Oh, Crap! I think I screwed up my taxes

Requiem_11
New Member



Joined: 09 Apr 2008
Posts: 2
Location: Southern California

Posted: Wed Apr 09, 2008 12:49 pm

 

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Geez I hate this stuff!
I'm in So.Cal working on a TN-1 (I'm on my 4th one). My wife is studying here on a separate F-1 visa. She has been receiving a SSHRC award from Canada to use in the US, paid out each year.
We have only been reporting our US income on the US non-resident EZ forms, and only our Canadian income on the Canadian forms. Since we were told that we were not residents of the US, we just naturally assumed that we are still Canadian residents. But now it's looking like that isn't the case either. Am I hosed here or what?
Anyone recommend someone in southern California who knows what they are doing when it comes to US-Canadian taxes with TN-1 and F-1 visas?
Ugh!

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 739
Location: Calgary

Posted: Wed Apr 09, 2008 9:44 pm

 

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You have to report all your income in both countries on both forms (T1 and 1040NR-EZ). If you read the instructions for the T1, it says to enter any W-2 information, etc. on your T1.

You file Form 8840 with the 1040NR-EZ to claim the tax treaty exemption.

If you foul up the US form it's not such a big deal, essentially what you are doing there is enumerating a list of what things you have had withholding taken from and sent to the IRS, which will usually be only the stuff listed on your W-2. If you don't declare your Canadian income to the IRS, it doesn't really matter, because Form 8840 essentially tells them to wire your withholding to Ottawa, so any undeclared Canadian income is largely academic. The only really important thing on the 1040NR-EZ is the W-2 information, and any other income that has had withholding tax deducted and automatically remunerated to the IRS.

The Canadian end is more important because you should have declared all your income to the CRA as Canada is your tax home and paid Canadian income tax on it all.

Also make sure you set your bank accounts up correctly, i.e. file Form W-8BEN with your US bank, and because you are still residents of Canada you should tell your Canadian bank you are resident in Canada even though you have a California address, so that they do not withhold Part XIII non-resident tax and send you a normal T5 instead.

Read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

Bear in mind if you claim the tax treaty exemption, you can only claim it for 5 years, i.e. they count up how many 8840s you have filed and if you try to file a sixth one they send you a lovely letter telling you that your tax home is now the US and you might want to think about cutting residential ties to your home country to avoid dual taxation.

They really started cracking down on that in the early 1990s, which is one of the reasons I left.
_________________
Steve.

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Requiem_11
New Member



Joined: 09 Apr 2008
Posts: 2
Location: Southern California

Posted: Tue Apr 22, 2008 8:38 am

 

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Thanks for the info and links. How do I go about changing 4-5 years of botched up tax forms for both countries? If I calculate and report it all correctly, is it just a redo ie. if for any given year I actually get a return (or larger return) will I get it, or will it just be a "be grateful we are not penalizing you" type of deal?

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