Canada Form T4A-NR where to put on 1040

[jkreuz2]

Cient worked 28 days in Canada. Received T4A-NR. Does this go on the Schedule C with the rest of her business income? Slip made out to Business. Taxes were paid in Canada, go on Schedule A? Doesn't meet requirements of other forms (1116 etc). Or do I put taxes on Schedule C???

This is a new one on me. Need some assistance please...

[itonewbie]

Refer to the T4A-NR, identify the type of service it was issued for, verify with your client details of the arrangement that led to these payments, and review whether any treaty provision should apply with regard to taxing right and concessions.

If Canada has the full right to tax the income and the correct amount of final tax was withheld, it should qualify for FTC, which will always give a better result than claiming a deduction on Sch A (if your client itemizes).

The fact is Part III of subchapter N (which includes §§901, 903, and 904) as well as §§164(a) and 275(a) share the same definition for "income, war profits, and excess profits taxes".  If the foreign tax is not creditable on F.1116, chances are, it won't be deductible on Sch A either.

But the first order of the day is to determine whether any treaty provision should apply and to what extent the income should be taxable in Canada as opposed to the US.  That will then drive how you report the income on the US return and what mechanism should be used to alleviated double taxation, if any.