Nuances in filing 1040NR as a Canadian non-resident alien

Hi, I am filing as a Non-Resident alien. Filing the 1040NR, certain issues have come up. FYI, I am married and have two kids (4years and 1 year old respectively).

1. For calculating the tax on form 1040NR, I just wanted to confirm if calculations for married Canadians uses the table for "married filing jointly" or "married filing separately". The instruction booklet accompanying the form states that if the "filing status box 3, 4, or 5, you must use the Married filing separately column". Box 3 is for married Canadians. Though the instruction booklet stresses using the "married filing separately" column there are posts on the Internet that state Canadians use "married filing jointly" column in the instruction booklet for Form 1040 (not 1040 NR).\
2. For claiming the child tax credit the rule states that the child should be a US resident. My kids were born in Canada and moved with me in August 2008 to US. Are they residents or do they have the status of non-resident alien like me?

Any help in this regard is appreciated. Thanks!

Your children don't qualify for the tax credit unless they're LPRs, US citizens or US nationals (which means American Samoan usually).

It's not clear what your situation is from what you've said, but from the sounds of it you're filing jointly with your spouse as well on 1040NR as explained in page 9 of the instructions, basically you check the box, put their ITIN/SSN in the box and claim an exemption for them, however you can only do that if they have no US-source income as it explains.

The difference between 1040 and 1040NR is that filing jointly is only allowed on 1040NR if the tax treaty provides for it (which it does with Canadians) and the spouse has no US income. On 1040, you can file jointly with your spouse and report both incomes. If that helps make it clearer. If they have income they have to file their own 1040NR and claim their own exemption.

Hi there!

I'm hearing contradicting results. From this post, and other links (replace dots with real .'s - www dot yyconsulting dot com / crossborder32), it says:

"the treaty allows you to use the "Married Filing Jointly" table to calculate the tax due on your earned income even though as a nonresident you can not file a joint tax return."

however, it seems that the us says(www dot irs dot gov/businesses/small/international/article/0,,id=96467,00.html):

"Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year"

I also looked at the US_CAD tax treaty, and did not find anything under "married" or "jointly"

any tips? any people filed jointly and got approved?

Thanks!

Well the second bit you're quoting there isn't entirely relevant to what we're talking about and the first bit is wrong.

You can file jointly if you're both in the same category at the same time, basically, with some exceptions. So if you're both resident in the US for tax purposes you can file jointly on 1040. If you're both non-resident for tax purposes you can file jointly on 1040NR, however you can only do that if the spouse of the person filing has gross income less than the exemption limit (and you're both resident in Canada for tax purposes). If both of you are earning significant amounts and getting W-2s then you have to file 1040NR separately.

Generally this is not an issue because in most non-immigrant categories the spouse cannot work anyway so their US-source income will likely be too low or exempt from reporting for various reasons, the main exceptions are L-2 and E-2 Spouse, or if both people individually have employment status.

Hi Steven,

Thanks for answering.

I just want to make sure that I can use the "married filling jointly" tax column from the 1040 tax table on my 1040NR. ie. I want to make sure that the US-Canada Tax treaty allows me to file as a nonresident alien but declare "married filling jointly" tax on my return. I need to be sure that this is in deed the case - david kempe said this is true. he said it's in the us canada tax treaty here: (www . irs . gov / pub/irs-trty/canatech.pdf)

but i can't seem to find it stated?

@steven - I don't understand how the second bit i posted is not relevant? It says:

"Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year"

and I was a nonresident alien. therefore, doesn't this say I absolutely cannot file as married filing jointly?

Hope any of you can help me clear this out soon! taxes are due April 15! yikes! Thanks again!

From the sounds of it you were both non-resident aliens, correct?

If one is filing as a resident and one as an NRA then you can't file jointly.

You can file jointly on 1040NR as tax residents of Canada but only if the spouse does not have reportable income over the exemption limit (which I think is $3,500 for 2008).

Hi Steven,

Yes, the last paragraph applies to us.

Where did you get this information? So far, all i found was from the technical explanation of the US/CAD tax treaty on pages 48 and 49 (david kempe helped us there)

I can't find it explicitly in the tax treaty , or an article though - shouldn't i be claiming this explicitly as a us/cad tax treaty benefit? ie. as item M on page 5 of 1040NR?

Paragraph 4 allows a resident of Canada (not a citizen of the United States) to file a joint
return in cases where such person earns salary, wages, or other similar remuneration as an
employee and such income is taxable in the United States under the Convention. Paragraph 4 does not apply where the resident of Canada earns wages which are exempt in the United States under Article XV (Dependent Personal Services) or earns only income taxable by the United States under provisions of the Convention other than Article XV.

The benefit provided by paragraph 4 is available regardless of the residence of the
taxpayer's spouse. It is limited, however, by a formula designed to ensure that the benefit is
available solely with respect to persons whose U.S. source income is entirely, or almost entirely, wage income. The formula limits the United States tax with respect to wage income to that portion of the total U.S. tax that would be payable for the taxable year if both the individual and his spouse were United States citizens as the individual's taxable income (determined without any of the benefits made available by paragraph 4, such as the standard deduction) bears to the total taxable income of the individual and his spouse. The term "total United States tax" used in the formula is total United States tax without regard to any foreign tax credits, as provided in subparagraph 4(a). (Foreign income taxes may, however, be claimed as deductions in computing taxable income, to the extent allowed by the Code.) In determining total taxable income of the individual and his spouse, the benefits made available by paragraph 4 are taken into account, but a deficit of the spouse is not.

The following example illustrates the application of paragraph 4.

A, a Canadian citizen and resident, is married to B who is also a Canadian citizen and
resident. A earns $12,000 of wages taxable in the U.S. under Article XV (Dependent Personal
Services) and $2,000 of wages taxable only in Canada. B earns $1,000 of U.S. source dividend
income, taxed by the United States at 15 percent pursuant to Article X (Dividends). B also earns $2,000 of wages taxable only in Canada. A's taxable income for U.S. Pu poses, determined without regard to paragraph 4, is $11,700 ($12,000 - $2,000 (Code sections 151(b) and 873(b)(3)) + $1,700 (Code sections 63)). The U.S. tax (Code section 1(d)) with respect to such income is $2,084.50. The total U.S. tax payable by A and B if both were U.S. citizens and all their income arose in the United States would be $2,013 under Code section 1(a) on taxable income of $14,800 ($17,000 - $200 (Code section 116) - $2,000 (Code section 151)). Pursuant to paragraph 4, the U.S. tax imposed on A's wages from U.S. sources is limited to B's U.S. tax liability with respect to the U.S. source dividends remains $150.

$1,591.36 ($11,700 x $2,013) / $14,800

The provisions of paragraph 4 may be elected on a year-by-year basis They are purely
computational and do not make either or both spouses residents of the United States for the
purpose of other U.S. income tax conventions. The rules relating to the election provided by U.S. law under Code section 6013(g)(see section 1.6013-6 of the Treasury Regulations) do not apply to the election described in this paragraph.

It's question 3 on 1040NR. You can't use the form for something it wasn't designed for, by definition if the spouse has income over the exemption limit the spouse has to file a separate 1040NR. Form 1040 is designed for joint returns.

what i understand:

if my wife does have a US gross income under $3500, and we are canadian residents, (therefore us nonresident aliens) we can file a joint return using the 1040 NR?

i simply have to check box 3, and apply for an itin for her by attaching form w-7.

this entitles me to claim the tax table for "married filing jointly".

is this what you're trying to say?

Basically.