Client is cross-border resident, Canadian citizen. Where do I record his earning from T4?

[karmichaelinc]

Client regularly files US return with Canadian return electing Section 216.  I am only doing US return.  I must convert to US dollars also.  Not sure how to do that either.  Help please

[itonewbie · Accepted solution]

My presumption is that your client is a commuter from the US and that your client either qualifies by domestic tax law in Canada or takes a treaty position to be a US resident for Canadian tax purposes.

Section 216 is a Canadian tax election, as you are probably already aware.  Assuming the rental property is owned by him, it should be reported on Sch E.  Provided this is not a QBU, you would use the spot rate to convert from CAD to USD.  If it is, indeed, a QBU, it would have to be accounted for in its functional currency, presumably CAD, and foreign currency exchange gain may then need to be recognized with each remittance.  Normal rules in relation to PAL would apply.

T4 for wages would be reportable on Line 7 of your client's F.1040.

Your client should also claim foreign tax credit for Canadian taxes paid/accrued on non-US source compensation and rental income.

Don't forget to consider FBAR and FATCA reporting, depending on the type and aggregate balances of your client's foreign accounts/assets.