US citizen paying Canadian tax - refund?


Hi there

I am a US Citizen and in 2004 I worked in Canada for a few days. (filmed a commercial via temporary work visa)

Starting in 2004 and still ongoing, I receive checks for this work via a US company. US taxes are properly deducted and I always receive a W-2 and pay US taxes. Starting in 2006, Canadian tax was also withheld from these checks. (I paid US tax and Canadian tax) Hence, for the 2006 tax year, I received a Canadian form = NR4. The forms states that I paid (withheld from my checks) over $3K. Also, I have not physically been in Canada since 2004.

Am I entitled to get this $3K back from Canada? (should I be paying taxes to both US and Canada) If yes, what do I do with this NR4 form? I have searched the Canadian Gov sites, but I am lost.


david ingram replies:

The problem is that the first two years were done incorrectly. You should have received a T4A-NR (not an NR4) with Canadian Tax Deducted for each of 2004, and 2005 as well.

There is no refund from Canada. Article XVI of the US Canada Income Tax treaty mandates withholding taxes for Canadian actors in the US and for American Actors or entertainers in Canada. AND, you were liable to file a Canadian tax return for the first year you earned the money.

Remember that visa you obtained to work in Canada? Well along with the visa was the responsibility to pay tax on the earnings to Canada. This is exactly the same principal that has a US actor from New York paying tax to California on any money earned in California (or Colorado or Arizona for that matter).

The company you were working for and your accountant did not know what they were doing. I have a California actor's return beside me right now where Canada has issued assessments for almost $200,000 for the years 1997 to 2005 when he did exactly what you have done. Came here, worked, got paid and then reported everything on his 1040 and 540 California return and ignored Canada. When questioned, his accountant, an enrolled agent, wrote an 'astonished' (and very naive) letter to the Canadian Tax Authorities stating that his client had reported everything e did not.

I have another one where Canada only wants $6,000 for work done in 2003. The problem is that the employers think they are doing you a favor by not deducting tax.

Properly, to stop the same thing happening to you, you should be preparing a 2004 and 2005 return and paying Canada its tax before they catch up and tax and fine you.

It is not double taxation however. The tax you pay Canada is reclaimed on the US 1040 by filing form 1116 and claiming a foreign tax credit. The only time this would not work is when you only make money in Canada and lose in the US. If this is the case, there sometimes is not enough tax owing to claim the credit. However, it is still not all lost because you get to carry the unclaimed amounts forward for up to 5 years.

If you need help you now know where we are.