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

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.

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?

As I said, withholding and final taxes are 2 separate things. Likely you will be withheld "as if" you are only making the US income in US and only the Cdn income in canada. Even when one has 2 jobs in the same country, withholding usually gets balled up, so expect this in your situation.

But, of course, since you will be reporting ALL income in canada, and getting credit for only the low taxarte you will be taxed in US, you may end up owing more to canada. There is little point trying to exactly figure out what your taxes will be. To be certain, take as little exemptions on your W-4 and TD1; don't aggressively try to cut your withholding until you know what you are going to be owing to each jurisdication, then start tailroing it. Or, just make sure you keep a 1/3rd of your overall gross set aside for taxes (including what has been withheld). Your RRSP and other deductions should cushion the shock.


The divvy-up will be quite simple: number of working days spent in each country

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

They're not morons, think about how much money they're making filling in T2s for their clients. And assuming they know what they're doing imagine the windfall when the person gets an EIN for their corporation and starts doing a US payroll, US corporation tax on their US-source income etc. Think about the huge volume of paperwork there, 1120-F, W-2, W-4, 8233, 8833, etc.

-- Tue Sep 15, 2009 6:22 pm --

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

Well legally they have two payrolls. From the sounds of it the $10,000 limit doesn't come into play because you're resident in Canada but work for a US employer? Or you earn more than $10,000 in each country anyway so it's not really relevant.

Anyway it can be pretty straighforward as long as their payroll dept. does their work correctly because there are two payrolls and they run both of them. You file a W-4 with the US branch and a TD-1 with the Canadian branch and you get a W-2 and a T4 at the end of the year. You use them to fill in your T1 and you file for a foreign tax credit on T2209 and T2036 based on what it says on your W-2. This is explained in the general guide for the T1.

What you do on the US end depends on what your status is in the US. You said you're a Canadian so I assume you were on TN-1 or something like that (US citizens must file a 1040 every year and form 2555 can come into play if you're not resident there). If you're just a Canadian who has a non-immigrant status in the US, you simply fill in 1040NR with your W-2. If you spend less than 183 days in the US you also file 8840. If it's more than 183 days and you earn more than $100,000 in the US you're supposed to formally make a tax treaty claim on Form 8833 to the effect that you are a resident of Canada for tax purposes, essentially. I don't know how to fill in 8833, it's a very open-ended form.

I don't think T1213 is relevant here because you're a resident of Canada from the sounds of it, not the US. You will owe more taxes on top of what you've paid in withholding as reflected on your W-2, not less. You will calculate this when you do your T1, you file for a foreign tax credit so you avoid dual-taxation but because Canadian taxes are higher you will pay some tax on top. You send in a cheque with your T1.

If it makes it easier to understand, you in essence have two jobs, one in Canada and one in the US because you will be on two payrolls. Just make sure the company you work for does the split correctly.

Note that if you are a US citizen and you spend more than 183 days in the US, the IRS will probably consider you resident for tax purposes which reverses the situation and then T1213 may come in useful. Changes all the other paperwork you have to file as well.

Thanks for the advice! Will let you know how it goes.



-- Tue Feb 22, 2011 5:58 am --

Hi guys,

Here's the update. To refresh: I am a Canadian citizen, working for a US Company as a full employee. I used to be based in one of our US offices. I wasn't able to cut ties with Canada, so I had to deal with submitting Canadian and US federal and state tax returns and applying for foreign tax credits...etc...huge hassle. However, since Sept 2009, I made arrangements with my company to come home and work from Canada. The company has set up a Canadian payroll for a few of us in this similar, remote-working situation. All my income is in Candian dollars. My company pays me in Canadian dollars with a Canadian payroll. I have a TN, and still go to the US occasionally for work purposes, (meetings with clients and colleagues, etc.) but the bulk of my work is done from home in Canada.

As you guys predicted, for 2010, my company issued me a T4 AND a W2, and told me that they reduced the amount of Canadian federal tax withheld on my Dec paycheques to account for (and assumedly pay tax on) time and work done in the US over the course of the year. However, I was never paid any US income, yet I've been given a W2 showing a gross US income (just barely over $10,000) with US taxes withhled. However, my CAD income was not reduced by this similar amount. I was paid fully in CAD, they just reduced the amount of Canadian tax withheld during the December pay period, with no adjustment to my T4. Now, it will look like I have more income than I was actually paid. When I fill out my Canadian tax return, won't I have to ADD the W2 to my T4 gross income number? Is this a mistake? Won't I get double taxed on that "extra" income listed on my W2?

I can't simply "ignore" the W2, can I?

Thanks!

-- Fri Mar 04, 2011 7:52 am --

Is there anyone who can help me??

Hello,

I have few tax questions. Here is my situations.
I am IT consultant and Canadian citizen and own a Canadian corporation. I recently got offered for 6months consultant job in USA. I will be doing most of the work from home here in Canada. I will have to go see client for first 2 weeks then I return to continue the work from home.
I will be working for recruiter who I have to invoice from my corporation and they will pay me in US dollars in US bank account.

Here are my questions:
1) Do i have to open/register a corporation in USA for this consultancy work? If so any links to help me register as a Canadian?

2) When i Invoice the company how much taxes I add to invoice. its in Cleavland Ohio.

3) Since I am working from home in Canada do i have to pay Taxes here in Canada (CPP) and in USA?

Thanks and great forum.

Ayub

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