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

[agnelson]

The fear -- unfounded in my opinion -- that most companies have in putting a Cdn employee on a Cdn payroll is the belief that is sets up a nexus in canada by which the Us company can become laible for corporate tax in Canada.

I have never subscribed to this notion, although I have heard business accountant types swear on it.

Any clarifaications, steven?

[Steven]

Only if they have Canadian earnings (which in this situation they don't) and even then if they have a payroll in Canada obviously all those earnings could be taken up by payroll expenses so profit - expenses = zero.

This is why I always tell people doing it the other way around not to do it this way because US corporation taxes are higher than Canadian ones, especially at CCPC rates. So on your CCPC you become subject to the full whack of US corporation tax on the US-source income and have all this annoying paperwork to fill in like an 1120-F and so on and you have to have a US payroll to pay it all out so you don't pay any corporation tax in the US. It's better to have two corporations, easier to do the paperwork.

Or in this situation, because he's a one-off employee, to be on a US payroll in the US and self-employed in Canada.

[agnelson]

I'd go one better and tell him to go contractor all the way -- forget CCPC it's not of any advantage.

But the employer in this case is not buying. Perhaps a call from CRA willenlighten them, next year sometime.

[Steven]

Yes I agree in his situation, there is no point to a CCPC, I was illustrating the corporation tax differences. He should be on a US payroll and self-employed in Canada.

I've noticed in the various TN-1 threads (like the one about the 1099) there's a lot of people who seem to have started CCPCs and then decided to work in the US. There's no real point to a CCPC in that situation if most or all of your income is derived from the US, all it does is create a monumental headache because Canadian law requires your tax home to be in Canada if you have a CCPC. And not only do you get whacked with the full part 1 corporation tax if you move your tax home to the US, you also get hit with departure tax too on the corporation's assets.

[agnelson]

Thus may advice to forget CCPC. Iv'e got one on another board now that was living in US and established fictitious Cdn residency just to establish a ccpc and now they are stuck with being unable to get a workable pension/education savings plan.

Who are the accounting morons forcing these CCPCs on people?!

[usagisisa]

Hi Steve,

I have a similar situation to mwberyl. I work for a US company, get a US salary, travel to the US to do some work but live in Canada and do most of my work from here. One step further, my company is in the process of establishing a Canadian business (obtaining a Canadian business number, setting up a canadian payroll..etc.). I am now being told that since my work is split between the US and Canada, even though we are switching to a Canadian payroll, the company will be witholding my taxes in the US in addition to my Canadian taxes. Is that common? I have been given a t1213 by my employer, that I need to fill out and send to the CRA. Am I supposed to estimate the days spent in the US vs Canada? How will the company withold? Based on that same estimate perhaps?

I'm very confused. Can you help shed some light on what ideally should happen in this case?

[agnelson]

Yes, T1213 can serve this purpose. Remember that your withholding is not an indication of your final tax.

You should have been under this arrangement all along, with company withholding US taxes on your US-based work and paying/withholding you as a Cdn employee when in Canada.

Ideally you should get separtae pay checks, but this is not necessary.

You will need to work out the exact numbers on your tax returns every year. What you want to avoid is owing a huge sum in one country while waiting for the refund from the other. Looks like the company is trying to work this out for you.

What you maight want to request (demand?) is that he employer provide pro tax preparation for this first year.

[usagisisa]

Thanks agnelson.

This is a fairly new situation. Although I am Canadian, I was living and working in the US up until May.

So, in essence, the T1213 form is a request to the Canadian government to reduce the amount of taxes that are witheld on my paycheque for the CRA, to accomodate whatever is witheld for the IRS. Is that right? So in theory, when it all nets out I should be effectively taxed at the higher rate (Canadian), however the US is claiming some of that tax money on the basis that a portion of it was earned in the US. And that amount witheld for the IRS is determined by the amount of time worked and a certain tax rate? Is that correct?
If so, then I would want a good estimate of my potential US-Canada time split. Are the respective tax rates automatically applied?