15% Canadian withholding tax on US resident working
I worked in Canada for less than 183 days and had a 15% withholding tax on my income even though I was paid from the US. I work in the film industry as a freelance accountant. Do I need to file a Canadian tax return and how can I recoup the 15% tax I paid in Canada?
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david ingram replies:
You are taxable in Canada and even though you may have heard abou8t an Article XIV or Article XV exemption under the US / Canada Income Tax Convention (Treaty), the exemptions do NOT apply to artists or athletes or anyone else involved in entertainment.
You must file a Canadian T1 Income Tax Return and report the money earned in Canada (even if paid from France, Germany, Australia or the US or anywhere else). You will pro-rate your exemption amounts on schedule 1 based upon the number of days you were in Canada.
When finished, you may have a refund but it is also more likely you will owe a little more, especially if you earned over $30,000.
You will then report the income 'again' on your US 1040 (and state return if in one of the 43 US states with a tax return). You will claim credit for the tax paid to Canada on US form 1116 or use it as an itemized deduction on schedule A if you wish but it is usually always more beneficial to use form 1116 which you can find at www.irs.gov.
Many actors, etc, in your position ignore Canad and hope it will go away. However, I am dealing with an actor right now where the CRA (Canadian IRS) has billed him over $180,000 for his income back to 1997.
Do it right and if you need help, we can look after it for you.
---------------------------------------------------
david ingram replies:
You are taxable in Canada and even though you may have heard abou8t an Article XIV or Article XV exemption under the US / Canada Income Tax Convention (Treaty), the exemptions do NOT apply to artists or athletes or anyone else involved in entertainment.
You must file a Canadian T1 Income Tax Return and report the money earned in Canada (even if paid from France, Germany, Australia or the US or anywhere else). You will pro-rate your exemption amounts on schedule 1 based upon the number of days you were in Canada.
When finished, you may have a refund but it is also more likely you will owe a little more, especially if you earned over $30,000.
You will then report the income 'again' on your US 1040 (and state return if in one of the 43 US states with a tax return). You will claim credit for the tax paid to Canada on US form 1116 or use it as an itemized deduction on schedule A if you wish but it is usually always more beneficial to use form 1116 which you can find at www.irs.gov.
Many actors, etc, in your position ignore Canad and hope it will go away. However, I am dealing with an actor right now where the CRA (Canadian IRS) has billed him over $180,000 for his income back to 1997.
Do it right and if you need help, we can look after it for you.
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