Confused, Moving Back to Canada

I'm a new member, but I have read a lot on this site!
There is a lot of great information but i"m still confused about a few things.

I'm currently working for a company in the US (under a H1), I'm looking at moving back to Canada, but continue to work for this company in Canada. They have been working on the green card for quite some time, I have received notice that my I-140 has been approved, and my processing date is in June 2006. So I know there will be some time before it gets processed

I'm trying to figure out the best case for the company and myself. The company really wants to keep me, but is not certain of immigration details, and tax implications.

Would the American company have to pay Canadian tax on the equipment even if it's not sold in Canada?

Would it be best for me to remain a direct employee of the US company but live in Canada, as I may have to travel to the US to perform work, and visit the office.

If I was to live in Canada but also keep a residence in the US and travel back and forth for the 180 day break line to keep my work permit, how would that work with the taxes?

Any help would be great, I'm sure I'll have more questions to follow.

Thank you for the help in advance!

I don't quite get why you're moving back to Canada if you're on a valid H-1B and your I-140 has been approved? Are you saying your H-1B will expire before then?

There are scenarios in which you can extend H-1B beyond six years if you have an approved I-140: http://www.immihelp.com/visas/h1b/h1b-v ... years.html

That was the first thing that came up in Google!

There are threads on here about the taxes but I'd suggest looking at that first if it's relevant.

It all comes down to family; I want to be closer to my son. The company would still like for me to work for them, and I would like to still work for them, as it will give me the greatest flexibility, as I can move "next door" to him and work from home most of the time, and travel in Canada, and to the US as necessary.

So I'm just trying to find information on what the best way to live in Canada, not get penalized on taxes in the US and Canada, or loose my status both from the work permit, and green card application.

I have read a lot on here, and there doesn’t seem to by any clear answer, any help would be great

Thanks

Well if you move back to Canada you've lost your status in the US basically, you can't maintain LPR status in the US if you don't live there.

Both USCIS and the IRS (and the courts) consider LPR status as definitive in determining your tax home, which means you have to pay taxes as a resident of the US. If you reside in Canada, the CRA will consider you resident there also so you expose yourself to dual-taxation. If at any point you move your tax home abroad (i.e. to Canada) then you lose US LPR status.

The only way around it I can see is to get a commuter green card, which basically delays the point at which you claim LPR status in the US, but to do that you need to have been sponsored from outside the country (i.e. to get an immigrant visa) and it doesn't sound like you're in that situation. Even if you get one it's not a long-term solution, it's up to CBP to determine whether you still qualify for it when you enter because the general idea behind them is that you have to delay your entry until your family qualifies.

So basically I think you're in a situation where it's one or the other, I'm afraid.

If you do move back to Canada and work for them here it's relatively straightforward, if you're just a one-off, you register as self-employed and invoice them (or set up a company of some description and invoice them). If you register as self-employed and receive over $100,000 of active business income from the US you have to file what is called a "protective" 1040NR return every year as well as a formal tax treaty claim on Form 8833. There is no non-resident withholding for Canadians, although your client can file a protective 1042 with the IRS if they want.

On the US end if you enter the US to work the simplest thing to do is to be directly employed by them for the work done in the US and they just give you a W-2 as per usual and you claim a foreign tax credit with your T1.

If you look on the CRA website there is a guide for self-employed people and also have a read of IRS publication 519, although be aware that a lot of what they go on about in there doesn't apply to Canadians because of the tax treaty. IRS publication 597 covers the tax treaty although it's in need of a serious update because it doesn't cover the 2008 treaty.

I would be a direct employee of them still and to be able keep my H1B would I have to "live" here in the US for 183 days a year, but still be able to live in Canada, and with the tax would I get taxed twice or just pay the us % then pay the difference between the US and Canadian % tax? (as I have read both explanations).

Sorry for questioning you, I have just read many different things, and I can't seem to get a consistent explanation, or one that makes sense to me. I know I may not be able to have the best of both worlds, but if I know enough I can make a decision on what will work the best, or what is manageable.

Thanks for the help so far!

I would be a direct employee of them still and to be able keep my H1B would I have to "live" here in the US for 183 days a year, but still be able to live in Canada, and with the tax would I get taxed twice or just pay the us % then pay the difference between the US and Canadian % tax? (as I have read both explanations).

It's pretty much as I explained it above, it's a difficult thing to fiddle because if you're a Canadian citizen with a job (self-employed or otherwise) where the work is done in Canada and family in Canada and you spend a reasonable amount of time here, the CRA isn't going to care what you do in the US and will consider you resident.

You'll never find on-line or anywhere else frankly a simple or straightforward explanation because determination of your tax home boils down to a combination of factors and also case law (and Article IV of the tax treaty). Have a read of CRA Form NR-73 and you will have a better understanding of it.

But like I said, in your situation if you become an LPR of the US then your tax home is definitely in the US, and if you have all the ties you're on about to Canada as well, then I find it hard to believe the CRA will not consider you resident in Canada.

So at that point you need to choose one or the other. If you really want to know try filing NR-73 with the CRA for a ruling on the Canadian side of it. But usually it's not a good idea to do that unless they tell you to.

Thanks Steve. Does anyone know what the tax implication then would be for me to move back mid year. How that will effect filing...what is the best way to do that, with out loosing my shirt?

Thanks.

It depends on what your current filing status is and if you're going to carry on working for them in the US at any point.

If you've moved your tax home to the US (i.e. you file on 1040) then moving it out again can be quite complex, basically you need to file dual-status, i.e. a 1040 for the period you were in the US, pro-rated, and a 1040NR for the rest of the year, pro-rated. Might need to file a 1040-C as well and possibly other bits of paperwork too, have a read of IRS publication 519. There is an example in there of a dual-status filing.

On the Canadian end it's relatively straightforward, you just file a T1 for wherever you've moved to, but you have to pro-rate your deductions and so on to the number of days you were in Canada. Obviously you will need to register as self-employed as well if that's your plan and get a business number, GST number, etc.