Tax-help-live in canada work for u.s. company

[mwbeyl]

I do work for a US Company and on a US payroll. Mainly I physically do work in the US. But I do work from my home in Canada from time to time but doing work only for US customers. Majority of my work is traveling to a site in the US for work but on occasion work out of my home office in Canada. Does that make any difference.

[agnelson]

Yes, it does, and complicates things. You are an employee in US, thus subject to FICA in US. the occasional work in canada is still employment, and probabaly should be paid as a cDn employee, subject to CPP and EI. You would prorate the time spent working in each jurisdiction to come up with what is Cdn-sourced. Tricky.

[mwbeyl]

The tricky part is what I was afraid of, do you know if I have to pay quarterly or is that something I can pay when I file my taxes once a year.

[Steven]

I don't think it's that tricky, you're on a US payroll in the US so the FICA is deducted so that bit is obvious. To avoid your employer having a Canadian payroll you register as self-employed and do the CPP in Canada yourself. The amount to withhold is based on the amount you've invoiced them, it's relatively straightforward.

This is explained in the CRA self-employment guide. You usually have to do installments in the second year, unless you're earning a tiny amount (I think the limit at the moment is $3,000).

Then you claim a foreign tax credit in Canada for whatever was withheld in the US, and when you claim your benefits when you're older, you claim under the provisions of the totalization agreement. How much you pay in tax at that point on your benefits will depend on where you happen to be living at that point, obviously.

-- Tue Sep 08, 2009 10:52 am --

He doesn't have to 'register' with CRA that he is self-employed: he is.

He needs to register to get a business number, GST number etc. so he can invoice them for the work done as a self-employed individual in Canada.

[agnelson]

That is if the US firm is willing to divvy up his work into employed work and contradct work.

Most firms have rules against such, so I don't think it will be that easy to get USco to pay him as a contractor while in Canada.

But I could be wrong.

If USco is unwilling to do this, then it is also unlikley that they will only collect fica on the prtion of work done in US.

AT that point is is simply best to accept that the work is done entirely as an employee -- not as self-employed at all.

[mwbeyl]

That is what I am thinking, they will not pay me as a contractor. The tax situation I have been told is for me to figure out the differences. Which makes it more difficult for me to figure out especially since some of the work is done in the states and some from my home office.

[agnelson]

Your are an employee in both countries. Count the days in each.

You would not be self-employed in this instance.

However, be aware that CRA at some point will want CPP and EI (both from you and the employer). They have mechanisms to deal with this, which may eventually force US firm to either put you on a Cdn payroll, or contract you.

[Steven]

That is what I am thinking, they will not pay me as a contractor. The tax situation I have been told is for me to figure out the differences. Which makes it more difficult for me to figure out especially since some of the work is done in the states and some from my home office.

If they will only pay you as an employee then legally they should register their company in Canada, obtain a Business Number, you give them a completed TD-1, they set up a Canadian payroll, perform CPP and EI withholding and issue you a T4. That's the only other legal way I'm aware of. You are effectively a Canadian employee working for them in Canada, therefore they must comply with Canadian law.

I would sit down with their HR or payroll dept. and see if you can get an exception to this rule of theirs. Because the more logical approach is as described above, register as self-employed in Canada and invoice them for the work done in Canada, then it's simple to calculate.

I can understand the logic to a rule like that for people based wholly in the US, but in this situation it's silly.