Tax Help - Canadian citizen/resident working in USA

I am a Canadian citizen living in Canada, who commutes to Michigan daily for work.

I am preparing my taxes and have a few questions. As a starting point I used my return from last year (professionally prepared), however my income was significantly lower in that tax year.

Heres where Im at;
For US Federal:
- 1040NR -->Return ~1k
For US state:
- MI-1040 -->Return ~.2k
For Canada:
- 5006-R
- 5000-S1
- 5000-S11
- 5006-C
- 5006-TC
- 5006-S11
Resulting in 5006-R line 435 = 4k Total Payable

Now I believe that in Step 5 of the 5006-C I could be claiming Foreign tax credits. Is this an option for my situation? (This was never used before, because my income was so little - part time work)

I've printed both the T2209 E and the T2036 and assuming these credits are applicable to my situation...I need some help.

What are business vs non-business incomes defined as, and what income do I have?

Thanks in Advance!

Non-business income means stuff that is not subject to FICA taxes or CPP/EI withholding generally speaking, e.g. income from investments, bank interest etc.

I can't really comment on your personal situation but yes of course you should be claiming foreign tax credits for the US federal and State income taxes. You can claim a federal foreign tax credit on T2209 and a Provincial one on T2036.

Under the tax treaty you can also claim FICA withholding as a Federal foreign tax credit.

Ontario taxes are higher, so you will undoubtedly pay additional taxes on top of what you've already paid in Michigan after you've claimed the credit.

The general guide for the T1 gives more information, you can sometimes work out the exchange rates to your advantage, e.g. you can use the ones from www.bankofcanada.ca on the day you were paid or the annual CRA rate they publish, whichever works out better for you.

Great Steve, thanks!

I will fill out these two forms and go from there.

Where can I find more info/forms pertaining to: "FICA withholding"?

Thanks

It should be listed on your W-2, Social Security/Medicare.

Hello,

I am actually in a very similar situation, as I was living in Windsor, and working in Michigan.

Last year I had HR Block do my taxes, this year I was going to attempt to do them myself. I am hoping that the forms you listed above are the only ones I need to fill out, however am very curious as to whether or not you are filling these out by hand or with a piece of software?

I looked at the US TurboTax, but it does not have a 1040NR form with it.

Is there any software to do this job?

Any insight would truly be appreciated.

Regards,
Sean.

I wonder why taxes are slower in Canada than in the US. (Quicktax v. TurboTax)

I'm sure there's some software out there somewhere that can do it, but the reality is that there aren't many people filing as non-residents with say, Michigan state taxes to take into account so doing it the old-fashioned way seems the best idea.

Like I said, on the Canadian side of it you can probably use Quicktax because you're filing as a resident, although you probably need the whizz-bang version to do the foreign tax credits, I suspect. And you've still got to do the conversions yourself.

On the US side it depends on so many things, how long you were there being one of the main ones so get 1040NR and the State forms and read the instructions carefully.

Steve,

Really appreciate the well detailed, quick response!

My plan is basically to look at last years US tax returns and go from there to know what forms I need to submit.
I imagine I should be able to find these forms somewhere, I am just hesitant to do it by hand in fear of my handwriting!

Again, I wasn't living anywhere other than Canada while working in Michigan so not necessarily sure how relevant the "how long you were there" clause will be. I'm hoping that with a University degree, I can do my taxes myself rather than have to find someone to do them for me....here's hoping though...

Hello,

I received refund after filing us tax return. My question is how the refund effets my foreign tax credits?

Thanks.

Well you've overclaimed on the credit so you either file a T1 adjustment and return it, or you can have a balance owing if it's some trivial amount. Good reason not to do them both simultaneously, i.e. do the US one first, wait for the refund, then do the Canadian one.

Assuming you're honest.

I'd give the CRA a call and ask them.

I got it, thanks very much.