US resident working as self employee in USA and remote for Canadian company as employee and get the T4

[Martin991]

Hi

I live in the USA and have an SSN and Green Card.

This is my first year in the USA, I continue to be an employee of a Canadian company working remotely from USA and I received my T4 with all Canadian TAX deductions, I am also self-employed and earned income in the USA, how do I submit my taxes in Turbotax

Thank you.

[DaveF1006]

You will need to report your Canadian Income and then claim a foreign tax credit for the withholding tax you paid to Canada. To report the income first:

1. Log into your account
2. Select Wages and income>other income
3. Miscellaneous Income, 1099-A, 1099>start
4. Scroll to the bottom of the page to Other Reportable Income
5. Other taxable income, answer yes
6. Then give a brief description of the income and the amount of the income listed.

To receive a Foreign tax Credit:

1. Go to, Federal>deductions and credits>deductions and credits>estimate and other taxes paid>Foreign Tax Credit>start or revisit
2. When it asks We just need to check if you have any uncommon situations indicate I paid foreign taxes on income I earned while working in another country. Even though technically you didn't, you will to indicate this so the program can move forward.
3. Navigate and record the entries that the program asks for and when you reach the page that mentions Foreign Tax Credit Worksheet, this is where you take notice.
4. The first that you will be asked is what category of income is it, you will say general category income..
5. Next screen will say Country Summary, select add a country and then select Canada.
6. When it says Other Gross Income - Canada, don't put anything here since you already reported this on your K1.
7. then you will navigate through the screens until you come to a screen that says Foreign Taxes Paid - Canada, here is where you record the amount paid under Foreign Taxes on Other Income. Then below that you will enter the amount of taxes paid in taxes.

To report your self-employment income.

1. Go to federal>wages and income
2.  Self-Employment Schedule C: 1099-NEC, 1099-K, expenses
3. Self Employment income and Expenses

[Martin991]

HI Dave

Thank you very much, I followed the instructions I think that I getting closer, just added Wages & Income the Miscellaneous income sample 80000, i added the Foreign Tax Credit as per the instructions, and added 15000, but the result is the balance is due around 8000 did not change. These are the steps of the screens, to see what I selected wrong

 - Foreign Tax Credit / Edit

- Did you pay foreign taxes in 2023 or have credits to use from a prior year? - YES

- Have you already all of your .... or schedules k-1? YES

Form 1116

- Deduction or Credit? Credit

Foreign Tax Credit Worksheet 

- Choose the Income Type - General category income

- Country Canada / Edit

- Country - Canada

- Other Gross Income - Canada / no changes empty all fields

- Definitely Related Expenses - Canada /  no changes empty all fields

- Foreign Losses / no changes empty all fields

Foreign Taxes Paid - Canada

- Does your total taxes paid only include taxes reported on a Form 1999-INT or Form 1099-DIV/ NO

- Foreign Taxes on Other Income / 15000

- Alternative Minimum Tax - Canada / no changes empty all fields

-Taxes Paid or Accrued / Paid

- Other Deductions Not Definitely Related / no changes empty all fields

- Investment Interest / no changes empty all fields

- Trade or Business Interest / no changes empty all fields

- Passive Interest / no changes empty all fields

- Country of Residence /USA

- Reduction in Foreign Taxes /  no changes empty all fields

High Tax Kickout 

You must adjust the foreign taxes paid or accrued if they relate to passive income that is treated as general category income because it is high-taxed

- Tax reclassified under high tax kickout / no changes empty all fields

- Foreign Tax Credit Carryovers/  no changes empty all fields

- Foreign Tax Credit Carryover Adjustments /NO

- AMT Foreign Tax Credit Carryovers / no changes empty all fields

- AMT Foreign Tax Credit Carryover Adjustments / NO

Gross Income Adjustment

 - We calculated your gross income from all sources as zero

- Enter any adjustment / empty no changes

- Miscellaneous Items / NO

Excess Foreign Tax Credit 

Your General category income tax credit exceeded your allowed credit by 15000

Result the Foreign Tax Credit is 0

THank you very much, i really appreciated your answer

[DaveF1006]

Change the category of income from general income to passive. This may make a difference. Let me know if this works.

@Martin991 

[Martin991]

Hi Dave

Same result the Foreign Tax Credit is 0

THank you

[DaveF1006]

There could be two different causes. One may be is that the foreign tax credit is a non-refundable credit and there wasn't enough tax liability to apply the credit to or the amount is being carried over. If neither of these then;

At this point, we may need to look at your file to pinpoint the specific issue you are having regarding the foreign tax credit.  What we are going to ask you to do is to share your tax return information  with all your personal information scrubbed clean.  All we will look at is the numbers in the return.

If you are using the online version. go to tax tools>tools>share my file with agent. once you select this, you will receive a token number.  What is that token number.

If you are using the software, go online>share tax file with agent. Press send at the next screen and this will give you a token number.

[Martin991]

I will do that, I just waiting for my T4 from Canada, Iam testing and preparing myself how to do the taxes, I using the online version,  if you try in an empty file, only enter my name and address in TN, no other income from another state, enter the foreign income as you recommended  70000 USD and add the taxes as credit as 15000.

if you try this you will see that the system calculates like 8000 that should be paid and you apply the credit still the same number

THank you

[Martin991]

Hi Dave

Token# is 1172232

 

[Martin991]

Hi @DaveF1006 

The Token # is 1172232

Thank you

[DaveF1006 · Accepted solution]

Change the income type to General Category Income. When you get to the screen where it mentions other Gross income, enter the $70,000 again.  This will not double your income but will apply your credit properly. Your $15,000 for foreign tax paid is recorded properly in your return.

Now, what happens is that you will be given a Foreign Tax Credit of $7666 which is the amount of your US tax liability on your return and the other $7334 will be carried forward for ten years to offset any future foreign income. Your credit is limited by the amount of tax liability assessed on your foreign income. 

Keep in mind, if you add more income to your return, your US tax liability may change thus the credit and carryover amounts may change as well. Your example is not set in stone so to speak. i have included a screenshot below to show where you should enter the $70,000 again.  I know it mentions not to report it if it reported elsewhere but you don't have a 1099 DIV, 2555, 1099 DIV or Schedule K1 so you will need to enter this so that the credit will be applied properly. Here is the screenshot on how to enter this in the foreign tax credit section. Be sure to reach out to me if you have further questions.

[Martin991]

Hi Dave

This makes the difference, and now makes sense, thank you very very much. I think as soon I receive the real number I will enter the numbers and check the results.

Thank you