Living In Alberta , Contract In Michigan, Incorporated

[bjm44]

Here is the deal.

I am a canadian registered Corporation of which I am the only employee.
I just secured a contract to install a computer control system which will take 1 day to install in michigan. I am wondering what I need to do now to proceed. I have researched this quite a bit and from what I gathered I need to get EIN and fill out form w8-ben , Is there anything else I need to do or forms I need to submit and do I have to submit any withholding taxes. As I am the only person in the corporation, will I have to file personal income tax? Sorry for all the questions but I am new to all this USA tax issues and am finding it overwelming and starting to second guess myself about deciding to expand into the USA.

[Steven]

It depends on the extent of your business in the US. If it's just a one-off and the amount your corporation compensates you is less than $10,000 pa for doing it (hint, hint) then you don't need to do anything tax-wise in the US. The corporation will need to file an 1120-F and an 8833 with the IRS for informational purposes every year, although the IRS have this weird calculation that I can never get the hang of that kicks in to tell them whether the corp needs to do that or not. With corporations I'm utterly clueless what it is, with individuals it's usually $100,000 of income. You can try phoning the non-resident dept. in PA but I've tried several times and gotten totally different answers each time.

The GST is zero-rated on your invoices.

If you know how to do a T2 then an 1120-F is relatively simple by comparison, the 8833 is a bit of a pain though as all the questions are open-ended.

You can get an EIN for this but it's not strictly necessary for informational returns.

If you get over the $10,000 limit then you have to start doing US payroll withholding, then you need an EIN and have to do FICA withholding and income tax withholding like any US company does, and you personally need to file a 1040NR and probably an 8840. You then also may need to file an 8233 with your client as well to inform them of your tax treaty status so they don't have to perform non-resident withholding.

This is awkward if you are an installer, because you can do that as a B-1 visitor, but you can't get an SSN so you have to get an ITIN by filing W-7. You can get an ITIN more easily by opening a US bank account (personally, not your business) and then you can file a W-7 to get an ITIN to put on the W-8BEN.

Have a read of IRS publication 519 (for personal tax issues) and IRS publication 515 (for the business side of it). IRS publication 597 covers the tax treaty provisions but it's out-of-date because the treaty changed last year.

If your company gets large enough the usual thing to do is to start up a separate US corporation because at that point you probably need an accountant to handle this and they're more familiar with a regular C-corp than a foreign corp. However you MUST remain personally a tax resident of Canada if you own a CCPC. Be very careful about moving to the US as it can expose you to departure tax very badly if you own a CCPC and it has any significant assets.