QUESTION:
I am a dual citizen who lived in Canada and moved to the US in the 2004 tax
year. I left my wife in Canada while her Visa processed. She moved here in
April 05. I filed a leaving Canada return for 04 as well as my US returns.
My wife filed a regular Canadian return for 04. She moved to the US in 05
and has been working for her old Canadian employer on contract. Is this
income taxable in the US or in Canada first? She is doing consulting work
from home in the US. They are direct depositing Cash into her Canadian bank
account. Last year it was about 50K Canadian.
=====================================
david ingram replies:
your wife will file a leaving Canada return for 2005 showing her date of
departure and pro-rating her exemptions and filing T1161, 1243 and 1244 if
necessary.
Her income earned in the US is NOT part of her Canadian return although
another method would be to take the annual income and put it all on Line 135
and then deduct the US portion on line 256 under article IV of the US /
Canada tax convention.
ALL of her income is reportable on your US return. She can exempt the
Canadian portion on Form 2555.
You have the choice of a joint return or two Married filing separate returns
in the US.
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