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

Hi,

I live in Canada but work for a U.S. company. I get paid in U.S. currency and it goes into a U.S. bank account. (I used to live in the U.S...and I kept one account open there)..I am Canadian Citizen. Do i need to file a 1040NR? And if so, do I also have to claim the income on my Canadian return? if i do, can I apply for tax credit?

Is there anyone who knows where I can get my taxes done who has experience in this type of stuff. I am so confused and I am not sure what forms to fill out.

Thanks

Where do you do the work? Canada or the US? And by that I mean where you physical are when the work is performed.

If you work in Canada for a US company, they're supposed to have a Canadian business number and they just issue you a T4 like any other Canadian company.

If you're a one-off sub-contractor you can either set up your own company or register as self-employed. You issue them an invoice and declare the income on your tax return, if you have a corp. you do the T4 yourself, if you're self-employed you usually have to do installments.

On the US end if you're self-employed it depends on the situation to some extent, you may have to file an 8233 an 8833 and a 1040NR or some combination thereof, there is no tax to pay if all the work is physically performed in Canada it's just a reporting requirement. You probably will have to file 8233 at a minimum, this is filed with your client, not the IRS. If you have your own corp. you report on 1120-F and make a tax treaty claim on 8833.

There's a version of Quicktax you can use if you're self-employed I think.

THanks for your response.

i work in canada from home, but I work for a company in the U.S. (they are not a canadian company), i never go to the U.S. to work.

i do not recieve any benefits from them at all. However, the money that i make does stay in the U.S. in a bank account that I opened when I lived there a few years back.

I do not bill them, they just pay me like they pay all their employees but they do no withhold anything.

So, I am still wondering if I need to file a 1040nr?

If you're directly employed by them they have to do Canadian payroll taxes (in which case it's probably going to be easier to register as self-employed and become a subcontractor). It's one or the other because you must be paying into CPP, it's legally required on employment income.

How you do this depends on a number of factors.

If none of the work is performed in the US and the amount you receive is less than $100,000 annually then I don't think there's anything you need to file in the US. If you receive over $100,000 you have to file a completed 8833 with the IRS to expressly claim tax treaty provisions (this is a bit vague - the IRS never seem to have a straight answer on what the limit is because it depends on the source).

If you ever physically do any of the work in the US then you need to file a completed Form 8233 with them in order to exempt your employer from non-resident alien withholding. They also have to file 1042-S and 1042, although the IRS will usually give them a waiver for this if all their foreign subcontractors are Canadian because there is no withholding. In your situation they should be giving you a 1042-S each time they pay you from the sounds of it.

For individuals I don't think you do need to file a US tax return in this situation as none of the work was performed in the US so there is no US tax, plus you're exempt from NRA withholding, so there's nothing to claim back. The IRS can sometimes get snotty and ask for one though, it's called a "protective" return, i.e. a CYA tax return and you make them aware there is no tax. You'd need to phone them and ask, usually it comes up if the amounts involved are quite large and the IRS wants to know where all the money is going to ensure there is no fraud involved.

Corporations usually do have to file an 8833 at least and a protective 1120-F return because the amounts involved are usually large enough.

Anyway this should give you a rough idea, like I said, call the IRS so you can explain your specific situation to them and see what they say: 215-516-2000.

Hi All - quick question - I am a sales affiliate - not selling items but merely giving people the option to click on my hop button to go to the seller. I then make a commission from the sale. I know any income I receive while ion Canada is taxable - but, a couple of the companies I sell for are now requesting a "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding "(fw8ben.pdf)

Does this mean I will have to pay taxes in the US on these commissions as well? What is this form for exactly -

Stats - I don't sell items - I am a middleman in a way directing people to the actual seller - whether that is in the US or any other country. I receive a commission from these sales.

What it means is that if you don't file it with them they will have to withhold 30% non-resident alien tax from the commission they're paying you. W-8BEN is to claim tax treaty status so they don't have to do the withholding. You have to file it every three years with each withholding agent you're dealing with.

If they withhold it then you have to file a 1040NR return with an 8833 every year to recover it (which is something you really don't want to have to do).

You might as well get an ITIN as well, this is simple to get in this situation, file a W-7 with the IRS and check box "a" as you're claiming a tax treaty benefit. You put the ITIN on the W-8BEN.

If you don't get an ITIN then getting back any withheld NRA tax is going to be more complicated (because it's harder to identify you).

Read IRS publication 519 for more information.

I'm not sure how much you're making out of this but if it's significant you may have to file a 1040NR anyway (it's called a "protective" return - you don't owe anything but they want you to tell them that), publication 519 explains this to some extent but it can be worth a phone call to the IRS.

My question is somewhat related to the first post in this thread.

I am dual US/Canadian Citizen. Husband-to-be is US Citizen. I am applying to sponsor him to become a Canadian Permanent Resident. I am doing this from the US. When/if that gets approved, we plan on moving to Quebec.
It is possible that we will both have the opportunity to continue working for our US employers by telecommuting online. Mine would be through a temp agency, his would be through a non-profit organization. Is it not possible to just continue getting paid as we are with US deductions and then just file both US and Canadian taxes and pay into the CPP that way or do we have to be "self-employed"? Is being "self-employed" the only way you can contribute to CPP when not earning income from a Canadian source? We really don't want to have to ask our US employers to change anything in the way they pay us (eg. Canadian payroll deductions or becoming sub-contractors) since I doubt they would go for it. Are we just trying to "have our cake and eat it"?

By law (the US-Canada tax treaty) you have to pay taxes where you live, so if you live in Québec you have to pay Canadian/Québec taxes.

Because you're physically there when the work is done (rather than commuting to the US) then either your employer has to have a Canadian payroll and issue you a T4, or alternatively you register as self-employed or set up your own company and invoice them.

Because you're US citizens, you still have to file a joint 1040 every year, but you individually file Form 2555 (or 2555-EZ if your income is below the foreign income exclusion limit). Under US law only the first $87,600 is exempt from US income taxes, so if you earn over that (each) you are subject to dual taxation on the amount over that limit. I haven't looked at the marginal rates in the US lately but I suspect you're looking at over $100,000 before you get hit with any significant US taxes.

This is how Uncle Sam stops US citizens from moving to The Bahamas and avoiding US income taxes.

Looking on the bright side, as US citizens you don't have to file all the annoying non-resident alien tax paperwork to report your US-source income.

Even if you physically did the work in the US you would still effectively pay the same amount of tax if your tax home is Québec, the difference would be that it would be subject to US withholding and you would claim a foreign tax credit for that amount. As taxes in Québec are higher, you pay the difference there so effectively you end up paying the same amount either way you do it, the only difference is who you pay it to.

Thanks so much, Steve. How in the world do you know the answers to all of our complex questions?

You mentioned:

...register as self-employed or set up your own company and invoice them.

What is the difference between registering as self-employed and setting up your own company to bill the "employer"? Are these 2 different scenarios or one and the same?

Well there are any number of different ways of setting up a company, self-employed, partnership, corporation etc. and they can all issue invoices.

If you want you can set up a CCPC, there are tax advantages to doing that (usually if you earn more than you can reasonably spend in a year).

However as a dual-citizen be careful using a CCPC as the majority of shares must be held by a Canadian resident. If you set up a CCPC and have money in it and then you decide to move back to the US, you will be hit hard by departure tax, because the corporation when you started it was worth $0 and when you leave it will be worth $whatever so your capital gain will equal $whatever and thus you will have to pay capital gains tax on the full amount.

Obviously if you're self-employed though you get whacked with income tax and both parts (employer, employee) of CPP on the full amount of whatever you make.

So either you pay the tax now or you pay the tax later!

Welcome to Canada.

Thanks so much, Steve. How in the world do you know the answers to all of our complex questions?

Sadly it's based on experience or experience of people I know. I'm a tax prisoner of Canada because of departure tax so be careful.