Taxation of Canadians in the U.S.

Taxation of Canadians in the U.S.

  • A Foreign Alien is anyone who is not a U.S. Citizen (Refer to our notes on residency determination).
  • A Foreign Alien will fall into one of the following categories for U.S. tax purposes depending on the facts:

 

Non-Resident Alien

    • Are required to file a form 1040NR.
    • The residency determination is done in a separate topic (refer to our notes on residency determination). 
    • Must use single or married filing separate status.
    • Canadians will be able to claim exemptions for children and spouse.
    • A non-resident alien is subject to tax on U.S. source income only. Income is considered a U.S. source it is earned through an activity or investment in the U.S.
    • A U.S. source income is classified as “income not connected with a U.S. business” or “income effectively connected with a U.S. trade or business”. They both are taxed at different rates.

Resident Alien

  • Are required to file a form 1040.
  • If one of the married taxpayer is not resident in the US for the full calendar year, an election can be made to treat him/her as a full year resident of the U.S. (6013 (g) and 6013 (h))

Dual-Status Alien

  • Two tax returns are required to be filed.
  • In the year of arrival, 1040 is the return and 1040NR is the statement.
  • In the year of departure, 1040NR is the return and 1040 is the statement. Married filing jointly return is not allowed to be filed. 

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