Canadian 'foreign correspondent' in the USA - HELP.

[rweston]

I'm a Canadian citizen, who has a job offer from the Canadian company i work for to relocate to California as a 'special correspondent'... I will be living in LA, i will be paid in U.S. dollars, but working for a Canadian company - i will NOT be paid from an American employer.

I'm trying to crunch numbers in my head - and figure out what's best. The State and Fed tax in California are pretty huge. (The job is 100K+)

What are my options here? I've been looking at everything from incorporating, to keeping a Canadian bank account. What's the best way to get the most out of what i'm getting paid - without having to double up with Canadian tax stuff (If that's even an issue)

I'm just not sure what the best thing for me to do is - and more importantly, what my options are.

-Canadian Citizen
-Canadian Company
-Living in USA
-Company pays (USA) Medical
-Own a home in Canada
-Will rent in LA

Please help... I need to give them an answer this week.

Thanks so much.

[Reba]

First things first: What sort of status do they intend to get you that will allow you to work in the US? And how long do you intend to stay?

You may want to speak with a tax and financial advisor who knows cross border tax issues.

[rweston]

I'm not 100% sure what Visa i'll have - But i do know that it's a 1-year contract...

They've done this before with other employees in the past - so i assme whatever Visa it is, it'll be the easiest one for them to get (that's how they do things)... But i think it may be an "I-Visa"...

[Steven]

I'm a Canadian citizen, who has a job offer from the Canadian company i work for to relocate to California as a 'special correspondent'... I will be living in LA, i will be paid in U.S. dollars, but working for a Canadian company - i will NOT be paid from an American employer.

If you work for them in the US, they have to have a US payroll so effectively they are a US employer at that point. Issuing you a T4 for the work you do there is not an option, they have to do FICA withholding, have an EIN and issue you a W-2 like any other US company. On an I visa you cannot be self-employed in the US (which includes having your own corporation, because it's not arm's length) so that is the only option.

Usually how this works is they have a US subsidiary and you go on that payroll while you're down there, although it's not strictly necessary to have a formal office, etc.

So all the State and Federal payroll taxes will be as for any other Californian. If you're a one-off I don't know what you're going to do about healthcare, that will be a bit of a stinker.

The only real question is whether to move your tax home down there, and if it's only one year I don't think it's practical to do that, especially given that it's mid-year. So basically your tax home remains in Canada for tax purposes (and this may help you maintain Provincial healthcare), you use your W-2 to fill in the 1040NR next year, and you claim foreign tax credits in Canada on T2209 and T2036 with your T1. The general guide for the T1 explains how to do this.

Canadian income taxes are usually higher than in the US so you will probably pay some Canadian tax on top, but California has high State taxes and if you're from BC there's a small chance you may actually pay more in California than you would in BC (but it's rare, usually only at the lowest bracket).

Read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

Don't get too worked up about the "substantial presence" test, the tax treaty largely negates the relevance of it, but the IRS wrote a lot of that blurb so they chucked it in there to confuse people. The only difference it makes to Canadians is what bits of paperwork you have to file with the return.