TELECOMPUTING - Telecommuting Working online for US company Thomas Huckaby - Tennessee resident pays tax on telecommuting to New


I'm living in Canada and I work online for a company in the USA. They're asking me to apply for an ITIN 
(form W-7) for their tax purposes as (not being a US citizen) I don't have a SSN.

The problem is I don't know which category I tick on the W-7 form.. there's "non-resident alien filing a 
US tax return" and "Nonresident alien required to obtain ITIN to claim tax treaty benefit" and several others.

I don't want to file a US tax return if I don't have to. Why should there be any need for me to pay taxes to the USA 
when I've never even set foot in there ?

Can you explain what I should do here, and how the whole cross-border taxation thing works ?

david ingram replies:

TO:    Chris Ralph

The cold hard logic is that you are not taxable in the US if you are performing the work in Canada and that would be the only answer I would ever have given up to 2 years ago when the state of New York won a surprising (to me) case when they managed to tax a resident of Tennessee who was working remotely on a New York State Company's computer.  

The situation was that Huckaby spent 75% of his time in Tennessee and 25% of his time in New York State and had been paying tax on 25% of his income to New York.

New York Appeals courts ruled that 100% of his salary was taxable in New York state and used the argument that 25% of his time was sufficient to create a nexus and taxed him.

read more at:

or at:

and at:

Your situation is different in that you are doing ALL of your work in Canada. 

Under Article IV of the US / Canada Income tax treaty, I can NOT see you taxed federally and since you are doing any work within the state, it is not likely that a state would try.

You are getting the ITIN to enable you to obtain tax treaty benefits.

They might then ask you to file a form W8-BEN to stop their having to deduct non-resident withholding tax.

I can not guarantee that you will not have to deal with the situation because the Company's auditors have been told to deduct tax. You may have to accept that fact to keep the job.  However, it will be a cash flow problem and a preparation problem, not a double taxation problem.

If somehow or other they do decide to tax you, any tax paid is either recoverable by filing a 1040NR tax return and claiming the exemption under the treaty or paying tax to the US and claiming the tax as a credit in Canada.

However, for Canada to give you credit for the tax, it might be necessary to have the two governments invoke the tie breaker rules in article 4(2)(d) of the US Canada Income Tax Convention.

In Huckaby's case, it was a new tax he was not paying before because Tennessee does NOT tax wages.  Before losing, Huckaby was only paying 'state' tax on 25% of his earnings..

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This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.--

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 for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at or  If you forward this message, this disclaimer must be included." -



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