My_question_is: Applicable to both US and
Canada
Subject: US citizen working in Canada; what are my tax liabilities?
Expert: [email protected]
Date: Friday January 04, 2008
Time: 12:54 AM -0000
QUESTION:
I am planning to start working for a canadian company in toronto, ontario on Feburary 1st, 2008. I have a wife and 4 kids whose ages at the end of 2008 will be 18, 16,14 and 3. My wife is a homemaker and the children will provide no additional income. My estimated gross will be 195,000 with rental costs of approx. 30,000. My questions are the following: What is my estimated provincial and federal tax liabilities and what credits am I eligible for? I will also be maintaining a residence in knoxville, tn USA and will be reporting the month of January's income earned in the USA. Next Question is what are my liabilites/credits for the income earned in Ontario,CA? Thanks for your assistance in this matter.
-----------------------------------------------------------------------------------------------------Subject: US citizen working in Canada; what are my tax liabilities?
Expert: [email protected]
Date: Friday January 04, 2008
Time: 12:54 AM -0000
QUESTION:
I am planning to start working for a canadian company in toronto, ontario on Feburary 1st, 2008. I have a wife and 4 kids whose ages at the end of 2008 will be 18, 16,14 and 3. My wife is a homemaker and the children will provide no additional income. My estimated gross will be 195,000 with rental costs of approx. 30,000. My questions are the following: What is my estimated provincial and federal tax liabilities and what credits am I eligible for? I will also be maintaining a residence in knoxville, tn USA and will be reporting the month of January's income earned in the USA. Next Question is what are my liabilites/credits for the income earned in Ontario,CA? Thanks for your assistance in this matter.
david ingram replies:
You really require someone to do the calculations for you and your family.
We would charge in the $400 range to do that for you.
In he meantime, the following which I did answer in November might give you an idea.
In your case, because all the income is in your name, tax will be significantly higher in Canada because you will be paying on one income and you will be paying Ontario Tax while coming from essentially tax free Tennessee
On the other hand, medical insurance will be significantly lower.
--------------------------------------------------------------------
________________________________________________________________
david ingram replies:
As an esoteric exercise, I decided to see what the difference actually was because Canadian taxes are NOT always higher than the US, particularly where two spouses have equal earnings.
The big difference is that the US has a joint tax return rate and when one spouse works an the other does not, a discrepancy does arise.
I used a US salary of $60,000 and a joint 1040 and MI 1040.
I did not use any deductions other than the standard deduction and did not claim for any children.
The results were
US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
If you had lived in Detroit, the city tax would be $1,470 changing the figures to
a total of $13,857.00 US or $15,715.14 Canadian
I converted the $60,000 to $68,045.62 Canadian
The results were
Cdn Fed tax of 9,581.69
ON tax of 4,659.14
CPP of 1,910.70
EI of 729.30
for a total of 16,880.83 which converts to $14,884.86 in US funds
The difference is $2,497.86 or about $200 a month. if you did not move from a Michigan city with a tax return or a difference of (14,884.86 - 13,857) $1,027.86 if you moved from Detroit
Then - (I was intrigued) I tried it with you both receiving $30,000 US
The results were
US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
and $1,470 Detroit tax 'IF' There is no change
Then I decided to show what would happen to a couple who moved to Canada and both worked equally.
I converted the $60,000 to $68,045.62 Canadian but split it into 2 returns of $34,022.81
The results were
Cdn Fed tax of 3,474.97 x's 2 or 6,949.94
ON tax of 1,721.67 x's 2 or 3,443.34
CPP of 1,510.88 x's 2 or 3,021.76
EI of 636.23 x's 2 or 1,272 .45
for a total of 14,687.49 which converts to $12,950.86 in US funds
and is only a difference of 12,950.86 - 12,387 or $563.86 or less than $50.00 a month AND qualifies your wife for her own CPP.
Of course, if you moved from Detroit to Windsor, you would be paying ($13,857 - 12,950.86) $906.14 LESS living in Canada.
For the record, I would normally charge a minimum of $400 Cdn for this 'what if' calculation and your question was rejected originally along with another 100 or so. However, it caught my eye and I decided to use it as a major answer.
The investment part of your income will also cause some differences because Canada will tax the dividends and capital gains differently, likely a little more. However, if you switched your accounts to Canadian securities, the tax may be a little less because of Canada's dividend tax credit.
Hope this helps a bit.
------------------------
David,
I am a U.S. citizen and resident, married to a (non-working) dual
U.S.-Canadian citizen. I recently learned that the company where I've worked for
the last 20+ years is closing its doors near the end of this year. I'm 55 and
can't get my pension for at least 5 years...10 years if I want a full pension.
We've been thinking of the idea of moving across the border to Canada (wife
would sponser me), and I have a question. Would it make any sense tax-wise for
me to live and work in Canada, pay into CPP for 5 or 10 years? I understand that
Canadian taxes are higher than in Michigan, and I have mutual funds and other
savings that are generating about $10,000 in yearly interest/dividends/capital
gains that I would be leaving in the U.S.
Thanks,
david ingram replies:
As an esoteric exercise, I decided to see what the difference actually was because Canadian taxes are NOT always higher than the US, particularly where two spouses have equal earnings.
The big difference is that the US has a joint tax return rate and when one spouse works an the other does not, a discrepancy does arise.
I used a US salary of $60,000 and a joint 1040 and MI 1040.
I did not use any deductions other than the standard deduction and did not claim for any children.
The results were
US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
If you had lived in Detroit, the city tax would be $1,470 changing the figures to
a total of $13,857.00 US or $15,715.14 Canadian
I converted the $60,000 to $68,045.62 Canadian
The results were
Cdn Fed tax of 9,581.69
ON tax of 4,659.14
CPP of 1,910.70
EI of 729.30
for a total of 16,880.83 which converts to $14,884.86 in US funds
The difference is $2,497.86 or about $200 a month. if you did not move from a Michigan city with a tax return or a difference of (14,884.86 - 13,857) $1,027.86 if you moved from Detroit
Then - (I was intrigued) I tried it with you both receiving $30,000 US
The results were
US fed tax of 5.714
MI tax of 2,083
FICA 3,720
Medicare 870
For a total of 12,387 which converts to $14,048.02 in Canadian funds
and $1,470 Detroit tax 'IF' There is no change
Then I decided to show what would happen to a couple who moved to Canada and both worked equally.
I converted the $60,000 to $68,045.62 Canadian but split it into 2 returns of $34,022.81
The results were
Cdn Fed tax of 3,474.97 x's 2 or 6,949.94
ON tax of 1,721.67 x's 2 or 3,443.34
CPP of 1,510.88 x's 2 or 3,021.76
EI of 636.23 x's 2 or 1,272 .45
for a total of 14,687.49 which converts to $12,950.86 in US funds
and is only a difference of 12,950.86 - 12,387 or $563.86 or less than $50.00 a month AND qualifies your wife for her own CPP.
Of course, if you moved from Detroit to Windsor, you would be paying ($13,857 - 12,950.86) $906.14 LESS living in Canada.
For the record, I would normally charge a minimum of $400 Cdn for this 'what if' calculation and your question was rejected originally along with another 100 or so. However, it caught my eye and I decided to use it as a major answer.
The investment part of your income will also cause some differences because Canada will tax the dividends and capital gains differently, likely a little more. However, if you switched your accounts to Canadian securities, the tax may be a little less because of Canada's dividend tax credit.
Hope this helps a bit.
------------------------
On December 25, 2007, David Ingram
wrote:
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax service and help
However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. For the last two
weeks, I have just found out that my own email notes to myself have been spammed
out and as an example, as I write this on Dec 25, 2007 since June 16th, my
'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have
actually looked at and deleted and I have actually answered 1234 email questions
for clients and strangers without sending a bill. I have also put aside
847 messages that I am maybe going to try and answer because they look
interesting. -e
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$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
David Ingram expert income tax service and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty advice on bankruptcy
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax service and help
Therefore, if an email is not answered in 24 to 36 hours,
it is likely lost in space. You can try and
resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you
will have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.
david ingram
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Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax service help.
Disclaimer: This question has been answered without detailed
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Canada Canadian American Mexican Income Tax service and
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Phone consultations are $400 for 15
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This is not intended to be definitive but in
general I am quoting $900 to $2,900 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,100 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two countries
$2,900 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $200.00 up.
With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
$250.
A Business for $400 - Rental and business likely
$550 to $700
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
This from "ask an income trusts tax service and immigration
expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
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