This post documents how I filed my California + Federal taxes for the 2019 tax season. There is also a paired article on New York taxes for the curious.
There is yet another companion article if you have received a letter from the CRA notifying you that your tax return is under review.
This is not intended to be a guide. I don’t know anything about taxes. I’m not a tax professional. I’m just some guy telling my story, and you’d probably be a fool to listen to it. This is provided for informational purposes only, and you should consult a tax professional before you follow any instructions you find online. I do not claim to know anything about taxes.
But maybe you can use this to sanity check your tax software.
About Me
Hi! If you’re reading this you might have had a California internship (congrats!) and are looking for instructions on how to file your tax return. Please close the tab if that is the case.
If you’re just curious about what some random guy did for this taxes, carry on!
And if you do use this as a guide, you didn’t hear it from me. Please consult a real certified 100% genuine tax professional for questions about your tax return. I can’t promise any results, otherwise I’d be an accountant, not an engineer.
For my 2019 return, I was:
- In the US for 4 months (September-December) of 2019 on a J-1 visa
- Not subject to FICA tax as a J-1 visitor, meaning box 4 and 6 on my W-2 were 0 (if not, ask employer)
- A non-resident of both the United States and California for tax purposes
- A resident of Canada for tax purposes
- Made less than $65,000 USD, qualifying me for TaxAct’s free file offer
- An employee of a company (not a contractor), receiving a W-2
- Had no US investments
- A student at the University of Waterloo on an official co-op work term
This made my return real simple at least. I had to file a return for both Canada and the United States.
Software
I used TaxAct via the IRS Free File Alliance. It’s set up so that you have to go through the IRS website and click on the link there — any other method of accessing the software will probably result in it asking you paying for something you don’t need to. I would guess this is on purpose.
I made less than $73,000 USD in 2019, but if I had made more I would not have qualified for any IRS Free File offer. I would consider filing a paper return just to stick it to the tax companies in this case.
To find the offer, I googled “IRS free file” and picked the first official-looking result from irs.gov.
I had to do some research with this part to find some software that supported a non-resident return (form 1040NR for federal, 540NR for California). Some of the offers are for US residents only, which I was definitely not!
I have since found out that TaxAct, along with H&R Block, TurboTax, and a number of other tax companies spend millions lobbying against making taxes simpler to file. There is no reason taxes should be this complicated. As a matter of personal principle, I will no longer be using TaxAct to file. As far as I know, OLT does not participate in lobbying, and I have used it recently to file my New York State tax return.
Important Forms
With taxes come with a ton of fun forms to fill out. Luckily, the software handles most of the nitty gritty details, but I oddly enjoy reading tax law and double checked by first filling it out by hand and verifying that the numbers the software reported were what I was expecting. The following records what I have on paper.
The forms to fill out were:
- Federal: 1040-NR (not the 1040-NR-EZ since I itemized some deductions…)
- Federal: 1040-NR — Schedule A
- Federal: 1040-NR — Schedule NEC
- Federal: 1040-NR — Schedule OI
- Federal: Form 8843
- State: 540NR
Let’s dive into them.
1040-NR
Note: The forms have changed since 2019. The line numbers refer to those found in the 2019 edition of the 1040-NR.
The 1040-NR is sort of like the non-resident equivalent of the T1 Income tax package filed for Canadian taxes. For the address field, I used my Canadian permanent address.
- Line 8: W-2 income from box 1
- Line 23: The same number, since I had no other sources of income
- Line 35: The same number
- Line 37: My total itemized deductions from schedule A (more on this later)
- Line 42: This is the tax owed, I used the IRS tax table to figure out the amount. It changes every year! I had to double check to make sure I was using the right year’s table, but you can use software to do it.
- Lines 40, 41, 45, 52 (zero), 53: Simple math, followed the form instructions
- Line 54: 0, from Schedule NEC
- Line 61: Same as line 53, I had no other tax owed
- Line 62, 71: As stated in my W-2
- Line 72, 73a: The fun part! Turns out taxes were overwithheld, so I got a nice positive number in this box.
Schedule A
As a non-resident, I was not eligible to take the standard deduction usually afforded to US residents. Instead, I took a few itemized deductions, which were better than nothing:
- Gifts to charity (I donated a bunch of things I had leftover at the end of the term to Goodwill and claimed a nominal amount)
- State tax paid (as shown on my W-2, box 17)
Adding these up gives the number to put in on line 37.
Note that the state tax withheld as reported on the W-2 is not actually what ended up being paid, due to the state tax refund. This resulted in a 1099-G being mailed to me, as the “extra” I had deducted on my federal return was not supposed to be deducted in the first place. For example, if my W-2 reported $5,000 withheld when I only owed $2,000, I could deduct the $5,000 from my federal income and receive a 1099-G next year for the remaining $3,000 that should have been subjected to tax in the first place.
Schedule NEC
This form is called “Tax on Income Not Effectively Connected with a U.S. Trade or Business”. All my income was from a US business, but this form is used to fill out line 54, so it’s attached even though the amount is 0.
Schedule OI
“Other information”. As a non-resident alien, this form was filled out to further explain my situation. The instructions for this form were pretty simple, but I had to dig real deep to find all the days I was in the US during the past years. For the purposes of this form, the instructions stated to exclude days present in the US under a J-1 visa. So strangely enough, I was in the US for ~100ish days, but I was “present” in the US for 0 days for the purposes of line H. This was outlined in the 1040-NR instructions document, page 45, item H:
Review your entry and passport stamps or other records to count the number of days you were actually present in the United States during the years listed … For the list of exceptions to the days you must count as actually present in the United States, see Days of Presence in the United States in chapter 1 of Pub. 519. If you were not in the United States on any day of the year, enter -0-.
Referring to Publication 519, page 4, Days of Presence in the United States:
You are treated as present in the United States on any day you are physically present in the country at any time during the day. However, there are exceptions to this rule. Do not count the following as days of presence in the United States for the substantial presence test…. Days you are an exempt individual
Which upon some deeper digging reveals:
Exempt individual. Do not count days for which you are an exempt individual. The term “exempt individual” does not refer to someone exempt from U.S. tax, but instead refers to any-one in the following categories. … A teacher or trainee temporarily present in the United States under a “J” or “Q” visa who substantially complies with the requirements of the visa.
Not that I was not a student, as that means something else for tax purposes. I was a trainee on a J-1 visa. Great! So I can exclude all my days present on a J-1. But wait… there’s more………….
You will not be an exempt individual as a teacher or trainee in 2021 if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. However, you will be an exempt individual if all of the following conditions are met…
The conditions are:
- You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years.
- A foreign employer paid all of your compensation during 2021
- You were present in the United States as a teacher or trainee in any of the 6 prior years.
- A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee.
This is awfully complicated, but thankfully it didn’t apply to me so I skipped it. I can imagine it might get thorny for someone that has done years of internships in the US.
I left before the end of the year, so I put “Not present in U.S. — No U.S.
immigration status” on line E. The status of my immigration had not not changed for line F.
I was not a frequent commuter since I had an apartment in San Francisco — I think that refers to those that work near/across the border and would have to fill out… literally every single day they travelled to work.
Form 8843
As stated on Publication 519, to properly exclude these days I needed to fill out Form 8843. My current nonimmigrant status I just put as “Canadian”. I included all the days I was literally in the US on line 4a, and excluded them all on line 4b since I all the time in the US that year was for the internship.
As a J-1 visitor, I was classified as a trainee, so on line 6 I included the contact information of the (Alternate) Responsible Officer as listed on my DS-2019.
In the 2022 iteration of this form, write ““Information provided
on Form 1040-NR” in part 1a, fill in line 4b, then fill out Schedule OI. Also fill out Part II of this form.
If you had multiple internships in the US, you cannot fill out two names on this form. I’d pick the most recent internship, but I’m not really a tax person.
540NR
For the California tax return I opted to take the long form, because of my donations. It turns out it doesn’t matter since California has a standard deduction for non-residents that was much higher than the donations I was trying to claim. The standard deduction in 2019 was $4,537.
- Line 7, 11: The 1 personal exemption, totaling $122
- Line 12, 13, 15, 17: As reported on my W-2
- Line 18: Standard deduction, $4,537
- Line 19: mathemagics
- Line 31: As computed from the California tax table, not the federal one!
- Lines 32, 35, 36, 37, 38, 39, 40, 42: Followed instructions
- Lines 63, 74: Same as line 42
- Line 81: As reported on my W-2
- Lines 101, 103, 125: Refund!
After filling out these forms by hand, it wasn’t too hard to translate it into the format that TaxAct wanted. If anything, using TaxAct would’ve make it easier since it wouldn’t have asked me to dig through all the IRS publications. For what it’s worth, it was fun reading through the legal-ese and tracking down information. Call me weird I guess.
Canadian Taxes
I ensured that the US return was filed before my Canadian side, because I needed the total taxes paid after refund on the US side before filing for Canada!
On Canada’s side, the only thing I added was the T2209, “Federal Foreign Tax Credits”. Because of the tax treaty between US and Canada (I think), I was not double taxed on the income I made. Instead, taxes paid in the US are credited towards that I would have owed had I made that same amount in Canada.
It’s worth double checking here is that the taxes paid in the US are what I actually paid to state and federal taxes after the refunds, not before! If I had claimed what was withheld for me and didn’t subtract the refunded amount, I would be way underpaying the CRA. For example, if I was withheld $5,000 USD, and received a refund of $1,000, I would only be allowed to claim $4,000 USD, not $5,000 USD as reported on my W-2.
This tax paid needs to be converted to Canadian dollars; I used the Bank of Canada annual rate for 2019, which was 1.3269 at the time. I considered this as a “Federal non-business foreign tax credit”. The country for this claim was the United States.
Turns out I owed a lot to the Canadian government since the tax rates in Canada were higher than in the US, meaning the credits I would receive would not be enough to offset my tax burden. I contributed the maximum I could to my RRSP to save some of the hit.
It’s worth noting that Canada provides form T1-M, “Moving Expenses Deduction”. This form can allegedly be used to deduct expenses associated with moving for summer employment.
You can also claim moving expenses if you moved to work, including summer employment, or to run a business. However, you can only deduct these expenses from the employment or self-employment income you earned at the new work location.
However, the text of the document is quite complex and includes a number of exceptions, such as if the company has reimbursed you for those moving costs. I would consult a tax professional before trying to fill this out.
Hey if you made it this far I hope you found it as interesting to read as it was for me to file! Maybe not. But I hope this was at least useful if foreign taxes were of interest to you. Let me know of any non-tax related questions you might have.
Like I mentioned, I recently used OLT to file my New York State tax return for 2021. This was because TaxAct wanted like $60 to file my taxes, part of which is probably going to lobbying to keep it that way or something. OLT asked for $15.95, which I thought was perfectly reasonable. I think there’s a way to get it down to ~$8, but I couldn’t be bothered. The UI is really old-style and it required me to know exactly what forms to use, but that was perfect for me since I just needed any software that would let me e-file.
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