andyt andyt:
But, US/Canada has a reciprocal tax agreement. AFAIK, you don't pay tax on the same income twice. If you reside in Canada, you pay Canadian taxes. Shouldn't also have to pay US taxes on that income. Certainly wasn't a problem for me when I worked in the US.
Try getting a refund from the Canada Revenue Agency.
I worked in the US twice: a few days short of 6 months in 1997. Since I was there less than 6 months, just paid tax to Canada and not the US. But in 1999/2000 I worked there for 9 1/2 months. That was a little over 6 months for 1999 alone. I called the IRS for tax rules; what they did is mail me a copy of exact text of the Canada/US Income Tax Treaty. They couldn't be bothered summarizing or simplifying or anything, just sent the whole law. The CRA wouldn't give me that, but one copy is enough. It states any Canadian who works in the US has to pay income tax to both countries. And similarly, any American who works in Canada has to pay the US income tax. However, whatever income tax you paid to the other country, is deductible from what you have to pay to your home country. In Canada the T1 form has a line for "foreign tax deduction". What I did was take what I paid to the IRS, convert to Canadian dollars using the conversion rate that CRA accepted at the time, and that was deducted from my taxable income. Of course the foreign tax deduction is a complicated calculation rather than just subtracting. I believe I ended up paying more. But that's the way it works.
I argued at the time that I was not a resident of Canada. CRA argued that because I still had a bank account in Canada, and because I still owned property (my house), that I was a resident of Canada. They said I would have to cut all ties to Canada to be considered a resident of the US. I wouldn't do that, intended to return to Canada. And real estate prices have skyrocketed since I bought my house in Winnipeg in 1990; so keeping my house was a sound decision.
Florida didn't have income tax, and my employer set payroll up as a "W2". That's an IRS code. That means I was a contractor, but not incorporated. CRA does not permit anything like a W2, in fact they went out of their way to ensure employers can't do that. Someone who is a "W2" does not have income tax deducted from each paycheque, but pays one lump sum at the end of the year. And the employer does not pay the employer portion of Social Security, their equivalent to both EI and CPP. The US blends them together in a big mess.
When I paid taxes to Canada, since the last province I lived in was Manitoba (and my house is there), I paid Manitoba provincial income tax. The reason for complicated formula for foreign tax credit is to proprate it between federal and provincial. Canadian federal income tax was higher than American, and since I paid Manitoba tax but Florida didn't have any, that meant I had to pay Canada substantial income tax.
These people should be able to subtract what they paid in income tax to the CRA from any income tax owing to the IRS. That foreign tax credit (whatever the IRS calls it), would cancel out everything. Why would they owe?
CKA Uber 
