How to Handle Dual-Status Tax Year & Form 1116 Foreign Tax Credit for US/Canada Split Year

You're on the right track with your dual-status approach, but let me clarify a few things: For your first question about calculating income for Form 1040 - yes, your method is correct. You're properly prorating your Canadian income based on your days of US residency and converting at the appropriate exchange rate. That's exactly how you should allocate your worldwide income for the portion of the year you were a US tax resident. Regarding your Foreign Tax Credit question, since you're using the cash method on Form 1116, you can only claim foreign taxes that were actually paid during your 2023 tax year. The additional CAD 5,000 you paid in April 2024 would be claimed on your 2024 tax return (filed in 2025), even though it relates to your 2023 Canadian income. This is a common situation with foreign tax credits - the timing mismatch between when income is earned and when additional taxes are paid. On your 2024 Form 1116, you'll identify that these taxes relate to 2023 income in the appropriate section, but they're claimed in the year actually paid under the cash method. One thing to double-check: make sure you're only claiming foreign tax credit for income that's actually being taxed by both countries during your period of US residency. The FTC is designed to prevent double taxation, not to give credit for taxes paid on income that isn't subject to US tax.

I had a similar situation last year when I moved from the UK to the US midway through the year. I discovered this great tool called taxr.ai (https://taxr.ai) that was incredibly helpful with my dual-status filing and foreign tax credit calculations. I was completely lost with all the proration formulas and Form 1116 requirements, especially since I also had additional tax payments in the following year. What I liked about taxr.ai was that it analyzed my foreign tax documents (in my case UK, but it works with Canadian T4s too) and automatically calculated the correct allocation for the dual-status period. It also properly handled the foreign tax credit timing issues, showing me exactly what could be claimed in which tax year. The tool even generated detailed explanations that I could attach to my return to explain the calculations to the IRS. For someone in your situation with the dual-status year and foreign tax credit complications, I think it would really simplify things.

I just wanted to follow up and say that I tried taxr.ai after seeing it mentioned here. I was skeptical at first because my situation seemed so complex (dual citizen with income in both Canada and the US, plus investments), but it was seriously a game-changer for me. After struggling with my dual-status return for weeks, I uploaded my Canadian tax documents and it automatically parsed all the information, converted the currency correctly, and showed me exactly how to allocate everything between my 1040 and 1040-NR. The Form 1116 calculations that I was dreading were completed in minutes with clear explanations of which foreign taxes could be claimed in which tax year. What really helped was that it explained why certain Canadian tax payments made in 2024 (for my 2023 income) needed to be claimed on my 2024 return instead of my 2023 return - something I was completely confused about before. Worth every penny for the peace of mind alone!

If you're still struggling with getting a straight answer from the IRS about your dual-status foreign tax credit situation, I'd recommend trying Claimyr (https://claimyr.com). I had a similar dual-status year with Canada/US taxes and kept getting conflicting information from different tax preparers. I needed to speak directly with the IRS to confirm how to handle some specific Form 1116 allocations, but kept hitting the "all circuits are busy" message for weeks. Claimyr got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to confirm that my approach for allocating foreign taxes paid was correct and gave me the specific publication sections to reference on my return. Saved me from a potential audit nightmare and the relief of having official guidance was worth it.

I wanted to follow up about my experience with Claimyr. I was really skeptical (as you can see from my previous comment), but after another week of failed attempts to reach the IRS about my foreign tax credit issues, I decided to give it a try. I'm honestly shocked to say it actually worked! Within about 35 minutes, I was speaking with an IRS representative who specialized in international tax issues. They clarified exactly how I should handle my foreign tax credit carryover situation and confirmed the correct approach for claiming additional foreign taxes paid in the year after the income was earned (which was exactly the issue the original poster was asking about). The agent even emailed me specific sections from the relevant IRS publications that I could reference in my return. This saved me from having to pay my accountant for additional research hours and gave me confidence that I'm filing correctly. I never thought I'd be writing a positive review about anything related to IRS phone support, but here we are!

I think you might be overcomplicating the calculation for your resident period income. When I did my dual-status return (Japan to US), my accountant just used the actual income received during my US resident period rather than prorating the annual amount. If you have pay stubs or bank statements showing exactly what you earned during your resident period, that might be more accurate than the formula approach.

Quick heads up about Form 1116 - make sure you're putting your foreign income in the correct category. Employment income goes in the "General Category Income" basket, not the "Passive Income" category. I messed this up on my first dual-status return and had to amend it. Also, don't forget to convert your foreign taxes paid using the same exchange rate method you used for the income!

One additional consideration for your dual-status situation - make sure you're aware of any potential treaty benefits between the US and Canada that might affect your tax calculation. The US-Canada Tax Treaty has specific provisions for residents who change status during the year, and there might be tie-breaker rules that could impact how you're treated for certain types of income. Also, since you mentioned you were working remotely for your Canadian employer while being a US tax resident, you'll want to verify that your employer properly handled any Canadian tax withholdings during that period. Sometimes employers don't adjust withholdings when employees become non-residents for Canadian tax purposes, which could affect your foreign tax credit calculations. Have you considered whether you need to file any additional Canadian forms (like a departure tax return) since you became a non-resident of Canada? The timing of your tax residency changes in both countries can create some complex interactions that might affect your overall tax liability.