# Foreign income reported on W2



## cheenus (Apr 5, 2018)

Hi,
I have a technical question regarding how to fill in my 1040 in this specific case:

I am an Indian citizen living in the US.
Part of 2017 I was living in the Canada. In Canada I was working for the US company's Canadian subsidiary.

I was vested some stocks as part of my benefits from the US company. As it was vested while I was working in Canada it was taxed in Canada. 

I also received a W2 for the same amount without any taxes being withheld.

Effectively I have a W2 over an amount which has already been taxed in Canada. And it is also reported in the T4 (Canadian equivalent of W2).

The question is - how do I report the income on my 1040? 
If I report it as a standard W2 income it is treated as US source income and I will be double taxed


Many Thanks.


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## Bevdeforges (Nov 16, 2007)

Receiving a W-2 means that you will need to report the amount involved on your US tax return. If the amount was already taxed in Canada, you should then claim the Foreign Tax Credit (form 1116) to credit the Canadian taxes paid. If the Canadian tax is less than the US tax on the amount, you'll have to pay the difference. If the Canadian tax is more than the US tax, you'll have a carry over credit to be used next year on your US taxes.
Cheers,
Bev


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## cheenus (Apr 5, 2018)

Thanks for responding to my question. 
I am still confused. The amount on the W2 is already included in my 1040 under foreign income. As it is a part of my T4 (Canadian equivalent of W2) and it was taxed in Canada. By including the amount under W2 the said amount will be calculated twice and my income will be more than what I actually received.

Also the Canada tax paid is higher than US tax and it reported in Canada. However since W2 does not show any tax withheld once it’s included in 1040 I am being double taxed on the income.

Could you tell me if I have a way to fix this


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## Moulard (Feb 3, 2017)

Not familiar with the US-Canada dual tax treaty... but that said, I expect the following to apply... If you were a tax resident of Canada then Canada will have primary taxing rights over the income.

When you file your US tax return you can use Form 1116 to claim a Foreign tax credit to offset some or all of the US taxes owed on the income.

A very simplistic example...

Say you earned 1000 as a resident in Canada. As a Resident you pay 200 tax to the CRA.
As a US citizen you also report the 1000 to the IRS owe 150 tax to the IRS.

Using Form 1116 you can reduce the US tax owed by up to 150 and carry over the extra 50 for up to the next 10 years.

Turning the tax numbers around, you would only owe the IRS 50.

Pub 514 is your friend...

https://www.irs.gov/pub/irs-pdf/p514.pdf


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