Being "Re-Taxed" in the US

jomo
New Member



Joined: 18 Jul 2007
Posts: 8
Location: CT

Posted: Mon Mar 10, 2008 1:21 pm

 

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Hi,
I'm living and paying income tax in the US and my wife is living and paying income tax in Canada. A US accountant has told me that we need to claim my wife's Canadian income on my US tax filing, which puts us into another tax bracket and essential results in being double taxed on my wife's income. Anyone else have this "double taxation" problem?
Thanks,
Jomo

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Reba
Moderator


Canuck in NC

Joined: 16 Jul 2004
Posts: 1449
Location: North Carolina

Posted: Tue Mar 11, 2008 3:18 am

 

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you wouldn't be double taxed because there is a tax treaty between the coutries, and your wifes "foreign" income is allowable tax free up to $80,000.
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jomo
New Member



Joined: 18 Jul 2007
Posts: 8
Location: CT

Posted: Tue Mar 11, 2008 5:30 am

 

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Hi Reba,
Thanks for the reply. Technically my wife's income is tax exempt. However, when our incomes are combined, it pushes us into another tax bracket which means I pay more tax on the income I earn in the US. I'm wondering if my wife even needs to be included on the US tax filing since she is living in Canada?
Thanks.

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1582
Location: Calgary

Posted: Tue Mar 11, 2008 10:07 am

 

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It's not clear what your situation is, are you in a non-immigrant status and working temporarily in the US? If you're not a permanent resident you can file Form 8840 and not pay any US tax at all, you simply file a 1040NR, claim the tax treaty exemption and pay zero income tax in the US. Then you file a T1 in Canada and claim the married person's allowance as normal. What it says on your US return is pretty much academic as long as it has the W-2 and W-9 information on there.

The only reason to do it any other way is if you want to pay less tax, i.e. claim non-resident status from Canada, however if your wife lives in Canada and you are still together you cannot do that, as that is a "substantial tie". So your only real option is to do it the way I just described above. (Unless she claims residency in the US via your 1040, which is what your accountant is on about, but then you're into the whole mess with proving non-residency from Canada which is impossible in the case of your wife).

Really the people to be talking to are the CRA, not an accountant in the US as having a spouse in Canada makes it an unusual situation. Have a look at the instructions for the non-resident T1. However, if you still have residency in a Province (which I'm pretty sure you do have, the residency would be the province where your wife resides) then you just use the T1 from that province. But check with the CRA.
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Steve.

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hdtvrocks
New Member



Joined: 29 Mar 2007
Posts: 4
Location: Vancouver

Posted: Tue Mar 18, 2008 12:56 am

 

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I'm in a similar situation, wife is working in US under a TN. She didn't claim no-residency in Canada, however she did rent an apartment in the US. Is she considered a permanent resident for US tax purposes or can she follow the forms you stated above?

UPDATE: I downloaded the Form 8840, says if she was in the US for more than 183 days in 2007, she is not eligible. Is there any way to find out how many days she was in the country? We didn't log it, but she was often back in Canada most weekends.

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