# Foreign Canadian income and what credits I'm allowed to claim on it



## maxim_311 (Aug 8, 2014)

I'll try and keep this short and in bullet points to make it easier. I appreciate all the help. Im in the USA and live in California. 

- 2012 worked in Canada for 2 months. Made $20,235. Got Canadian refund of $3,797

- On 2012 return accountant forgot to include my foreign income

- I got a Fed refund fed $3,876 and state $1,774 with total reported income of $75,572 (this is without foreign income)

- I spotted accountants omission of my foreign Canadian income ($20,235) and have him amend my return

- Now I owe Fed $1,353 and State $1,925 with total reported income $95,808

*QUESTIONS*

- Is this giant swing in my refund seemingly correct?

- With foreign income you're supposed to be able to deduct/write-off taxes you paid in Canada. In the #7 Credits field of my 1040X he used my Canadian refund amount of $3,797. Shouldn't he have used the total of the taxes that were deducted from my Canadian pay? ($4791 Income Tax, $961 Canadian pension plan, $370 unemployment insurance) which totals $6,122

- Owing money to the Federal gov't I can understand. But why does my state tax liability rise on money made out of the country?

I will be returning to Canada for work again next month so this issue/question is gonna pop up again soon. Thanks for any help.


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## Nononymous (Jul 12, 2011)

Sounds like you need a new (and better) accountant.


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## Bevdeforges (Nov 16, 2007)

maxim_311 said:


> *QUESTIONS*
> 
> - Is this giant swing in my refund seemingly correct?


Possibly - because you pay tax on all of the additional income (since you have already taken credit for your personal exemption and standard or itemized deductions).


> - With foreign income you're supposed to be able to deduct/write-off taxes you paid in Canada. In the #7 Credits field of my 1040X he used my Canadian refund amount of $3,797. Shouldn't he have used the total of the taxes that were deducted from my Canadian pay? ($4791 Income Tax, $961 Canadian pension plan, $370 unemployment insurance) which totals $6,122


No, for foreign income you only get credit for the foreign income taxes paid - so nothing for the pension plan, unemployment or other misc. taxes. Also you say you got a Canadian refund, which meant that you were overwithheld. All you get to take (as either a deduction or a tax credit against US taxes due) is the net - what you actually paid in tax which is only $994 ($4791 less the 3797 refund.) Otherwise you have to declare the refund as income in the tax year you received it.



> - Owing money to the Federal gov't I can understand. But why does my state tax liability rise on money made out of the country?


Depends on the state, but generally you are taxed on all income you make while resident in the state. A 2 month gig in Canada is not long enough to break your US/state residence - though you may be able to claim something for the $994 you paid in income tax on that additional income.

Cheers,
Bev


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## maxim_311 (Aug 8, 2014)

Bevdeforges said:


> Also you say you got a Canadian refund, which meant that you were overwithheld. All you get to take (as either a deduction or a tax credit against US taxes due) is the net - what you actually paid in tax which is only $994 ($4791 less the 3797 refund.) Otherwise you have to declare the refund as income in the tax year you received it.


****...really? So the amount I owe is gonna go up that much more because he credited more than he should have.




Bevdeforges said:


> Depends on the state, but generally you are taxed on all income you make while resident in the state. A 2 month gig in Canada is not long enough to break your US/state residence - though you may be able to claim something for the $994 you paid in income tax on that additional income.


How does one go about breaking your residency in a state?


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## Bevdeforges (Nov 16, 2007)

maxim_311 said:


> ****...really? So the amount I owe is gonna go up that much more because he credited more than he should have.


Hard to say precisely without all the paperwork, but it sure seems like that to me.



> How does one go about breaking your residency in a state?


It varies a bit by state, but first of all, you have to be resident outside the state for the better part of the year and/or establish residency elsewhere.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Typically the additional state income tax would not be larger than the additional federal income tax, so that looks odd. Maybe California has higher interest and penalty charges for late payment, but that'd be the only reason I can think of why the additional state tax owed would be larger.

It's likely the additional federal income tax owed would be reduced by $994, your total foreign income tax, on that previously unreported income. So you should see the Foreign Tax Credit form (Form 1116) as part of your Form 1040X package, and that $994 figure (or something very similar to that figure) should be reflected in the "Tax and Credits" section of Form 1040X. On the 2013 version of Form 1040 it's line 47.


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## jbr439 (Nov 17, 2013)

Almost certainly a stupid question, but given the other issues, I'll ask anyway: were Canadian dollar amounts converted to US dollars for use in filing US tax returns?


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## maxim_311 (Aug 8, 2014)

jbr439 said:


> Almost certainly a stupid question, but given the other issues, I'll ask anyway: were Canadian dollar amounts converted to US dollars for use in filing US tax returns?


You're right...the dollar amounts were not converted.


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