Employed or self-employed

[Turpentine]

I am a Qc resident and have a full-time job there. I am however also hired occasionally by a US university to teach there on contract, on a TN. So far, I have been receiving W-2s from them, on which is included a "travel allowance" supposed to cover my flight, hotel and meal expenses when I have to go down there to teach. This is problematic, because it is still unclear whether I can claim those travel expenses on my Canadian return: I called CRA a few times, got various answers obviously, was pretty much told in the end to claim them and see what happens. I'm still waiting to see whether I am getting or not a refund. (my employer does not want to simply open an expense account for me)

This US employer has offered me to hire me as an independent contractor instead, so that I would get a 1099 instead of a W2. I figure that this would potentially simplify my life in terms of claiming travel expenses as a self-employed person, as well as other expenses necessary for my job. However, I am wondering, are there disadvantages to this solution that I should be aware of, e.g. complicates tremendously tax filing, means I will have higher taxes, etc.? I'd like to know before I tell my employer which way I want to go.

Thanks a lot for the help

[Steven]

You can't be issued a 1099 as a non-resident alien and it's tricky to do it on TN-1 as that category requires direct employment (and your tax home would have to be in the US anyway, which it's not).

Payments made to non-resident aliens are reported on 1042-S but if you're working for them in the US the most practical way is to do it on a W-2 like you currently are, as you have to do US payroll withholding if your total pay is over $10,000 in any given year in the US, and you can't register as a self-employed person in the US on TN-1 so there's no way of doing the payroll withholding unless you're directly employed.

The travel allowance is part of your US pay if it's on your W-2, so it's reported on 1040NR, not T1. You must file 1040NR and 8840 every year in the US and report the amounts from your W-2. You claim a foreign tax credit in Canada on T2209 and T2036, that is the deduction reported on your T1, not the expenses included on your W-2.

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

The general guide for T1 explains how to claim a foreign tax credit using your W-2.