Working in Canada while living in the US

I am in the US on an H1 and we are in the process of filing for permanent residency and a VISA. This could take another year. My husband would like to return to work and could do so for a Canadian company in the area of remote or even telphone sales. We live in California but also have a place in Canada. We travel back and forth on a frequent basis. My questions: 1. Can he work for a Canadian firm while living in California? 2. What conditions need to exist for him to do this legally?
3. Are you aware of any recruitment firms that recruit for this type of role (remote sales/call center or other)?

I assume from the sounds of it he's on H-4? If you get PR status while he's outside the country that's going to cause problems if he's not listed as your spouse on the application, you'd have to sponsor him for him to get back in which would take years.

I suppose technically speaking if he keeps his H-4 visa up-to-date and you list him as living with you as your spouse on the AOS paperwork you could get away with it.

The tax situation will be a real mess though as you have to file jointly in the US, but he won't be living there. I suppose he would have to file a non-resident T1 in Canada and claim the foreign tax credit in the US with the 1040, but the CRA I think are going to be highly suspicious of a Canadian who lives in Canada working for a Canadian employer filing as non-resident. Might get away with it for six months but longer than that and he's going to start getting interesting phone calls from them when he files his non-resident return.

And you have to file jointly in the US for the immigration paperwork, IIRC, so he can't move his tax home back to Canada.

Can't think of a way around that one I'm afraid, unless he wants to pay taxes twice.

I assume from the sounds of it he's on H-4? If you get PR status while he's outside the country that's going to cause problems if he's not listed as your spouse on the application, you'd have to sponsor him for him to get back in which would take years.

I suppose technically speaking if he keeps his H-4 visa up-to-date and you list him as living with you as your spouse on the AOS paperwork you could get away with it.

I don't think there is any problem there. People get their I-485's approved while outside the country on a regular basis. They do not put travel plans on hold just because the I-485 is getting close to being approved and might be approved in their absence. They just make sure they have a current advance parole and/or H-1B/H4 visa--if they do all should be well.

I do not think he plans to live in Canada--I think he wants to work for a Canadian company while living in California. If he were living in Canada while pretending to live in California that could be a problem but I do not think that is his plan.

The real issue is that to do what he wants to do--work for a Canadian company while living in California--he needs either to have a visa in his own right (unlikely for the kind of work he may be doing) or to have an EAD as a derivative on his wife's I-485. Even if both he and the company are Canadian, if he wants to work in the USA, he needs work permission in the USA in some form. When he does get his EAD, there is no reason for him to restrict himself to Canadian employers unless he wants to.

The tax situation will be a real mess though as you have to file jointly in the US, but he won't be living there. I suppose he would have to file a non-resident T1 in Canada and claim the foreign tax credit in the US with the 1040, but the CRA I think are going to be highly suspicious of a Canadian who lives in Canada working for a Canadian employer filing as non-resident. Might get away with it for six months but longer than that and he's going to start getting interesting phone calls from them when he files his non-resident return.

And you have to file jointly in the US for the immigration paperwork, IIRC, so he can't move his tax home back to Canada.

Can't think of a way around that one I'm afraid, unless he wants to pay taxes twice.

Well he's not going to be living in Canada so this won't be an issue. If he were then there would be nothing wrong with filing as a resident in both countries and claiming the Canadian taxes as a credit on the US return. Dual US-Canadian citizens who live in Canada do so all the time. It's perfectly fine from a tax perspective but in this case it wouldn't be honest from an immigration perspective so I'm glad that is not his plan.

If he were then there would be nothing wrong with filing as a resident in both countries and claiming the Canadian taxes as a credit on the US return

This is illegal. You can only claim one tax home at a time as per the tax treaty. If he files as resident in Canada he cannot claim a foreign tax credit in the US as he doesn't qualify for it.

It's perfectly fine from a tax perspective

No it's not in this situation as he's not a US citizen and anyone who does it will be in deep trouble if the IRS or the CRA get wind of it. If you claim a foreign tax credit on Form 2555 and you meet the substantial presence test in Canada and are filing in Canada as resident you are violating US federal law by claiming a deduction you are not entitled to. Do not do this. This is why the non-resident T1 and 1040NR forms exist.

The only exception to this rule is if you are a non-resident US citizen living in Canada, you still have to file a regular 1040 return but as a non-resident and a T1 in Canada, if they meet the IRS non-resident test they can still file Form 2555. The same does not apply in reverse, a Canadian citizen (or a dual-citizen of both countries) who is resident in the US and filing as a resident cannot file as a resident in Canada simultaneously.

You can only claim one country as your permanent residence. If you have income from the other country you must file as non-resident and make a tax treaty claim (with the exception of US citizens resident in Canada).

As to the immigration issue, sorry I misunderstood the question, the answer is obviously "no" he can't, because he's on an H-4 visa. You can't even legally look for work on H-4.

He's have to be sponsored by a US employer, whether or not the employer is Canadian-controlled is irrelevant, they become a US employer if they have a US establishment.

If you claim a foreign tax credit on Form 2555 and you meet the substantial presence test in Canada and are filing in Canada as resident you are violating US federal law by claiming a deduction you are not entitled to.

In the hypothetical situation where he truly were living in Canada, he would file Form 1116, not Form 2555, to be safe. In most cases it will have the same effect on his taxes and doesn't have the same restrictions as does Form 2555.

Is it possible to do the following:

He works for a Canadian company from the US while on H4. He received income in Canada, files for taxes in Canada, does not file for taxes in the US.
In that case, can he file for taxes in Canada as a resident?

He can't work in the US without a work authorized visa, even if he is telecommuting for a Canadian company. If he's on US soil and working, he needs US work authorization.

And if he's on H4 and goes and stays in Canada for 6 months on vacation, and while he's there, works for a Canadian firm, gets salary, files taxes there.

I don't understand this because, you can be on H4, and have real estate in Canada which can be rented out. Or you can sell stocks in Canada and earn money that way.
I am not able to find any place where the law states this. I'm just getting a lot of opinions, and at least 1/3rd of them say 'yes you can work'

You cannot work in the US (i.e. the work is performed there) on an H-4 visa. Or without specific work authorization.

The income types you are talking about are not the same as employment income (well income from stocks isn't). Besides that's a tax issue, not an immigration issue, the two are separate.

Rental income from Canada is Canadian-source income effectively connected with a trade or business (as the new tax treaty stands) but the employment (landlord duties) in order to receive the income is in Canada. No physical work is performed in the US so there is no need for work authorization.

It's where you physically are when the work is performed that matters for immigration issues (and many tax issues because he still has to declare the Canadian-source income in the US).

For example if he worked in telesales, it's where he is when he answers the phone that matters.

I don't think it's ever actually come up in US courts but it's come up in UK courts when people have been on holiday there and the boss has phoned them to ask a question - technically they are then working in the UK and need work authorization. The court applies the principal of de minimus non curat lex, i.e. the "law is not concerned with trifles". As a result caselaw is that for immigration and tax purposes (according to the interpretation by the authorities) in the UK you can be there for up to two weeks doing something connected with work (training, meetings) without needing work authorization or filing tax paperwork.

But none of that helps you of course, sorry. Might want to try getting H-2B for him is the only advice I can offer.

In the hypothetical situation where he truly were living in Canada, he would file Form 1116, not Form 2555, to be safe. In most cases it will have the same effect on his taxes and doesn't have the same restrictions as does Form 2555.

I don't think you can claim living expenses on 1116. Anyway, in that situation he would be filing as non-resident in Canada and resident in the US, so he can do either/or for the tax credit claim. What you can't do is file as resident in both places. Even as a US citizen living in Canada you have to file as non-resident in the US, but you still file a 1040 rather than a 1040NR, so from a practical standpoint with the paperwork, it's similar to filing as resident in both places, you just check a few different boxes and file for a tax credit.

What he would basically have to do in this situation not to foul up the immigration application would be to do exactly that, file the same way a US citizen would if they lived in Canada. The problem like I said before would be that the CRA would find that hard to swallow, because he's not a US citizen, he would be a Canadian citizen living and working in Canada.