Paying taxes on a salary advance/bonus?

Hi there,

I started work in the US in August of 2009, and got an up front 'signing bonus' that is effectively a salary advance (I would need to pay back a prorated amount if I leave within 12 months). I will be paying taxes to the CRA for 2009, but not for 2010, but this advance/bonus was included as part of my 2009 W-2. Is it possible for me to pro-rate the advance for what was worked in 2009 in my Canadian taxes?

Thanks!

No.

Why are you reporting any US income on a Cdn return? If you left canada to live and to start work in US, you should be filing a departure return with a departure date.

If your departure date was before you earned any US income, none of it is reported in canada.

forums.serbinski.com is my preferred place to answer these questions, if you would like to go deeper.

Hi there,

I started work in the US in August of 2009, and got an up front 'signing bonus' that is effectively a salary advance (I would need to pay back a prorated amount if I leave within 12 months). I will be paying taxes to the CRA for 2009, but not for 2010, but this advance/bonus was included as part of my 2009 W-2. Is it possible for me to pro-rate the advance for what was worked in 2009 in my Canadian taxes?

Thanks!

As with most cross border tax questions it really depends. In many cases CRA (Canada Revenue Agency) will consider a bonus you received to be taxable in Canada if it was received before exiting Canada (as long as you properly severed your ties to Canada).

If you receive the bonus after you severed your ties from Canada you are only taxable in Canada on the income you earned before you moved. And agnelson is right in that you would need to file a final T1 Canadian return on exit.

The final Canadian tax return does however carry some tax implications e.g. deemed disposal of non-taxable Canadian properties.

Also note that as a non-citizen of the US entering the country you're required to file a dual status return. This would entail filing a 1040nr and a 1040 for 2009.

If you have any specific questions on the information above let me know and I can elaborate.

Cheers

Phil
250-661-9417

Just to clarify, as cdn, one is entitled to file a full year 1040 (reporting all 2009 income) instead of a dual-status, using tax credits and/or foreign earned income exclusion to eliminate the US tax on the Cdn income one would report, and to provide the best taxrate on one's US income.

Otherwise, Hogan's comments are bang-on.

agnelson

Thanks for the feedback...are you talking about the IRC 6013(h) election to file for the full year?

Phil

Just to clarify, as cdn, one is entitled to file a full year 1040 (reporting all 2009 income) instead of a dual-status, using tax credits and/or foreign earned income exclusion to eliminate the US tax on the Cdn income one would report, and to provide the best taxrate on one's US income.

Otherwise, Hogan's comments are bang-on.

Treaty non-discrimination.
A Cdn moving to US is allowed to be treated the same as a US citizen moving (back) to US.

So, 1040 is allowed, since US citizen would file this way, as is 2555, since this too would be available to USCs.

This geneasrlly yields lowest US tax, certainly over dual-status return.

I see what you're saying now.....that works for sure.

Thanks

Phil

Treaty non-discrimination.
A Cdn moving to US is allowed to be treated the same as a US citizen moving (back) to US.

So, 1040 is allowed, since US citizen would file this way, as is 2555, since this too would be available to USCs.

This geneasrlly yields lowest US tax, certainly over dual-status return.