usagisisa wrote:I don't know if it was a 1040 or a 1040NR. I might have done it wrong last year. What is the difference?
If you're filing a T1 in Canada and a 1040 in the US, you're paying taxes twice, you can't claim a foreign tax credit because you're saying both places are your principal residence. You have to file on 1040NR if your tax home is in Canada, so you're only taxed on your US-source income. Then you claim a foreign tax credit in Canada.
Going forward, the company will essentially allow me to live and work from Canada, and give up my US residence. Although my "official" assignment will be one of our US offices, since there is no Canadian office. Travel to client sites will be a billable expense. Am I exposed to any weird tax situations by doing this? Do I get a full credit for all my US taxes by using the 1040NR or 1040 form? I don't want to be contributing to a us social welfare system for no reason.
Yes, it is a weird tax situation. You cannot be directly employed by them and work for them in Canada unless they set up a Canadian payroll, get a business number, issue T4, etc. If they don't want to do that you basically have to become a sub-contractor and register as self-employed in Canada. You give them a completed Form 8233 and issue them invoices. You do the CPP and so on yourself.
You must pay taxes proportionally under the 2008 tax treaty, so for work performed in the US while you are physically there, you owe the IRS taxes as well. The simplest way around that one is to be on their payroll while in the US and they issue you a W-2 and you do a 1040NR every year for that portion of your income. You can claim eligible US expenses against your US income and Canadian expenses against your Canadian income.
The social security situation isn't a problem, there is a totalization agreement between Canada and the US, have a look at www.ssa.gov
Cross-border work is always a weird tax situation when part of the job is in one country and part of it in another.
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