When a Canadian works within the U.S., their employment earnings could also be exempt from U.S. taxation in some instances as much as a $10,000 restrict. In your son’s case, Arlene, it feels like each federal and state withholding tax utilized to his earnings from the Silicon Valley firm in California.
What’s an Particular person Taxpayer Identification Quantity? When do you want it?
When Canadians earn U.S.-source earnings, like employment earnings, they’re sometimes required to file U.S. federal and state tax returns. The U.S. equal of a Social Insurance coverage Quantity (SIN) is a Social Safety Quantity (SSN). SSNs are usually required for U.S. residents and a few non-citizen residents of the U.S. In your son’s case, his non-resident alien standing within the U.S. means he wants an Particular person Taxpayer Identification Quantity (ITIN) to file a federal return. It’s a tax processing quantity for sure non-resident and resident aliens.
In an effort to apply for an ITIN, Arlene, a taxpayer should file a Kind W-7, Software for IRS Particular person Taxpayer Identification Quantity (ITIN) with their U.S. federal tax return.
Arlene, it feels like your son had a federal and state tax submitting requirement within the U.S. He ought to hunt down recommendation from a U.S. tax skilled who may also help validate and help together with his tax submitting necessities.
Easy methods to report overseas earnings in Canada
Canadian residents are taxed on their worldwide earnings. In case your son spent a summer time within the U.S. working, however in any other case maintained his Canadian ties, he doubtless remained a Canadian resident for tax functions for all of 2022. Which means his U.S. earnings ought to be reported on his Canadian tax return, transformed to Canadian {dollars}.
To keep away from double taxation, overseas tax withheld is mostly eligible for a overseas tax credit score on a Canadian tax return. Nevertheless, in your son’s case, it’s the internet tax withheld that ought to be claimed, Arlene. It isn’t the tax withheld on his W-2, however the federal and state tax payable as calculated on his federal and state tax returns. So, for instance, the California refund would scale back the declare for the state tax withheld on his W-2.
When do Canadians should file a U.S. tax return?
Canadians should usually file a U.S. tax return with the Inner Income Service (IRS) for incomes different U.S.-source earnings. This consists of U.S. rental earnings. U.S. non-resident property house owners who promote actual property within the U.S. are additionally usually required to finish a U.S. tax return.
Sadly, the processing instances for non-residents submitting U.S. tax returns may be sluggish. It is not uncommon for the Canada Income Company to ask for documentation of overseas tax paid. A replica of a U.S. tax return is probably not adequate proof, both. The CRA usually needs documentation of the U.S. tax evaluation from the IRS and state tax authorities with the stability owing or refund.