Foreign Income Taxes on a W-2 Tax Slip (USA)

Forum|Forum|3 years ago
March 21, 2023
2 replies
6 views

Which amounts of income taxes withheld on the W-2 Tax Slip are to be reported on the T1 General Tax Return

ProFile (Canada)

This topic has been closed for replies.

J

janisbossenberry

Level 7

Federal and state US income taxes can be claimed as a foreign tax credit against foreign employment income on the "Foreign Income" screen. Social security and medicare taxes cannot be claimed as foreign tax credits.

H

HowardEAAuthor

Level 2

Hi Janis!

Thanks for your input. It is truly appreciated.

What I did learn from a conversation with a senior CRA representative, is that while the Medicare Taxes cannot be claimed as a Foreign Tax , they are an allowable Deduction on Line 25600 on the T1 Tax Return.

Regards,

J

janisbossenberry

Level 7

Well, I have never heard of that after 15 years of preparing Canadian tax returns for US dual citizens. Line 25600 does include a 15% deduction for income including Medicare premiums, if they have been reported as income on the tax return. This is the case if the individual is receiving US Social Security. You can also include them in medical expenses, so they will become a non-refundable tax credit if the taxpayer otherwise has enough medical to claim. It sounds to me like the CRA individual "googled" Medicare premiums and saw the words "including Medicare premiums" when deducting the 15% pension income.

L

lycos747

Level 2

I am a bit confused. In this link -https://turbotax.intuit.ca/tips/common-usa-tax-forms-explained-how-to-enter-them-on-your-canadian-tax-return-12636#:~:text=W2%20forms%20are%20issued%20to,which%20will%20report%20to%20line10400.

It states W-2 Box 4 Social security tax withheld, Box 6 Medicare tax withheld, along with any final Federal and State taxes paid on your US tax return can be entered as foreign taxes paid into your tax return and the amount will carry to line 40500.

J

janisbossenberry

Level 7

Well, you learn something new every day. After much "googling", I read the fine print on the back of the T2009 form available from CRA (current form). It says that amounts paid under FICA including social security and medicare taxes qualify for the foreign tax credit if both of 2 conditions apply - you were required to pay them, and the employment was of a short-term and temporary nature such that you would not expect to receive a financial benefit from their payment. The form does not define short-term, so I expect that if you had an ongoing employment situation they would not qualify. Everything else I read says that those 2 withholdings do not qualify as FTC as they are not income taxes.

L

lycos747

Level 2

Thanks!

Sign up

Login with SSO

Let's get you signed in

Login with SSO

Scanning file for viruses.

This file cannot be downloaded