Untangling Canada & US Taxes - Help Needed

**DerJaeger** · 03-17-2007, 12:17 PM

I need some help from someone who has experience with filing taxes in the US and Canada for the same financial year -- or a referral to someone who can prepare my income tax returns for this situation.

Last year I resided and earned income in both Canada and the US, so I must file taxes in both Canada and the US. In both countries, my tax situation is straightforward.

However, in order to avoid double-taxation, you need to know how much tax you will pay in both countries... but you don't know that until after you file your taxes. Seems like a real chicken and egg problem, but I can't seem to find any information anywhere that outlines what the correct steps are in this situation.

So... anyone else here wrestled with this problem before? If so, how did you resolve it?

**highflyingpilot** · 03-18-2007, 01:00 AM

Indeed...I face the exact same problem so I just took it to someone to do my return for me. Sorry I can't be of much more help

**DerJaeger** · 03-19-2007, 09:20 AM

Originally Posted by highflyingpilot

Indeed...I face the exact same problem so I just took it to someone to do my return for me. Sorry I can't be of much more help

Did you use a tax agent who specializes in doing cross-border taxes like this, or does H&R Block or some other generic tax firm do this? I can't for the life of me find one in DC that seems to specialize in this, but maybe I'm just not looking in the right places.

**davep** · 03-20-2007, 12:45 AM

No chicken and egg problem.

You first pay taxes to the country in which you are NOT a tax resident. You only pay taxes on the income you made from that non-resident country. Then you pay taxes to the country in which you ARE a tax resident. You will have to pay taxes on income from both countries to that resident country, but can claim a 'foreign tax credit' for the taxes that you paid to the non-resident country. Make sense?

NB: tax resident is not the same thing as permanent resident, legal resident, or any other resident. you need to go through some flowchart form crap to determine what your tax residency is.

I'm not a tax guy, but a canuck living in the US for a few years (still tax resident in canada) with income from both... let me know if this is unclear.

**davep** · 03-20-2007, 12:48 AM

Originally Posted by DerJaeger

Did you use a tax agent who specializes in doing cross-border taxes like this, or does H&R Block or some other generic tax firm do this? I can't for the life of me find one in DC that seems to specialize in this, but maybe I'm just not looking in the right places.

Another buddy in the same situation as me didn't feel like figuring it out for himself, so he took it to H&R block. The situation you've described (so far) doesn't sound very complicated so any place should be able to do it for you.

**elchupanebre4** · 03-21-2007, 12:54 AM

File your CA taxes. Once you know the tax paid get Fed. form 1116- Foreign Taxes paid. This will give you a credit towards the US taxes you owe. I'm failry certain it isn't too much more complicated than this, but I can look it up at work within the week if you need me to. (I work as in intern in tax accounting, and while I file individual returns 30 hours a week generally only see this on forieng investment income, but the same prinicipal applies.) Also if you want to see a professional, any compentent CPA firm in the area should be able to either advise you or do your taxes. As long as you don't have a Sch. C or Sch. A shouldn't be too big of a fee (3hrish or $150-350, but I would advise avioding H&R Block, they are ok for your 14 year olds basic return, but have a rep as the worst in the industry, and $100 saved in fees might cost you a whole lot on your return). I would point out that his late in the game you might not be able to get a professional preparer to take you on, usually the cutoff is 3/15, and an extension would end up costing you fees on the taxes you owe. Worse comes to worse if you want to save money, but would like to be 100% sure they are done right, file the CA return, and then go to a CPA for your Federal return. It's not to complicated of a return, most people dread taxes. PM if you need me to wal through something, like I said I'm an intern, but this is my second tax job..

**DerJaeger** · 03-21-2007, 05:31 AM

Thanks for the advice guys. I'll see if I can find a good local CPA for the US taxes and take it from there. I can probably handle the Canadian one myself, since it is fairly straightforward.