Canadian citizens working in the United States are usually not sure if they should be filing taxes in Canada.
According to CRA if someone is not considered to be a resident of Canada for tax purposes he/she is not required to file Canadian taxes.
Taxpayers who are considered as residents for tax purposes in Canada must report their worldwide income when filing their taxes in Canada.
I ran into a scenario this year where a taxpayer was considered as resident of Canada for tax purposes. This tax payer had made about USD 105,000 and was issued a W2.
For filing his return in Canada we need to follow following steps:
Convert his income to Canadian dollars. You can use average exchange rate for conversion.
This tax payer’s taxable income in USA was around USD 78,000.00 after taking all allowable deductions. For filing his tax in Canada you need to report gross income converted to Canadian Dollar. His taxable income in the U.S is not acceptable for reporting in Canada.
You need to complete form T2209 to get foreign tax credits and report these on Line 405 of Schedule 1. (http://www.cra-arc.gc.ca/E/pbg/tf/t2209/README.html)
If there is a balance left after using federal foreign tax credits use form T2036 to offset foreign tax credits against provincial tax. (http://www.cra-arc.gc.ca/E/pbg/tf/t2036/README.html)
This taxpayer ended paying around CAN $ 5,000.00 in provincial taxes because he did not have enough credits left to offset his provincial tax liability.