Question about claiming the FICA tax credit.

[i5walker]

Hi there,
I did a search on this topic before I dared to add yet one more question to this very-very-useful forum, but I couldn't find a detailed answer to my question, hopefully I can get a hint from someone on this.

I moved to the US on 2005 for a new job. That year I paid FICA taxes in the US and also had already paid the maximum of CPP/EI in Canada.

During 2006 and 2007 I only paid FICA taxes (I was a non-resident of Canada for tax-purposes so I didn't file returns in Canada.)

I moved my tax-home back to Canada in 2008, so I have to file a dual-status return for last year. In 2008, I also paid both FICA taxes for the part of the year living in the US and CPP/EI for the time in Canada.

So, my guess is that I should only be allowed to claim the FICA taxes on my Canadian return of 2008? I guess I should have done that also for the 2005 return but it's probably too late. Anyway, about 2008, should I claim as a tax credit the total of the FICA taxes I paid? It seems like a lot to claim, giving that I didn't work in Canada for too long last year, the amount of FICA taxes is over 50% of the tax I got deducted in Canada in 2008. Somehow it doesn't feel right.

Finally, I guess I should use form T2209 for this?

thanks in advance,
-I

[Steven]

If I understand you situation correctly you can't claim a tax credit because you were a tax resident of the US when the taxes were withheld. Your T1 needs to be pro-rated to the period of time after you moved back to Canada (i.e. your deductions and exemptions reduced to the number of days you were resident in Canada). You can only claim a tax credit for taxes paid outside of Canada for work done outside of Canada while you were resident in Canada, which you weren't, from the sounds of it if you're filing a dual-status return in the US.

[i5walker]

Hi Steven,
You understood the situation correctly and I guess you must be right. That's why it didn't make sense to me, although for the research I did, I was under the impression that I could claim that tax credit. The key as you say, is that I wasn't a resident when that tax was withheld. That was the missing piece. Very grateful for your endless valuable contributions to this forum.

-I

[agnelson]

Just to re-emphasize this point. If one is resident in canada while working as an employee in US, and thus required to pay FICA and also report the wages on thier Cdbn return, the FICA tax is part of the allowable US taxes eligible for foreign tax credit on your Cdn return.

If you are not resident in Canada, then the US wages are not reported as income in any event, and thus NO US tax arising from that income can be claimed, inclding FICA (even if it were eligible, since no US income was reported, the calculation would still yield ZERO credit).


Rememebr that with as little as 6 quartes of FICA payments, you will be entitled to some Social Security upon retirement, if you work a combined total of 10 years in US/Canada.