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QUESTION:
I am a Canadian who was working in the US on a TN Visa for a travel book company in their mapping division up untill July, 2003 at which time the division closed and I was laid off. I was offered a writing assignment on a contract basis with the same company. The writing assignment was about travel in B.C. As a result, I spent 4 months in B.C. researching and writing. My questions are:
1. Should I just file a US tax return? -- payments for the assignment have my US social security number.
2. Can I deduct a standard per diem for my travel expenses? If so how much can I deduct?
Thanks very much for your time.
XXXXXXXXXX
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david ingram replies:
It is not gray or even fuzzy. It is black and white.
Strangely enough, Earl Brown (editor and photographer for the MILEPOST) just sent me my copy of the 56th annual MILEPOST a couple of days ago and I did a tax return for another writer doing a northern BC travel book a while ago as well. Earl is also a Tax consultant in Fort Nelson up north and if you make it to Nelson in your travels, you should drop into his office - call 250 774-3488.
In the meantime, you should file a US 1040 or 1040NR for the seven months you were working in the USA and file a Canadian T1 for the time you were working in Canada in one of the two examples following:
If you were in the USA for the year before or had gone down there intending to stay, you should file the Canadian return for the short period of your return and pro-rate your exemption amounts.
If you were just there for six or seven months, you should file your Canadian return for the whole year and include the US earnings and claim a foreign tax credit for the US tax and FICA and Medicare paid as well as the tax paid to any states you may have worked in.
The above will largely be governed by how you filed your 2002 returns. If you filed 2002 or before as a departing Canadian, you would be an arriving Canadian in 2003.
There is no standard per diem for "ordinary" people to deduct in Canada. You must keep track of your expenditures and deduct what you spent. If you have lost your receipts or did not keep them, start reconstructing them sooner rather than later.
The good news is that neither your US nor your Canadian returns are due until June 15th. The bad news is that you have to so both and maybe some state ones as well.
Hope this helps. We are, of course, always available to assist you with the preparation of both countries and any required state returns by mail, email, fax or courier.
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