My_question_is: Applicable to both US and Canada
Subject: Who do I pay?
Expert: taxman at centa.com
Date: Saturday October 22, 2005
Time: 05:27 PM -0700
QUESTION:
I am an American Citizen living in Montreal with my wife who is completing
her medical residency. I will have lived in Montreal for all of 2005 and
earned some income doing contract work across the border in NY. No taxes
have been withheld in the US, as I am self employed. I did not earn any
income in Canada, although my wife did. My wife's taxes are easy because
her Canadian income can be exempted on our US return. However, I'm not sure
to whom I will need to pay taxes. I'm pretty sure that I will owe social
security type taxes to Canada rather than the US, and I suspect that I will
pay the income tax to Canada and somehow exempt it by treaty in the US, but
I'm not sure as none of the publications that I can find seem to deal with
my particular wrinkle of being a US citizen, living in Canada, and working
in the US. Do you know who I will need to pay and if there are any
publications dealing with my situation that might help me? Thank you very
much.
==================================
david ingram replies:
Don't ever expect a reply in two minutes again. I was sitting here
answering some emails and you dropped in on top of more than 100, most of
which will not be answered because I only answer about 30 a week.
You and your wife will need to file - drum role please - a total of 6 or 7
income tax returns for 2005.
1. You and your wife will file a joint US 1040 with a Schedule C to report
your US self-employment. However, as a resident of Canada, you are exempt
from both halves of the US FICA (social security) but will pay both halves
of the QPP (Quebec Pension Plan) which is analogous with the Canada Pension
Plan.
That return will also have a 2555 to exempt your wife's earned income up to
$80,000 and possibly one or more 1116 forms to claim foreign tax credits for
any tax you pay to Canada on interest, dividends, rents, royalties or your
wife's Canadian earned income over $80,000.
2. For various reasons, you and your wife "might" decide to file two federal
US returns as "MFS" (married filing separately).
You will also file a New York State Tax "IT-203" return as a non-resident to
report your self-employed New York State income.
Neither Canada nor Quebec has a joint tax return so you will each have to
file separate federal and provincial forms.
3. You will file a Quebec Income Tax return reporting the self employed
income and paying both tax and QPP.
4. You will file a Canadian Federal T1 General with a T2124 business
schedule. You have to prepare the Quebec return first to calculate the QPP
payable to calculate your personal tax credit amounts.
5. Your wife will file her Quebec Return
6. Your wife will file her Canadian T1-General
If you need help, your situation is my specialty and we would be pleased to
look after it for you by fax, email, snailmail or courier.
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a regular
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Those outside of the Lower Mainland will be able to listen on the internet
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Call (604) 280-0600 to have your question answered. BC listeners can also
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Callers to the show and questioners on this board can also attend the
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And for those in the Vancouver area, Fred is running an infomercial for 1/2
hour every night in October on Channel 10 television at "groooaaannnn" 1 AM
in the morning. It has a couple of useful concepts in it that can be
recorded to really get the idea.
David Ingram's US/Canada Services
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Disclaimer: This question has been answered without detailed information or
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