Friday, December 14, 2012

If you live in Canada and work in the United States, are you double taxed

If you live in Canada and work in the United States, are you double taxed?
I am wondering if Canada has income tax and if so, would you be charged income tax as a resident of Canada and also by your employer in the US?
Canada - 2 Answers
Random Answers, Critics, Comments, Opinions :
1 :
That is a very good question. I am curious of the answer.
2 :
First of all, if you are a US citizen who happens to live in Canada but work still in the US, you do not need to file tax returns in Canada -- just the US. But if you are required to file a Canadian tax return, you are not "double taxed" (exactly - but you sure can be). First, you need to file all your US returns -- federal, state, local -- then you file your Canadian return. You report on it, your total worldwide income, converted into Canadian dollars based on the US average for the year. Canada figures out your tax liability based on this income, then gives you a Foreign Tax Credit equal to (in Canadian dollars) the amount of taxes you paid federally, to state and locals, to medicare and to social security. If after this credit, you still have a tax liability , then you owe Canada the balance. For instance, if you made 100K $US and the exchange rate was 18%, then you would report 118K $CDN of income, take a foreign tax credit equal to all your US taxes multiplied by 1.18 and see if you owe any more to Canada. Now, the more deductions and exemptions you have in the US, reduces your taxes in US and increases your refunds. However, the less you pay over there, the less your FTC will be, and the more you may be required to pay in Canada. Whew!!