TN Visa & Income Tax question

I am self-employed, live in Canada, and have an opportunity to do consulting/contract work for a company in the US. The work would require me to visit the US for brief periods (few days to a week) every few months. Does a TN visa cover this type of situation? Would the letter from my employer/client need to specify a start/end date of the particular visit, or of the overall work contract?

Reading the forum (this is an amazing wealth of information!), I'm also now wondering if this would affect income tax filing if I am receiving payment from a company in the US?

Thanks for your help!

I have to say I always find these questions mildly amusing because TN-1 was expressly designed for your type of situation, but people seem to think it was intended to allow you to stay in the US for ages with endless renewals!

Yeah, if you fit in the NAFTA category, they give you a job offer letter, you compile all your qualifications etc., you get TN-1. You go and visit as and when under the terms of whatever job it is and do the work. Basically the job offer letter says you will enter for say, periods of a week or two over a total period of a year to do whatever job it is and then followed by the job description, what you're going to do and why that fits into the NAFTA category, etc.

Yes, it does affect your taxes, how exactly is hard to say because you're probably going to be in the "proportional payment of tax" situation in the new tax treaty, so there are no specific instructions as yet.

The Canadian end is fairly straightforward, the only difference is that you claim a foreign tax credit for any income tax (not social security) paid in the US, the general guide for the T1 explains how to do it.

On the US end you file a 1040NR and an 8840, helps a lot if you're directly employed by the US company, because then you just get a W-2 from them for the work performed in the US and that makes filling the tax forms in very easy indeed. (Note, you MUST state on your W-4 when you start work with them that you are a non-resident alien). And according to the job offer letter you are employed by them so that's it.

If you want to be self-employed in the US, ugh, put on your glasses and pull up your chair because you're going to have to do a lot of reading. Technically you can't do it in TN-1 so I won't bother boring you further.

The only slightly tricky bit with your US employer is that NRA withholding is done differently than for resident employees, tell them to read pages 22-26 of IRS publication 515.

Also have a read of this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

It doesn't really help much but it gives you a general overview.

Don't get too worked up about the "significant presence" test, you live in Canada, that's where you're resident, the end.

Thanks Steve. That was very helpful.

I'm still not clear on the whole income tax aspect though because as a consultant in Canada I wouldn't actually be an "employee" of the company in the US. It's simply a contract to do a project. Do I have to pay US taxes on my income from that company? (They would not be withholding taxes.) Would that apply only to work done while I'm physically in the US or to any work for which I am compensated by the US company? I hope you're not going to tell me that I would be considered self employed in the US in this scenario?

I think I may have found the answer to my question. Under the US-Canada Tax treaty, as a resident of Canada with a fixed place of business in Canada, I think I would be exempt from US Tax withholding using form W-8BEN.

So this should all be simple, right?

So now my question is still whether applying for a TN is the appropriate course of action for my visits to the US as a contractor?

I think if you are going only on business trips you do not need a TN. If you plan on working on-site in the US, you need one.

The problem I have is that whenever I have traveled to the US for meetings, they want to know who I am working for and whether the company is located in Canada. If I am self-employed in Canada as a consultant it seems to me I am entering a bit of a grey area with regards to who my employer is?

Mmm, one of the reasons I set up a corporation frankly.

So this should all be simple, right?

No, the W-8BEN is for financial investment income, usually bank interest. All it's for basically is to stop the bank from reporting your interest to the IRS, so they won't expect to get a tax return from you declaring that income.

If you really want the nuts and bolts of it, read IRS publication 519, however it waffles on about things that don't apply to Canadians which makes it hard to understand.

You are only subject to US withholding on work done in the US, i.e. US-source employment income. In essence your employer treats you like any other employee, the only slight difference is they have to NRA withholding, which is done at a slightly higher rate than for residents.

They issue you the W-2, you use that to complete your 1040NR (or 1040NR-EZ) and you fill in 8840 as well.

With the W-2, you convert that amount into Canadian dollars and claim a foreign tax credit in Canada using the schedules to the T1 and attach them to claim a reduction in your Canadian income tax by that amount.

It's relatively straightforward if they directly employ you (which they basically have to on TN-1). I doubt the new tax treaty will make much of a difference in these circumstances.

Where it sucks is you cannot claim a tax credit for the social security withholding, it counts as CPP under the totalization agreement, however social security taxes are usually higher than CPP, depending on what your income is.

This makes it less lucrative to have US clients than most people think, if you actually physically have to go there and work for them.

yes they usually think that if you do not have a company in Canada, you will work on site in the US. Other than the tax issues mentioned, this is another hassle everytime one has to cross and explain if one has US clients.

The usual trick is to have fancy business cards printed up, i.e. not something made on an inkjet printer.

I was sent to secondary inspection at Hartsfield once and pulled out my business card and I could tell from the look on their faces they didn't think it was real. So I said: "you're more than welcome to phone up the office and ask them who I am." Which got me out of there. (An hour late for my meeting).

Hi,
Would anyone know whether I can elect to not have UI premiums deducted from my pay as a TN-Visa holder. It just seems that it is such a long and arduous process to return to Canada to file for UI benefits in case I get laid off.

As for social security, I get a annual form from the US SS office stating my contibutions and I assume that I will be able to collect this in the future upon my retirement...I hope?

Any guidance would be very much appreciated.

Thanks,