Moving to Canada but working for US Company

My_question_is: Applicable to both US and Canada
Subject: Moving to Canada but working for US Company
Expert: [email protected]
Date: Wednesday March 07, 2007
Time: 02:53 PM -0500


My husband is currently on an H1-B visa, and we are both Canadian citizens.
We plan to move back to Vancouver for education, healthcare, living standards, etc. reasons.
My husband will continue to work at his computer development job in a telecommuting position, going into work once or twice a month.
He will continue to get paid in US dollars (approx. $94,000 US/yr). How will this affect us tax-wise, immigration wise, etc.?
We have been away from Canada since January 2000. I will not be working in Canada. Thanks.

david ingram replies

I am just too busy to answer in detail. This older answer will likley help you

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I'm an American citizen residing in Canada (permanent resident) and working for an American company remotely from home in Canada. I get a W2 at year-end. I assume I have to file both US and Canadian tax returns.

My questions are :
1) Do I file a US tax return and claim a foreign tax credit on my Canadians tax return. Or is it vice versa?
2) Do I still file state/local tax return in the US (I lived in Maryland prior to landing in Canada), even though I now reside in Canada?
3) For the extra tax I end up paying to the 2nd country (in excess to what I pay to the first country), can I claim any type of credit or deductions on that tax in next tax year?

Thank you very much!

david ingram replies:

If you are working in Canada, you should not be getting a W-2. The reason is that as a reasident of Canada, you should not be paying into US Social Security or Medicare or paying basic income tax to the USA.

Your first tax liability for services rendered in Canada under Article IV of the US Canada Incomne Tax Treaty is to Canada.

You should be filing a Candian T1 return and paying Canada and provincial income tax first. Then you would file your US return and either:

1. Use form 2555 to exempt up to $82,400 of income from US tax and then file US form 1116 to claim a foreign tax credit on the excess OR

2. Use form 1116 to claim the foreign tax credit onyour US return for tax paid to Canada. If you have children, you woul dusually do the latter because it would usually qualify you for the $1,000 per child USA refundabvle tax credit.

3. In the case of interest (10%) and dividends (15%), you must get any excess tax back from the US by reclassifying the income on form 1116.

4. In the case of interest, you can claim the difference between 10 and 15% as a deduction on Canadian schedule 4.

5. You should NOT be paying into a US 401(K) or US Social Security. Canada will not allow the 401(K) as a deduction.

Your employer should start paying you on a 1099 Basis and pay you your salary plus their share of Social Security plus their share of Medicare plus their share of any 401 or other pension plan they contruibute to.