Taxes/Payroll - Working in US/ Living in Windsor

[neil_user]

Hi all- CRA has sent me notice of reassessment mid last year for 2020. CRA basically asked for US tax return proof has they had not received it. My accountant had sent the IRS transcripts to CRA after that. Just now, they sent notice of collection saying I still owe them the amount. Looks like CRA never received my US tax return. Anyone had similar issue before and knows the fix for this?

Thats why I always send in a paper return and file after I receive physical IRS transcript.

 

[marako1201]

Wait did you not pay any tax to Canada? You do need to pay the difference in tax rates b/w US and Canada to Canada since you would be a resident here. Yes RRSP would save you some taxes, TFSA is after tax contribution.

For ex, you paid 30k taxes to USA and your Canadian liability is 40K, then you would pay the difference of 10K to Canada after claiming 30K of Foreign tax credit.

If your US and Canadian tax rates are the same, then only you wouldn't owe anything to Canada. Since you mentioned BC, this scenario is impossible unless you commute to NYC. I could probably do a better job with your taxes, you should get a decent accountant.

Thanks. My accountant was adamant that I do not pay any taxes to the CRA. I should have gone to a different accountant a long time ago instead of wasting almost a year in going back and forth with the CRA on this matter. Had I known I owe the tax difference to the CRA, I would have paid it a long time ago and wouldn't dealt with all the stress and collections notices and calls.

I already contribute to 401K and Roth 401K in the U.S through my employer, would I be able to claim credits for those contributions as well? How would contributing to RRSP impact tax liability, if any?

 

[mayple]

Thanks. My accountant was adamant that I do not pay any taxes to the CRA. I should have gone to a different accountant a long time ago instead of wasting almost a year in going back and forth with the CRA on this matter. Had I known I owe the tax difference to the CRA, I would have paid it a long time ago and wouldn't dealt with all the stress and collections notices and calls.

I already contribute to 401K and Roth 401K in the U.S through my employer, would I be able to claim credits for those contributions as well? How would contributing to RRSP impact tax liability, if any?

So to clarify, for the past years that you filed with CRA, you never paid any taxes to CRA? So what was the purpose of your tax filing to CRA then? If you file, then the expectation is to calculate correct taxes. Depending on your income and other circumstances, more than likely you would have owed some taxes to CRA. I thought that was common knowledge and has been discussed on this forum several times before. Did your accountant not calculate nor advise you of your tax obligations correctly?

 

[marako1201]

So to clarify, for the past years that you filed with CRA, you never paid any taxes to CRA? So what was the purpose of your tax filing to CRA then? If you file, then the expectation is to calculate correct taxes. Depending on your income and other circumstances, more than likely you would have owed some taxes to CRA. I thought that was common knowledge and has been discussed on this forum several times before. Did you accountant not calculate nor advise you of your tax obligations correctly?

Well, in hindsight, I should have hired a different accountant but she's been doing cross-border taxes for 35+ years for US and Canadian border agents and business people. In any case, the reason I was filing my return with the CRA was to report my U.S. income and claim credits for taxes paid in the U.S. Also, I needed to file at least 3 years of return in the U.S. to be eligible for Canadian citizenship.

My accountant filed my return with the IRS first and then with the CRA for the past 3 years. CRA had sent Notices of Assessments for each year with zero balance owed but all of a sudden they reassessed my 2019 return in late mid 2021 and then later reassessed my 2020 return. I have contacted another CPA to review my return and tell me what my taxes owed to the CRA will be. I'm learning only now that I do have to pay additional taxes to the CRA because of BC/Canada being at a higher tax rate.

Hopefully, my 2021 return which will be filed in a few weeks is straightforward and I don't end up owing tens of thousands of dollars in taxes in Canada as well.

 

[mayple]

Well, in hindsight, I should have hired a different accountant but she's been doing cross-border taxes for 35+ years for US and Canadian border agents and business people. In any case, the reason I was filing my return with the CRA was to report my U.S. income and claim credits for taxes paid in the U.S. Also, I needed to file at least 3 years of return in the U.S. to be eligible for Canadian citizenship.

My accountant filed my return with the IRS first and then with the CRA for the past 3 years. CRA had sent Notices of Assessments for each year with zero balance owed but all of a sudden they reassessed my 2019 return in late mid 2021 and then later reassessed my 2020 return. I have contacted another CPA to review my return and tell me what my taxes owed to the CRA will be. I'm learning only now that I do have to pay additional taxes to the CRA because of BC/Canada being at a higher tax rate.

Hopefully, my 2021 return which will be filed in a few weeks is straightforward and I don't end up owing tens of thousands of dollars in taxes in Canada as well.

Thanks. That is a real miss by a qualified CPA. I hope you're not going to have to pay penalty because it doesn't seem to be your fault. But regardless, thousands in additional taxes seems pretty excessive. I would have imagined that the difference would be minimal (no more than 10k for most folks) but 20-30k is pretty hefty.

 

[mayple]

I use one of the below:
US: olt, turbotax, taxact, taxslayer
Canada: Simpletax, ufile.

You can file online for Canada also but not sure if it works for you.

Filing methods/steps i use to avoid audit from cra: File US online. Wait till refund arrives. Apply for transcript via mail from IRS and State. File Canada one via paper(after including original W2, original transcripts).
Stupid thing what cra does is to ask for these documents in original for many of us(my colleagues) hence we follow this method. Even on 401k exemption i could not get it last year because they wanted all damn documents in original(the ones that were physically mailed to us).

Hi - are you able to provide some insights on the tax software you've used for Canadian filings. Is there one that you recommend more than the other? I tried testing out simpletax/wealthsimple, but not sure how to tell whether i've included all items correctly. How did you become certain of your calculations before submissions? e.g. There is a section that asks about "Other Foreign Income & Foreign Tax Credits" , I'm assuming that is where you add ALL US taxes paid in total (i.e. federal, state, FICA and Medicare)? If so, how does the software figure out how much was federal tax vs state vs other categories. I imagine that difference in types of taxes is what will be used to assess equivalent Canadian tax obligations (federal, provincial etc.)?

 

[harirajmohan]

Hi - are you able to provide some insights on the tax software you've used for Canadian filings. Is there one that you recommend more than the other? I tried testing out simpletax/wealthsimple, but not sure how to tell whether i've included all items correctly. How did you become certain of your calculations before submissions? e.g. There is a section that asks about "Other Foreign Income & Foreign Tax Credits" , I'm assuming that is where you add ALL US taxes paid in total (i.e. federal, state, FICA and Medicare)? If so, how does the software figure out how much was federal tax vs state vs other categories. I imagine that difference in types of taxes is what will be used to assess equivalent Canadian tax obligations (federal, provincial etc.)?

Yes thats the only section you need to declare total income and taxes paid. Not sure what else you want to verify with installed software as if the formulas are different. Website rules are up to date as its centralized.
As long as you are not paying any additional tax, no point in researching too much on hunting for different software.

Try turbotax software as my colleague uses it.

 

[mayple]

Yes thats the only section you need to declare total income and taxes paid. Not sure what else you want to verify with installed software as if the formulas are different. Website rules are up to date as its centralized.
As long as you are not paying any additional tax, no point in researching too much on hunting for different software.

Try turbotax software as my colleague uses it.

Thanks - I'm asking to validate because its clear from many other posts that folks are getting re-assessments to the tune of thousands of dollars (20-30k) and it seems pretty excessive. Also, does this software break down federal vs provincial owed? I could only see one section on the left pane where it says shows the tax due under "Owing", but doesn't break it down. I'll try turbotax to reconcile these numbers as well.

 

[tuhadapeo]

Thats why I always send in a paper return and file after I receive physical IRS transcript.

this might be a basic idea question, but do you order transcripts from federal and state both? What do they look like? Is that a staright forward process to obtain one?

 

[mayple]

this might be a basic idea question, but do you order transcripts from federal and state both? What do they look like? Is that a staright forward process to obtain one?

Yes, Federal and State transcripts are requested separately. A long term cross border Canadian origin worker told me that even filing copies of your US returns is often times sufficient. So you could always send in copies of ur US tax returns along with Canadian.

 

[lostrocked]

QQ - If my wife lives in Canada for full year and I live less than 180 days. Do I still have the pay taxes in Canada for the full year even if I dont earn anything in Canada?

 

[swan0206]

QQ - If my wife lives in Canada for full year and I live less than 180 days. Do I still have the pay taxes in Canada for the full year even if I dont earn anything in Canada?

Where did you established your residency? If you haven't declared your residency in Canada and just commuting randomly , you might not have to pay any taxes in Canada but if you have been a resident of Canada but just that you haven't completed 180days, you still need to file taxes. I have filed taxes for even one month, coz i moved at the end of the year(Dec) and established my residency here, yes i donot earn anything in Canada as well.

Better reach out to a CA or tax consultant for the clarification

 

[neil_user]

Yes, Federal and State transcripts are requested separately. A long term cross border Canadian origin worker told me that even filing copies of your US returns is often times sufficient. So you could always send in copies of ur US tax returns along with Canadian.

From my exp, they don't accept tax returns. Anyone can put anything on the returns that you submit. Thats why they need original IRS/State transcripts as proof of foreign taxes paid.

 

[sukhimicrobio]

Hi All,
I have a very basic query..
1) Can anyone inform me for the US Canada border commuters (Living in Canada and working in US), if we need to file the 1040 NR or 1040 form for the US tax return?
2) Is there any tax difference among the 1040NR vs 1040?
Thank you!

 

[tuhadapeo]

From my exp, they don't accept tax returns. Anyone can put anything on the returns that you submit. Thats why they need original IRS/State transcripts as proof of foreign taxes paid.

so do you order an online transcript? Print and attach with Canadian tax? Or request them by mail?