I will apply for ITIN with the tax return together.

DaveF1006
Employee Tax Expert

First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

i don't know who gave you the idea about a fake SSN. This is the correct procedure for filing a return where one spouse is a resident alien or citizen and one isn't.

 

Follow these directions carefully. You might need to apply for an ITIN . Turbo Tax will give you an option to apply for a W7 in the return.  Per IRS, if your spouse is a nonresident alien, he or she must have either an SSN or ITIN  if  :

1.  You file a joint return or

2.  You file a separate return and claim an exemption for your spouse, or

3.  Your spouse is filing a separate return.

For filing status, you can file either Married Filing Jointly ( see Nonresident to resident  ) or simply Married Filing Separate. 

[In the TurboTax program, you would follow the step-by-step interview questions to choose the appropriate filing status, enter your spouse information and leave the SSN blank, after print out the return , you can leave it blank or hand-write APPLIED in the space.]

If you want to file Married Filing Separate, you can qualify for an exemption for your spouse only if:

 - Your spouse had no gross income.

-- Your spouse won't file a tax return.

 - Your spouse didn't qualify as the dependent of another taxpayer.

Additionally, you cannot e-file a tax return which does not include a SSN or ITIN.  If you fall under one of the above conditions, you will have to manually apply for an Individual Taxpayer Identification Number ITIN on Form W-7.  

See https://www.irs.gov/Individuals/General-ITIN-Information.   

Although you cannot e-file, you can still use the TurboTax program to prepare your tax return and required forms. Then print, attach to the Form W-7 with the required documentation (see the above link) and submit everything to the IRS Austin location in Texas by mail.  

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First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

Thank you all for your response.

As I have no US income in year 2019, do I need to file 1040NR? 

If I do not file 1040NR, how can I get ITIN?

 

Seems like we can not file married joint, as Canada still treat both of us as resident.

KarenJ2
Expert Alumni

First year moved to US. How to claim income from Canada to IRS while I have paid tax to CRA

If you do not have any US source income and you are a US nonresident, you do not need to file a 2019 US tax return.  If you have a US filing requirement for 2020, you will need to apply for an ITIN on your 2020 US tax return.

 

Please note, if you are a US resident for 2020, US residents must declare their worldwide income on their US tax return.

 

Canada and the US have different requirements to determine residency.  You can be a resident of Canada under Canadian rules and a resident of the US under US tax rules.

 

You will be considered a United States resident for tax purposes in 2019 if you meet the substantial presence test for the calendar year or you are a green card holder. To meet the substantial presence test, you must be physically present in the United States (U.S.) on at least: 

  1. 31 days during the current year (2019), and 

  2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:  

  • All the days you were present in the current year (2019), and 

  • 1/3 of the days you were present in the first year (2018) before the current year, and 

  • 1/6 of the days you were present in the second year(2017) before the current year

 

The calculation is only an example. 

2019   70 US days      = 70 

2018    9 US days *1/3 =  3 

2017   30 US days * 1/6 = 5  

  

70 + 3 + 5 = 78 days.  78 days is less than 183 days so you are a nonresident. 

 

Please see Publication 519 US Tax Guide for Aliens for more information.

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