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Hi David-
This is a followup question to our conversation last week.
Is there any reason that I can not be a US-paid employee of a US company but live in Canada as a permanent resident as long as I am willing to support the tax obligations to both countries (with associated credits)? I would be doing "work" whilst in Canada, but only via phone and email, and only with US people. My company sounded like they were unable (less than unwilling) to put me on a Canadian payroll, nor allow me to be an independent contractor. I understand that I may have to pay tax to both countries throughout the year, but that the US would credit me for taxes paid to Canada when I file my annual return...is that also correct?
Followon question: would there be any benefit to contributing to an RSP and/or 401k during this time?
Thanks,
NXXXX
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david ingram replies:
I find it hard ot believe that I am answering this at this level for "nothing".
If you are working in Canada, you so not own any tax to a US state. Any tax you pay to a US state is just that. A tax that was not necessary. If you are working in Canada - note I said working in Canada - you do NOT pay any US Social Security or Medicare taxes because the US / Canada Social Security Agreement says you do not unless you have been transfewrred by the company for a period of five years or less AND you have written permission from the Canadian Government exempting you from CPP.
If you are working in Canada, Canada will NOT give you one cent of credit for any taxes paid voluntarily to the US. I say voluntarily, because there is no legal obligation for you to actually pay "any" taxes to the US if you are earning less than about $110,000 US.
Canada will specifically tax you full rates on any money put into a 401 K plan and CVanada will specifically NOT allow you any deductions for FICA (social security) because you are not obligated to pay it.
So - your company may not want to do it properly but it will cost you a minimum of about $8,000 US extra a year in tax to Canada if you follow the procedure you seem to want to.
The last time you enquired, you wer talking aobut working aweek out of every eight or so in the US. I this was the case, you "wopuld" owe "some" tax to the US. But only a bit and the difference would likely be $7,000 exztra tax rather than the $8,000 I suggested before.
I gave you the solution in the first email. Your company should pay you as a self employed consultant on a 1099MIS and they should pay you their share of the payroll taxes they would usually pay. Then, you will have the money to pay the Canadian Government as you go.
Whatever you do, do not participate in a 401K - Canada will tax you on the deduction. Buy a Canadian RRSP or nothing instead. You need a phone consultation which we charge out at $350.00 Canadian (minimum and per hour).
How are you coming to live in Canada? have you married a Canadian? or are you just intending to drive across the border.
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
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