Can I work on a 1099 under a TN status?

[Cedartie]

I have a company that is offering me a position but it is as a 1099. Can I do this under the TN status or do I have to be a W2? If so what are the benefits of a 1099 over a W2?

Marty

[Steven]

Well (a) you can't be paid on 1099 as a non-resident alien if that's what you are (i.e. you haven't moved your tax home to the US) it would be a 1042-S instead and (b) you cannot be self-employed on TN-1.

There are no advantages to you to having a 1099 over a W-2, what it basically means is that your employer is off-loading the withholding onto you, which they may be doing to avoid having to do the social security matching or other reasons, like not including you in their healthcare coverage scheme.

[agnelson]

A TNer can be paid by 1099. This is clearly established.

However the 'client' must act as your TN sponsor. You cannot self-sponsor your TN, but you can be self-employed in IRS/tax terms.

As steven brings out however, unless you keep your Cdn residnency (and thus your healthcare) and are not required to pay US SE tax, there is no advantage for the 'employee' to be self-employed unless one is paid the extra $50K that the company is saving.

It comes down to $$.

[Steven]

A TNer can be paid by 1099. This is clearly established.

Not as an NRA I thought, although it doesn't much matter with Canadians because there's no NRA withholding.

BTW, many years ago the IRS also warned me against registering as a non-resident alien self-employed person if at all possible because it's the rarest filing category. They don't seem to have improved the paperwork since then.

I wouldn't mention to CBP that you're registered as self-employed in the US either, based on what it says in the CBP manual.

[agnelson]

If you are on TN and still living in canada, self-employed is the best way to go (as long as you've filed for the exception Form 8233 -- and have no fixed base) as you are exempt from IRS tax altogether, including FICA (you may be subject to state tax).

[Steven]

Do you know how to fill in the 8233 (and also 8833 in certain situations)? This question comes up on here once in awhile, I did fill in an 8833 with some help from the IRS many years ago but I'm damned if I can remember which section of the tax treaty to quote now, it's too long ago. And it might have changed anyway.

The most common one that comes up is when someone for whatever reason wants to stay a tax resident of Canada and they're in the US for more than 183 days and their income is over $100,000 so the IRS wants a formal tax treaty claim to be included with the 1040NR. I.e. they want to be exempt from the substantial presence test.

[agnelson]

The substantial presence test is not the main problem. What is a problem is 'fixed-based', which has been more aggressively been defined over the years against the independent servoce clause. Of course, that clause has been removed from the treaty entirely, so the whole notion of NRA contractor work has to be re-evaluated based on the new treaty, which is actually gives narrower marging than SPT.

A good topic for the tax forum at forums.serbinski.com, not so much here on a general board

[Steven]

You can't use Form 8840 though if you're there over 183 days, so that's when Form 8833 might come into play because you can't simply claim a closer connection you have to use a separate part of the internal revenue code. The substantial presence test isn't really a big problem because of the tax treaty but it's the paperwork you have to file and 8233 and 8833 aren't the easiest forms to fill in.