TN and becoming an independant contractor

[averagecdn]

I was working for a consulting company as a System Analyst up until about 2 months ago with my TN. The company I was working at decided they wanted to hire me as a client support technician which of course is not on the list of NAFTA Approved jobs. So today they came to me and said we will hire you as an independent contractor.. Can anyone provide me with some information as to what is involved. Who writes the letter for customs? What do I have to setup in the USA and is there anything that is required in Canada? Any assistance is great..

[Steven]

If they've changed your job, TN-1 is not an option plus you cannot be self-employed on TN-1. You can be sponsored for TN-1 by company A while working for company B, i.e. sub-contracted, but it must be arm's length, i.e. you must not have a controlling interest in company A.

If they're unwilling to sponsor you for a visa and you want to be an independent contractor anyway, the only real option is E-2, i.e. treaty investor. However it's tricky to do if you're the only person employed by the company you're setting up because you're supposed to "control" it, not be employed by it (but on the other hand I know people who've gotten E-2 and their only employee was their wife, pretty much).

E visas are by far the most complex non-immigrant category to apply for, requires proof of funds, proof of investment, business plan, etc. Investor categories are where finding a really good immigration consultant can help a lot because they have "fill in the blanks" applications.

There is more information here: http://toronto.usconsulate.gov/content/ ... ment=evisa

E is unusual as far as Canadians go because it requires an actual visa, you cannot apply for it at a POE.

[nabs]

I'm in a similar situation as averagecdn. The company will only hire me as an independant contractor. For all intents and purposes, however, I'll be working like a contract employee. Good thing is that they will sponsor my TN-1 and my profession is on the NAFTA list. Do I need to set up anything in Canada or US to establish myself as an independant contractor? Is there anything else I need to consider? Thanks.

[Steven]

Answered in my post above.

I suppose what you could do is start up a Canadian company and sub-contract yourself via TN-1 but it sounds a bit silly to me.

Really when employers say this to you, what they mean is that they don't want to do payroll withholding for you as it's too complicated for them or it will cost them too much money because of the employer's social security contribution.

In scenario (a), i.e. it's too complex for them, then if they're too thick to do payroll withholding then they're clearly going to be too dense to do the non-resident alien payments either using 1042-S, 1042 and 8233, so really that's a non-starter.

In scenario (b) to still be working for a Canadian company sub-contracted into the US then you're going to have to get your company an EIN and do the US payroll withholding yourself, couple that with the Canadian end of it and you're basically going to be working as an accountant. TD-1, T1, T2, T4, W-2, W-4, 1120-F, 1040NR, 8833, two sets of corporate withholding payments, etc.

And bear in mind none of this takes into account that the IRS hates it when employers hire "independent contractors" who are basically direct employees who have had FICA tax withholding off-loaded onto them.

So either convince them to directly employ you or find an employer who will.