Taxes/Payroll - Working in US/ Living in Windsor

[missedTheGCBus]

Right. NO issues in contributing to hsa. You can just keep it active for long term and if you move then you can anyway use it. nowadays there are more options of investing on hsa money too hence surely a good tax saving instrument.

@harirajmohan , @swan0206 any ideas if filing canadian taxes via regular mail instead of electronically and include IRS transcripts + proof of payment it will reduce chance of audit?

The CPA I am working with says it doesn't matter, but I think I read a post here somewhere on this forum that hard copy regular mail filing can reduce odds of audit?

 

[harirajmohan]

@harirajmohan , @swan0206 any ideas if filing canadian taxes via regular mail instead of electronically and include IRS transcripts + proof of payment it will reduce chance of audit?

The CPA I am working with says it doesn't matter, but I think I read a post here somewhere on this forum that hard copy regular mail filing can reduce odds of audit?

It doesnt matter as i was audited on both cases.
For my colleague's nephew, cra sent letter saying they dont want additional documents. Thinking they are not storing those additional docs(assuming in some cases) which is why people(including myself) started to get letters on asking for the same supporting documents we sent in the initial bunch. So no one knows how to avoid audit hence just send what you have and wait for audit to reply with same set of documents.

Later i started filing electronically to get the tax return assessed first(and later wait for any audit letter for sending support docs via file upload online).

 

[missedTheGCBus]

I

It doesnt matter as i was audited on both cases.
For my colleague's nephew, cra sent letter saying they dont want additional documents. Thinking they are not storing those additional docs(assuming in some cases) which is why people(including myself) started to get letters on asking for the same supporting documents we sent in the initial bunch. So no one knows how to avoid audit hence just send what you have and wait for audit to reply with same set of documents.

Later i started filing electronically to get the tax return assessed first(and later wait for any audit letter for sending support docs via file upload online).

Thanks I see, so when you e-filed you would wait for the audit to provide documentation, like proof of payment of US taxes etc?

Sounds like it doesn't matter either way

 

[tuhadapeo]

Hello All

I recently got a letter hinting for line item 512300 to be completed for RCA268. I'm enrolled in a 401k plan with my employer. Could anyone else with a 401k share if they had to fill out this line as well?

 

[tuhadapeo]

Hello All

I recently got a letter hinting for line item 512300 to be completed for RCA268. I'm enrolled in a 401k plan with my employer. Could anyone else with a 401k share if they had to fill out this line as well?

@harirajmohan @swan0206 - any thoughts on this?

 

[harirajmohan]

Hello All

I recently got a letter hinting for line item 512300 to be completed for RCA268. I'm enrolled in a 401k plan with my employer. Could anyone else with a 401k share if they had to fill out this line as well?

Usually we dont fill out the forms, line by line when we complete the return with online/offline software hence i am not sure how to interpret about what they are hinting.
Here is what i did:
Include your income in Canada with the total of (1040 filed total income line + 401k contribution in w2). Later include form RC268 at cra filing to mention the 401k amount.

 

[tuhadapeo]

Usually we dont fill out the forms, line by line when we complete the return with online/offline software hence i am not sure how to interpret about what they are hinting.
Here is what i did:
Include your income in Canada with the total of (1040 filed total income line + 401k contribution in w2). Later include form RC268 at cra filing to mention the 401k amount.

Thanks, that's what I had done. But for someone they aren't liking it, or maybe its the CRA agent in particular. Do you remember if your RCA form had any value for line 512300? Trying to gauge for folks who've successfully completed taxes did they actually had a value for that line even if its marked as zero.

 

[rthtor]

Thanks a ton everyone, this thread has been helpful!
I'll lay out certain assumptions based on my understanding so far before I ask the Qs -

1. I was working on a US H1B for a US employer running USD payroll into my USD account while physically in the US until late 2022. I'm not a US Citizen or a US PR.
2. For tax year (TY) 2023, everything in (1) is true, except that I was physically in Canada for all of TY2023 as a Canadian PR. I used the CRA test to figure out that I'm a "CA factual-resident for tax purposes". I used the IRS test to figure out that I'm a "US non-resident for tax purposes".
3. This means that my entire W2 income for TY2023 is actually Canada-sourced.
4. My company has been withholding USD tax at source for the entire TY2023.

Qs -

1. Am I right in assuming that my tax payment will be to the CRA and the potential FTC claim will be to the IRS and not vice-versa?
2. I need to file 1040NR in the US, is this correct?
3. If (2) is true, will simply filing the 1040NR be enough for a refund of the entire IRS withholding for TY2023?
4. Do I also need to file the IRS Form1116 and claim an FTC with the IRS?

Tagging @harirajmohan. Apologies for ping :'(, but saw you hadn't been online recently, so figured this would be needed.

 

[harirajmohan]

Thanks a ton everyone, this thread has been helpful!
I'll lay out certain assumptions based on my understanding so far before I ask the Qs -

1. I was working on a US H1B for a US employer running USD payroll into my USD account while physically in the US until late 2022. I'm not a US Citizen or a US PR.
2. For tax year (TY) 2023, everything in (1) is true, except that I was physically in Canada for all of TY2023 as a Canadian PR. I used the CRA test to figure out that I'm a "CA factual-resident for tax purposes". I used the IRS test to figure out that I'm a "US non-resident for tax purposes".
3. This means that my entire W2 income for TY2023 is actually Canada-sourced.
4. My company has been withholding USD tax at source for the entire TY2023.

Qs -

1. Am I right in assuming that my tax payment will be to the CRA and the potential FTC claim will be to the IRS and not vice-versa?
2. I need to file 1040NR in the US, is this correct?
3. If (2) is true, will simply filing the 1040NR be enough for a refund of the entire IRS withholding for TY2023?
4. Do I also need to file the IRS Form1116 and claim an FTC with the IRS?

Tagging @harirajmohan. Apologies for ping :'(, but saw you hadn't been online recently, so figured this would be needed.

If your income is in USD then why would tax being paid to cra.

File IRS.
Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.

 

[rthtor]

If your income is in USD then why would tax being paid to cra.

File IRS.
Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.

>If your income is in USD then why would tax being paid to cra.
Because the USD/W2 income was earned while physically present in Canada.

 

[harirajmohan]

>If your income is in USD then why would tax being paid to cra.
Because the USD/W2 income was earned while physically present in Canada.

I am not sure if you have taxes paid to US or to Canada.
So file to the country where your taxes were paid to in W2 and then file to second country mentioning the taxes paid to first country(and the difference if any).

 

[rthtor]

I am not sure if you have taxes paid to US or to Canada.
So file to the country where your taxes were paid to in W2 and then file to second country mentioning the taxes paid to first country(and the difference if any).

My US company has been withholding USD tax at source for the entire TY2023. I have a filed and approved deadline extension with the IRS.

 

[rthtor]

yes, Thats what I mean by payroll taxes, If I work remote than it means I am employed by US employer in Canada not in US, which requires them to deduct taxes and remit to CRA.

Since you are a Canadian resident you pay to CRA taxes on your global income, you can claim taxes paid to US as credit, thats what I mean by Foreign tax credit(FTC). When working remote completely from Canada, CRA is taking issue with claiming FTC on taxes paid to IRS. They are saying, Tax returns should be first filed in Canada and then take Tax credit on US side, thereby paying taxes to Canada and asking for a refund from IRS. This can result to cash flow issue as you have to pay CRA even though your taxes might have been withheld by your employer and paid to IRS.

From what I can see traveling few days a month is safest approach. thereby you can easily claim FTC and everyone is happy.


@harirajmohan If I can't get a refund from IRS on my Social Security, can I claim it as Foreign Tax Credit?

>From what I can see traveling few days a month is safest approach. thereby you can easily claim FTC and everyone is happy.
@ejackson6691, how does this affect CRA's protest against a claimed FTC?

Also, were you able to do what you've described here?

 

[rthtor]

If your income is in USD then why would tax being paid to cra.

File IRS.
Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.

@harirajmohan, thanks for your assistance so far!

QQ about -
>Mention/include the taxes paid in US.
Where would this be denoted?
>Include RC268 form to get the 401k income exempted from tax.
I don't think I can include this because this form is only for cross-border commuters.

 

[harirajmohan]

My US company has been withholding USD tax at source for the entire TY2023. I have a filed and approved deadline extension with the IRS.

I still cannot interpret if your withholding(tax at source) is being paid to IRS or CRA. I havent seen w2 tax being paid to cra hence i cannot compare or ask questions based on that.
Irrelevant of above, simply follow this logic - file tax return to the country where your w2 tax is paid. Then include that tax paid in the second country and file the return.

Per my understanding, CRA cannot have multiple forms for same 401k contribution exemption as i assume that they just named the form with "commuters" representing the majority of users. Lets wait for others comments on it or consult some tax consultant to confirm or you can pay additional tax for that contribution.
may be you can search if you have any additional form to get 401k contribution exemption.