Working in US Without Visa & Withholding Tax

[David25]

Got a temp gig in NYC last year, supposingly for just 2 weeks, so I did not go thru the trouble of getting visa, just claim 'visitor' when I went thru immigration. The 2 weeks turned to over 1 year, and I go down to the office once every month. I do most of the work from home, and receive payment in USD to the Corp I setup for this purpose, and the company pays me as an employee.

Recently got enquiry from the company re. 30% Withholding Tax and all that shit. Since I am basically a 2 persons 'Corporation', do not have the resource to deal with all these paperwork and headache. Wonder anyone on this site have similar experience?

Will IRS go after me on the past year withholding tax, like retroactively?

I am also going down periodically without work visa, what will happen if the Immigration find out? Will I be put to jail while I am working in the US???

Wonder if I should cut the loss and disappear from the contract so as to avoid confronting with Uncle Sam? And close down the 'Corporation' pronto? But I feel bad for the company cause they come to rely on my excellent service...

Anyone have similar or advise to share? Thanks.

[Reba]

So, you've been working illegally in the US for a year, and not paying income taxes?

You might want to find a good tax accountant, and a lawyer.

[Steven]

Not clear what your situation is from what you've said. It is a US or Canadian corporation and where are you paying yourself? You don't need a visa or to pay US taxes if you're doing the work in Canada and simply visiting to have a meeting with them or to install something (until you get over the $10,000 limit).

If essentially all the work is being done in Canada and the visits to the US are incidental to that work then essentially to avoid the 30% NRA tax you have to file an 1120-F every year for a Canadian corporation and also make a tax treaty claim on Form 8833. Because the payment is from a US business to a Canadian corporation they don't have to do anything, pretty much, although you may need to inform them of your corporation's tax treaty claim, it's not legally required though (because it's obvious if it has a Canadian address).

The IRS can exempt your corporation from the filing requirement if they're in the mood and it's a relatively small amount. If it receives over $100,000 they generally won't though. It also seems to revolve around whether it has an EIN. I keep getting different answers when I ask.

[David25]

The corp is Canadian and I got paid in Canadian. I do most of the work from Canada, out of last year, went down 8 times, everytime for a few days. Since it is a small Corp, I do not want to entangle with IRS with paperwork.

I quit yesterday from the gig, 2 more weeks to handover the crab. Now, after this thing is over, do I still need to do all these forms if IRS does not pursue me? Normally how long does IRS keep their record? I will hate to have them send me paperwork and amount owe withholding tax suddently in the future. Will they pursue me through Revenue Canada??? How long will I be liable for this? Or will my client company be liable after I quit?

I am also planning to close my Corp next, to me, not worth the hassle.

[Steven]

You'd have to call the IRS, I get ten different answers from ten different people.

From the sounds of it you're not doing anything illegal or anything subject to US reporting requirements, you may be required to file an 1120-F and an 8833 for informational purposes, the IRS can waive it if the active business US-source income is below $100,000 but I've gotten differing answers to that one.

In any event, if you know how to fill in a T2, an 1120-F is relatively easy by comparison, the IRS (supposedly) can help you fill in 8833 which is the tax treaty claim.

Because the work is being done in Canada rather than the US, there is no US tax liability, they just want the paperwork in case they audit your client and they have proof of where the money is going (hence the $100,000 limit because amounts under that are relatively trivial) and the US also has this weird paranoia about "tax treaty shopping" so they want foreign corporations doing business in the US to declare where they are resident.

If you're just going down briefly to hand stuff over to them or planning meetings, things like that, that doesn't usually incur a tax liability because it's incidental. Where "incidental" begins and ends is a bit vague of course.