TN, Self-employed, W-2, 8233 and taxes fun

[edm]

Thanks!

Got a call from a Tax Lawyer from Quebec this morning who said to forget about the idea as a one-client company where I would work at the client's site is basically an employee-employer relationship and that the gov't would get on my case.!

[Steven]

To be honest I'm losing track of what your situation is, exactly.

If you are working for them on-site and you're on TN-1 you have to be directly employed, so you just put down "non-resident alien" on the W-4 and file non-resident on 1040NR and file an 8840 every year if you live primarily in Québec.

If you're working primarily in the US there's no point to a Canadian corporation because it makes it massively more complex, use a US corporation. If you are non-resident it would have to be a C-corp though, only residents can use S-corp.

To be honest I think my original answer is the solution, but you will end up paying a lot of tax that way because you effectively pay the combination of US social security tax and Canadian income tax after you claim the foreign tax credit for the US income tax.

You can't register as self-employed in the US so there's no other way to do it if you continue to live in Québec.

The fact that you're self-employed in Québec is largely meaningless, because your job is in the US and you are directly paid by them, the only difference is you use a different tax return form in the US to a resident and you still have to file a T1 in Québec.

[edm]

Got it.

The situation is really complex (employed by a company, working for a third one), so the employee-employer relationship is unclear, but I'll go on the safe side and just pay the extra taxes.

[Steven]

Actually it's pretty straightforward as you are simply an alien employed by a US company. The only wrinkle is that you are self-employed in Canada, so you can carry on having Canadian clients and doing your own payroll withholding and prepare your own T4, etc. as per usual, the only difference is that you also have an additional source of income which will be on the W-2 they give you and you have to claim a foreign tax credit for it.

But there's no other paperwork on the Canadian end because they've done all the withholding in the US, and your US tax return should be relatively simple if all you have is a W-2 and that's your only US source of income.

[edm]

I guess the simplest would be to declare non-residency in January, planning on stopping my freelance work anyways.

Less taxes, less paperwork, more fun

Thanks again!

[Steven]

I've put up various threads on here on the problems of moving your tax home to the US, have a search.