Working in the US from Canada

We are a US company that may hire a Canadian to do training. He would continue to live in Canada, but most of his work would be at events in the US. We've never hired someone to work outside the US before. What are the issues?

Does he need a Visa?
Do we pay in US or Canadian $?
Is he a US employee or a Canadian employee?

I don't even know where to begin. Thanks for any help. The Homeland Security/Citizenship & Immigration website was not much help.

He may need work authorization, depends on the circumstances, entry to train a customer can be done as a regular B-1 NAFTA visitor, provided the product came from the same NAFTA country, i.e. Canada in this case. If you're employing him in the US as an after sales person for stuff you've sold in the US then he would need work authorization. Do a web search on "B-1 NAFTA entry" and look up the regs.

You can pay him in any currency, that's not relevant from a legal standpoint although the exchange rate may be an issue to him or to you.

Obviously he is a Canadian employee, how you go about this depends on how much time he spends in the US and how much you pay him while he's in the US.

Generally, a US company that has Canadian employees who work for them in Canada must do Canadian payroll withholding like any Canadian company would do, this requires the US company to get a Business Number (equivalent of an EIN) and do income tax and CPP withholding and issue a T4 (equivalent of a W-2).

However if the employee is a one-off, the usual method is that he registers as self-employed or sets up his own business and simply invoices you.

For any work he does in the US, you simply set him up as any other employee and issue him a W-2 for whatever work he's done while in the US. Then the employee files a Canadian tax return every year and a 1040NR in the US. He declares his US-source income on the 1040NR and claims a foreign tax credit in Canada. The only real difference from the employer standpoint is that he would be subject to non-resident alien withholding and must state that on his W-4. This is explained on pages 24-26 of IRS publication 515. He'll probably need to get an ITIN as well by filing W-7 (or an SSN, but that requires work authorization which he may or may not need).

He can do a combination, i.e. be self-employed in Canada and be working for you and be directly employed by you in the US. It's not really practical for a non-resident alien to register as self-employed in the US in this situation although legally it is possible (if for some reason you go this route you must get a completed Form 8233 from him).

There is a provision in the US-Canada tax treaty that provides an exemption, i.e. if the person is directly employed by you in the US, then you don't have to do Canadian payroll taxes if the amount the person earns while in Canada is less than $10,000 and they spend less than 183 days there. Doesn't sound like this will help you given that he lives in Canada. Outside of this exemption the current treaty (amended in 2008) requires taxes to be paid proportionally to each country based on where the person physically is when the work is performed.