QUESTION:
I telecommute from home, employed by a US Corporation. Would I be able to live in Canada and continue with my current employment? Is it necessary I maintain a residence in the USA?
AND, 2nd question, please---would I be able to retire in Canada and still collect my US social security and company pension benefits?
Thanks very much!! Amelia
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david ingram replies:
There have been 4 of these in a row and all a little different and all require a slightly different answer.
You can telecommute from the US but have no US tax liability unless you are a US citizen. If you are a US citizen, you have to report the earnings from the US company but would have to be making over $100,000 US before you would have a tax liability to the US because the first $80,000 is exempt from US taxation by filing form 2555 and the next $20,000 to $34000 is eligible for a foreign tax credit.
http://www.irs.gov/pub/irs-fill/f2555.pdf
If you are a Canadian without a green card, you do not have to file a US tax return.
And, yes, you will be able to collect your US social security in Canada and CPP and OAS from Canada as well.
I am adding another pair of questions I have answered which should put the other points into place for you.
Hoping this helps, I remain,
david ingram
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QUESTION:
We are in process of applying for PR status. My partner telecommutes. We are hoping his company will get a Canadian Employer's number from the CRA, however if they are unwilling to do that we're wondering if there is a more transparent way for the company to continue to employ him. That is, if his status with the company remained exactly the same and we simply moved to Canada once we get PR status. Then he would be a US citizen and a Canadian PR, (tele)commuting to a US company. Would the company have to do anything differently? Currently they deduct Colorado taxes as well as US taxes. Could all that be hashed out at the end of the year by a cross-border tax preparer?
Thanks for any info.
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david ingram replies:
When you leave the US, the company should cease making any US deductions - cease period - no exceptions.
They should either establish a Canadian account as an employer OR they should pay your partner as a contractor with no deductions. They should pay your partner their share of what they were paying for Social Security, a 401 plan and any other medical benefits, etc.
Your partner would then prepare their US return and include the Canadian income on the US return and claim up to $80,000 earned in Canada as an exclusion or claim a foreign tax credit.
I can look after all the returns for the both of you by mail, email, fax or courier.
david ingram
The following is a similar answer for a Canadian citizen with the same question. The difference is that the Canadian does NOT have to prepare a US return while a telecommuting US citizen must continue to file a US return for ever although they do not usually have to pay any income tax to the US.
Neither of you is allowed to pay into US social security as you do not live in the United States.
An exception to the above social security statement would be when company transfers their US employee to Canada for less than 5 years. In that case, the company must write to the Canadian Canada pension Plan authorities and get written permission to continue their employee on US Social Security rather than pay the payments to the Canada Pension Plan equivalent.
Hope this helps. I am available for phone consultations for a fee of $350 CDN for up to an hour.
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QUESTION:
Hello,
I have exhausted all of my efforts in trying to find a straightforward answer to my (now) dilemma.
I am a Canadian citizen living in British Columbia. I recently got offered a job by a US company (in the US) and they do not require me to re-locate. I am able to work from home and stay in Canada. I will be paid US dollars and will be considered a full-time employee of the company vs. a sub-contractor.
Through my numerous previous research efforts, I have obtained the following information:
- I only need to get an ITIN (US Tax identification number via form W-7) in order for the US company to withhold my taxes.
- The US company also sent me forms W-4 and I-9 to complete.
This should have been fairly straightforward. I fill out the forms, have US taxes withheld and claim them back next tax season with the IRS.
However, the IRS now will not give out ITINs without a tax return being filed.
There is now discussions of the US company requesting me to possibly obtain a TN work visa (but still reside in Canada) only for the purpose of being able to get a Social Security Number so that I can file US taxes. If I do this, will I not be taxed dually?
Is there a much simpler solution to this problem? I have suggested to my US employer that they pay me (no taxes withheld) till year end, issue me a W-2 next year and I will pay all taxes due to the IRS myself and then apply for my ITIN at the same time. Is this a feasible solution?
Many thanks for all your time and assistance!
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david ingram replies:
NO NO NO NO NO!
If you are working in Canada and living in Canada, there is absolutely NO US tax liability. Your ONLY income tax liability is to Canada.
Your company has two choices.
1. The easiest is to pay you as a self-employed contractor. They will pay you a contract amount equal to what would be your salary PLUS their half of the Social Security and Medicare and any amounts that they would usually pay to your pension or 401 plan (K, B, etc.), and any other incentives that might exist.
They would not issue you any IRS documentation other than maybe give you a statement at the end of the year stating that they had paid you "x" number of dollars.
You would file your return next year as a self-employed person and pay both halves of CPP and your income tax. You could buy (and they could pay you extra for it) your own group medical cheaply by joining the local chamber of Commerce or the Vancouver Board of Trade.
OR
2. They could get a Canadian Employer's number from the CRA. You could look after your own payroll or we (or a 100 others) could do it for you. You would make deductions for EI (Employment Insurance), CPP (Canada Pension Plan) and Income tax. The company can join the local Chamber of Commerce or the Vancouver Board of Trade to buy you a Canadian Group benefits plan.
You, we, or the company would then file a Canadian T-4 slip for you by Feb 28th, 2005 for the 2004 tax year.
There is NO US tax liability for you if you are not physically present in the USA when performing your duties for the US company.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
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Those outside of the Lower Mainland will be able to listen on the internet at
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Local phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600.
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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 & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com.
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