# Forms 1116 and 2555



## MonkWho (Apr 16, 2016)

I've looked over several threads on the forum and still have some confusion with these two forms.

Here's my situation.
I'm Canadian. Wife is from US. Married couple years ago. Got a green card. She lives in STL and we have an apartment rented in both our names there. I still live in Nova Scotia and work as a consultant for a Canadian branch of a large computer hardware/software company. Most of last year I've been working on getting a transfer to US part of the company and it was completed by early December 2015. At which point I officially moved to STL permanently.
Most of my income was made in Canada during the year. Taxes deducted and paid there.
Small portion of income was made in US in the month of December when I permanently moved here.

When I got transferred to US part of the company I went through an onboarding process and one of the tings they did for me was to get me together with a tax advice company. We spoke at length about US tax system and things I would need to file. Seeing as I have TFSA account up in Canada I would need to do 3520 and 3520-a (filed an extension for this one already). And of course FinCEN 114. Another thing I was advised to do is file only form 1116 when doing the main tax return. So that's what I'm trying to do in TurboTax. And it seems like it is working. Kind of.

TurboTax walked me through adding my gross Canadian income and taxes I paid as "General category income" but it's complaining about field 3e (Gross income from all sources) calculation not being accurate. It seems the field right above it "B Adjustment amount" is highlighted in red and is expecting me to put a number in there. I'm thinking I should fill my Gross foreign income amount in there but not quite sure. If I do, it stops complaining and all of the calculations in the end tell me that I can carry forward my full tax amount from this year which is quite substantial.

On the other hand I can also file form 2555 and put my Canadian earnings in there then go through the process of excluding my Canadian income based on my residency status and then claim it back on the form 1116 but this way it tells me that there is no carryover amount. I don't have any expenses related to my Canadian income that I can claim as far as I can understand reading all of the forms.

So after all this rambling my question is this: Do I just file 1116 as is or do I have to file 2555 too and go through residency calculations process and all that stuff?


TL;DR: Do I have to file both 2555 and 1116 or can I just put my complete amounts on 1116 and skip 2555 altogether?

Thank you in advance for any help you fine folks can provide.


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## BBCWatcher (Dec 28, 2012)

You are allowed to skip Form 2555. If that tax result is more favorable, then you should especially since you're now a U.S. resident.


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## Bevdeforges (Nov 16, 2007)

Neither form 2555 nor 1116 for that matter are required. 

But are you filing jointly with your wife, or separately? That can also affect your results, as well as what deductions and exemptions you'll be able to take against your Canadian income. 

There are lots of "options" in the US tax system and you have to kind of try each of them on (and in combination where that's possible) to see which set of options works out the best for you.
Cheers,
Bev


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## MonkWho (Apr 16, 2016)

BBCWatcher said:


> You are allowed to skip Form 2555. If that tax result is more favorable, then you should especially since you're now a U.S. resident.


So if theoretically I was physically present in US during 90% of 2015 and in Canada only 10% of the time would I need to file both and somehow differently? What if my "tax home" was still in Canada where I still have very strong ties and I still was paid by Canadian company in Canadian dollars with taxes being deducted there? Does anyone know if IRS talks to border agencies regarding things like that?



Bevdeforges said:


> Neither form 2555 nor 1116 for that matter are required.
> 
> But are you filing jointly with your wife, or separately? That can also affect your results, as well as what deductions and exemptions you'll be able to take against your Canadian income.
> 
> ...


We are doing "Married filing separately" because I was not full time resident of Missouri in 2015 and my wife was. From the information I gathered I saw that it was easier to file separate returns in situation like ours. In fact she already filed while I'm still working on mine.
And I would think at least one of the forms would be required to report my foreign income in some form.


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## Bevdeforges (Nov 16, 2007)

MonkWho said:


> So if theoretically I was physically present in US during 90% of 2015 and in Canada only 10% of the time would I need to file both and somehow differently? What if my "tax home" was still in Canada where I still have very strong ties and I still was paid by Canadian company in Canadian dollars with taxes being deducted there? Does anyone know if IRS talks to border agencies regarding things like that?


It's dangerous trying to split hairs like that. If you are resident in the US and doing work there, then you have to file a US return. It does not matter in what currency you are being paid, nor the nationality of your employer. It's where you are physically located while you are doing the work. You would need to file a Canadian return for at least the 10% of the time you were working in Canada.




> We are doing "Married filing separately" because I was not full time resident of Missouri in 2015 and my wife was. From the information I gathered I saw that it was easier to file separate returns in situation like ours. In fact she already filed while I'm still working on mine.
> And I would think at least one of the forms would be required to report my foreign income in some form.


Not sure about the state of Missouri, but with your US Federal forms you have the option (yet another one) to file jointly with your US spouse - in which case you would report all your worldwide income as though you had been resident all year in the US. There are obviously some advantages to doing it that way, too.
Cheers,
Bev


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