Canadian student in USA - paying taxes w/ income from both countries

[TakeruK]

1 hour ago, Shah Az said:

I found this thread very helpful but I got some questions.

1- I am Canadian, got graduate (Masters) scholarship (Fulbright) in US School  2014-16. I recieved monthly stipend and tution waiver (actually paid by US Govt under Fulbright GRANT). However, I reported only stipend as income in US (as per my Tax consultant Advice). The stipend I recieved were already taxed and my tax was filed in US by the Grant Office on my behalf. When I reported my income to CRA, I was charged tax payable (CAD 900 in 2014, CAD 1500 in 2015) which I paid and for 2016 I am expecting similar amount to be paid. 

I don't understand, when I was taxed in US, why do I need to pay taxes in Canada. i have 2 kids (under 6) and my wife is household. Any advice ?

 

Regards

Shah

If you are filing as a resident (for tax purposes) of Canada, you will be taxed on all worldwide income. You should have two options now:

1. You can try to get a declaration from CRA that you are a non-resident of Canada. Fill out NR-73 and send it to them: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/nr73.html If you are a non-resident of Canada, then you only get taxed in Canada on Canadian-sourced income. I think you can easily be deemed non-resident if your family is living with you in the USA and you have no strong ties to Canada.

2. When you report your income to the CRA, did you also claim the Federal Foreign Tax Credit (Line 405)? https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-405-federal-foreign-tax-credit.html

If you are a resident of Canada (for tax purposes), then you need to report BOTH your US income and your US taxes paid. Your tax software should help you do this and ultimately, you will file a copy of your US tax return to Canada. 

You should not be double taxed on your US income! What they do is first determine how much tax you would have had to pay if it was Canadian income. Then they look at how much tax you paid to the US government. If your US-paid taxes is higher than what you would owe in Canada, you should owe nothing to Canada. However, if you were supposed to pay more tax to Canada than you did to the USA, then you must pay the difference to Canada. (For example, if your tax in Canada would have been 2000 CAD, and you paid the equivalent of 1100 CAD to the USA, then you still owe 900 CAD to Canada).

Usually for student level stipends, you normally pay way more to the IRS than you would to the CRA so you shouldn't owe anything to Canada. Check if you correctly claimed this credit in past years. If not, you should file a correction and get your money back! 

[Dystroxic]

This is a fascinating thread, because back in 2015 I went through all of this myself trying to figure it all out. PhD student in the US, but Canadian citizen (and factual resident).

@TakeruK, I'm wondering if you had the same experience as me on one thing. When filing with the CRA, I found the foreign tax credits (i.e. deducting the amount I pay in US taxes from my owed Canadian taxes) to be useless. Unfortunately, tuition credits are applied before foreign tax credits are, so my tax was reduced to 0 due to my tuition credits (about US$50k), and therefore there was nothing to apply the foreign tax credits to. This was quite saddening because it meant I paid taxes in the US but ALSO had to use up my tuition credits in Canada. Does this sound familiar to you, or did you find some sort of workaround for that?

One topic I saw a lot earlier in this thread was that grad student assistantships aren't considered taxable by the CRA (and there was some back-and-forth on this). I thought I might provide some clarity on the official stance on this. Here's the relevant document: Folio S1-F2-C3. Look under the "Student Assistantships" section:

"As a condition of receiving financial assistance, a student (usually a graduate student or an upper-year undergraduate) may agree to do some teaching, marking of examination papers, demonstration of work, or research as a member of the staff of a university. If part of the assistance is paid in the form of a fellowship (for doctoral as opposed to post-doctoral studies) and the remainder as remuneration for the performance of the duties, those two parts are treated differently for tax purposes. The amount received as a fellowship is subject to subparagraph 56(1)(n)(i), while the amount received for services rendered as an employee is considered employment income under subsection 5(1)."

In my experience, everything in the US that is termed an "Assistantship" (whether a Teaching Assistantship or Research Assistantship) has at least some condition on something the student must do for the university, even if it's just that your advisor specifies which research project you work on (the one funding the RA), otherwise they will call it a "fellowship." Therefore, these payments should almost certainly be reported as taxable income in Canada.

EDIT:

In further reading of that linked Folio, there's a specific section for "Research Assistants". Basically, it says that if you're paid as a student doing research with guidance from a professor, and that funding comes from a research grant, then it is considered to be a research grant for the purposes of your income tax. A bit above that is a section that describes how research grants are taxed, which is basically that anything above the costs of the program you're enrolled in are considered taxable income. So, if you pay tuition of $40,000 and get a $50,000 research assistantship (but no tuition waiver), then you claim $10,000 as taxable income. If you pay tuition of $40,000 with a full tuition waiver and get a $50,000 research assistantship, then you claim all $50,000 as taxable income. I think.

Edited April 3, 2018 by Dystroxic

[TakeruK]

5 hours ago, Dystroxic said:

This is a fascinating thread, because back in 2015 I went through all of this myself trying to figure it all out. PhD student in the US, but Canadian citizen (and factual resident).

@TakeruK, I'm wondering if you had the same experience as me on one thing. When filing with the CRA, I found the foreign tax credits (i.e. deducting the amount I pay in US taxes from my owed Canadian taxes) to be useless. Unfortunately, tuition credits are applied before foreign tax credits are, so my tax was reduced to 0 due to my tuition credits (about US$50k), and therefore there was nothing to apply the foreign tax credits to. This was quite saddening because it meant I paid taxes in the US but ALSO had to use up my tuition credits in Canada. Does this sound familiar to you, or did you find some sort of workaround for that?

This sounds super familiar to me. I even called the CRA to inquire about it because I thought the tax software was doing it wrong (after all, if the purpose of the Foreign Tax Credit is to prevent double taxation, then wouldn't forcing us to use our education credit for taxes already paid in the US be double taxing?). The CRA agent said that they get this question a lot and the agent that it is indeed true that we must apply our educational tax credit before the Foreign Tax Credit. The CRA agent also says they agree that this is inconsistent with the intent of the no-double-tax thing. However, they said that's how the law is currently written. So, if we want to do something about it, we should be writing our MPs. I feel like this is something few people act on because 1) it affects very very few people and 2) most of the people affected are outside of Canada!

I only found this out because we had made a mistake for my partner's tax return. My partner was working in the US (not a student) and therefore we thought their income was taxable in Canada. So my partner would have had to use their educational credits (they attended school in Canada prior to moving to the US with me). So we sadly filed my partner's taxes and used up all of their education credits :(. But then, when we got our notice of assessment, they told us that my partner was NOT a resident for tax purposes in Canada because 1) they had no income and 2) they had no other ties to Canada, so they changed my partner's tax return to a non-resident tax return and therefore, US-based income was NOT taxable in Canada. So my partner kept their educational credits after all.

So, based on this, there is indeed one way to get around having to use up Canadian-earned education tax credits and it's to get yourself declared as a non-resident. Then you won't be taxed by Canada on income outside of Canada. However, this would mean you won't earn educational tax credit from your US school either, so if by "work-around" you mean to find a way to preserve your US school's educational credits then it won't work.

[Carthage32]

Hey everyone, I hope tax season is going well!

 

Sorry for asking this again if it was already addressed, but just wanted to clarify one thing: I have a W2 which shows income from an on-campus job I had and I have a 1042-S which shows my fellowship payment. 

 

Am I right in thinking that I don't have to report the 1042-S to CRA? (There was tax withheld on the fellowship payment, and I'm claiming that as a foreign tax credit, if that matters).

 

Or should I be reporting the W2 + 1042S amounts as total income?

 

Thanks so much!

[aGordeno]

For such a case, when you're a foreign student of the US university, you should report all of your taxes, regardless of the state of income. That's the IRS thing, so you need to prepare all your questions on this while submitting W8BEN form (the option of W9 for non-residents) in order to proceed. Have a luck with that!

[txiao]

Thank you all for the helpful info on this complex topic. 

I have a few linger questions, after reading some of the previous posts and tried my very best digging through CRA's website 

My information: 

I'm also a PhD student in the US on F-1 visa. I have very little ties to Canada (only a bank account, no family or home address anymore). I do not satisfy the substantial presence test and therefore I'm considered a nonresident alien in the US.

my income is only from a stipend for living (not a fellowship) from the university, as well as waived tuition. 

canadian tax residency: 

some previous posts have mentioned that while studying in the US, they were no longer considered Canadian tax resident because of having very few ties to Canada. However I've read somewhere that Canada has determined everyone must be tax resident somewhere (can't be tax-resident nowhere, which intuitively make sense). so since I'm nonresident alien in the US, does that mean I must be a resident in Canada, even if I have very little ties?

Can someone more knowledgeable confirm whether this would be the case? 

provincial tax residency

I haven't seen this pop up, but let's say that I am considered a factual resident of Canada, would I also be considered a resident of my province? (I lived in Quebec before I left). Again, I have very little ties to Quebec (only a bank account). Intuitively, it makes less sense to me that I would be taxed in Quebec if I don't live there and have few ties there. But would it be possible that I'm considered factual resident of Canada but not a resident of any of its provinces?

 

Thank you so much for the information

[flipflop]

Hi all,

I came across this thread while trying to figure out my taxes for the last year and I'm finding it very helpful. I am a Canadian student studying in the US and only have US stipend and scholarship, as well as W-2 for Teaching assistant work.

For Canadian taxes to the CRA, my questions are:

• I know all US incomes must be reported, but I'm unsure if my stipend on 1042-S should be reported as a scholarship or foreign income. I'm using simpletax software, and it seems like the scholarship section does not specify whether it includes foreign and canadian scholarships. I believe this amount should be non taxable, but if I included it as a general foreign income, it shows I have an owing. 
• Also for the W-2 income, I am reporting that as foreign income and I believe we also have to report the amount of US tax already paid. Should I be doing my US returns first to figure out the total taxes I paid for that income, or is the amount withhold on the W-2 sufficient?

Thanks for any tips/thoughts on these questions. I know this is late follow up on this thread, hope there are still active members.

[watergirl]

Hi -- Canadian in the US for a PhD here, and wondering about similar questions. NSERC income in Canada, and RA and small grants in the US. 

I was told by the CRA to fill NR-73 to determine residency status (I wish I knew this early on in my grad studies), then fill the Canadian tax packages accordingly. In the letter I got back from them, I was referred to S5-F1-C1. Since I am a "factual resident of Canada", I then called the CRA, and I was told to attach the T2209 with my US income for each year of reporting, and attach a copy of my tax returns for each year. I'm still unsure about whether to include (sum up) my W-2 (income from RA) and 1042-S (fellowships) on T2209, what to put as amount of taxes already paid etc. And how to account for any taxes not withheld at the source (showing up on W-2 and 1042-S) but that I paid to the state or IRS after filling my US taxes....

Calling the CRA today and hopefully I can update with some answers.

PS: If that is helpful to anyone reading, if you are still contributing to your TFSA in Canada but wrote a departure date in your tax returns my mistake or misunderstanding, you will be taxed a lot on it so get that checked! 

[time_consume_me]

On 1/5/2021 at 11:35 AM, watergirl said:

Hi -- Canadian in the US for a PhD here, and wondering about similar questions. NSERC income in Canada, and RA and small grants in the US. 

I was told by the CRA to fill NR-73 to determine residency status (I wish I knew this early on in my grad studies), then fill the Canadian tax packages accordingly. In the letter I got back from them, I was referred to S5-F1-C1. Since I am a "factual resident of Canada", I then called the CRA, and I was told to attach the T2209 with my US income for each year of reporting, and attach a copy of my tax returns for each year. I'm still unsure about whether to include (sum up) my W-2 (income from RA) and 1042-S (fellowships) on T2209, what to put as amount of taxes already paid etc. And how to account for any taxes not withheld at the source (showing up on W-2 and 1042-S) but that I paid to the state or IRS after filling my US taxes....

Calling the CRA today and hopefully I can update with some answers.

PS: If that is helpful to anyone reading, if you are still contributing to your TFSA in Canada but wrote a departure date in your tax returns my mistake or misunderstanding, you will be taxed a lot on it so get that checked! 

Related question: how long did it take to get a response re: your NR-73? I mailed one in last month and still no mail.

I cannot log into my online account because I haven't filed or my status is off -- I get an error. I was told this would be resolved by doing NR-73 and sorting out whatever outstanding taxes I have. Ready to do that, just need word back on that NR-73.

Looking forward to following your progress and reporting on my own so that I might be of some help to others.

Cheers

[watergirl]

14 minutes ago, time_consume_me said:

Related question: how long did it take to get a response re: your NR-73? I mailed one in last month and still no mail.

I cannot log into my online account because I haven't filed or my status is off -- I get an error. I was told this would be resolved by doing NR-73 and sorting out whatever outstanding taxes I have. Ready to do that, just need word back on that NR-73.

Looking forward to following your progress and reporting on my own so that I might be of some help to others.

Cheers

Hey,

I sent one in mid-July of this year and obtained a letter back/response from them in early October of this year -- so about 3 months.

And following up on my previous post, CRA told me to include the W-2 amount only as "income" on the T2209 form, but in the amount of taxes paid, to sum up total taxes from W-2 and from 1042-S. They also told me to attach the IRS transcript (which you can get here https://www.irs.gov/individuals/get-transcript) to prove the total $ amount paid in taxes, along with photocopies of US tax returns. 

Hope that's helpful!

[Polarpeak]

This is a helpful thread. The TL11a form is pretty critical. I didn't know we needed that until today.

On the TL11a form does it show tuition paid, even if the tuition was covered by the University?

For example I got these forms for my stipend/teaching assistantships:

$15,000 on 1042-S
$10,000 on W2

My tuition would be $50,000 but the University pays for that. What amount would be on the TL11a?

I am claiming the $10,000 as income and the $15,000 as scholarship, does this seem correct?

[Polarpeak]

Wow, that $10,000 tax treaty hard boundary sucks. I made $11,500 on a W2 and my spouse made $12,000 on a W2 and $3000 of the 3500 over the limit went to taxes. Guess I worked for free for a month yay! 

[NikolaiB]

(1) Hi, what CRA number is everyone calling? I call 1-800-959-8281, but there is no option to specifically speak about general tax advice. What I have been doing instead, is asking about a particular form, then they say they cannot help me, but put me through to someone who can.

(2) @ Polarpeak - yeah, that is my understanding of this too. That the 1042-S income, which is a scholarship meant to support graduate studies, and is not taxable. The W2 income is taxable. Per watergirl, we can claim a tax credit on both W2 and 1042-S income.

(3) One thing that I have not heard discussed yet is the 48 percent surtax that I am being charged. This seems odd, as I pay NY state resident taxes! So, my total tax bill comes out to be very high.

(4) @ watergirl - thank you for the W2 and 1042-S advice!

(5) The TL11a advice seems odd. We can claim tax credits on tuition that the university charged us and then paid for?

Also, I hope I am not the only person who made a dumb mistake and did not file Canadian taxes. Now I am trying to sort it all out. It seems like its much better to do this right away and admit to the mistake. At the very least, it seems like the amount of tax that I would have owned is small. And, at least for one person here, CRA determined they were a non-resident b/c they had few ties to Canada.