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QUESTION:
Hello David
I would appreciate your comments on my case:
I am not really a snowbird but a grey haired eng. consultant, retired, =
with
only Cdn company pension and a CPP pension income in Canada now doing
some work in the US (NAFTA TN1) .
I spent about 21 days working in the USA , Luisiana, in 2003, using a =
local
US employment agency, treated as their employee, under a NAFTA TN1 visa =
and
was issued with a SSN card.
I did the 21 days consulting work in LA, and the the remainder of the =
work
(30 days+) at my home office in Canada, and was paid about $27k USD, =
they
witheld Fed tax of about $8k, OASDI $1K, Medicare $215, State tax $863. =
I
think it was witheld as a W8? (not sure of US tax terminology).
I expected to claim treaty protection to avoid double taxation but do =
you
have any ideas on other/best approach and ways to minimize tax?
1- Do I file Form 8840 or 1040 NR re US/ Cdn tax filing for 2003?
2 - How do I handle state taxes?
2a) - Do I need to do anything before end of 2003?
3- Can I reclaim any of the OASDI or Medicare witholdings?
4- Will this US income impact on my CPP pension payment?
5- Is there any Canadian reduction in tax on this income earned outside
Canada?
6 - Can I claim all expenses incurred to earn this income ( travel, =
board,
lodgings. home office etc) ?
7 - If I live and work for 365 days in the USA, still maintain Canadian
property, do I pay US income tax only ie. no Canadian tax, on all my
income including Canadian pension income?
Thanks for your help, I really appreciate your tax articles - and the =
humor.
TXXXXXXXXXXXX
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david ingram replies:
It would have been nicer if they had hired you as a contractor - =
Although the TN vise says that you cannot be self-employed, that term =
means that you cannot set up in business and deal with multiple clients. =
The trerms of your TN visa were that you could only provide the =
services to the one company.
1. For 2003, you will file a 1040NR. Because they deducted tax and =
FICA and medicare and state tax, you were treated as an employee and =
cannot claim the treaty exemption of being self-employed with no tax at =
all to the US because of no fixed base.
You could possibly claim the "up to" $10,000 exemption as an employee =
because it sounds like the $27,000 would work out to about $10,000 for =
the 3 weeks working in the US: if you worked: =20
3 out of 7 weeks times $27,000 =3D $11,571 earned in the US
3 out of 8 weeks times $27,000 =3D $10,125 earned in the US
3 out of 9 weeks times $27,000 =3D $ 9,000 earned in the US.
This would exempt the Total $27,000 from any Federal US tax.
2. You would still owe Louisiana State Tax.=20
2 a) There is nothing you need to do tomorrow (today).
3. No - You will be leaving the OASDI and Medicare behind but that is =
not all bad - see (5)
4. It will not impact your CPP.
5. After you report the income on your Canadian return, you will get =
credit on your Candian return for the taxes paid to the US authorities.
6. The question of expenses is dealt with under the terms of your =
work. If the contract was for you to do this job from your home office =
and the situation changed and yuou had to go there to get information, =
etc., then your travel expenses would be deductible. =20
If you took the job in Louisiana and part way through, decided that you =
could do it at home and they said okay, then your expenses would NOT be =
deductible because your office was one of convenience and not of =
necessity. I expect that your situation is somewhere in between.
What I would prefer and you can still do it, is for the company to =
recognize you as a contractor. They still have until Jan 15th to =
reverse all the deductions they made. They would then issue a 1042 S or =
a 1099-MISC for you and we would be filing a different tax return. =20
That is to their advantage because they get back their contributions to =
medicare and OASDI (FICA).
Phone their payroll first.
If the terms of your contract were for you to work 3 weeks in Louisiana =
and the rest in Canda from the start, they goofed in that they should =
NOT have made US withholdings from the money you recieved. If they KNEW =
you were working in Canada for 4 or 5 weeks, and were a Canadian to =
start with, they should not have made all the deductions for the money =
earned out of State and out of Country.
You might want to have their payroll people talk to me. You should =
likely hire me for an hour phone consultation ($350 CDN) and get it =
straight for your argument.=20
7. If you move your family to the US and work there for a year or =
two, you would escape Canadian Income tax under Article IV of the =
Treaty. If your family remained in Canada and you kept your house =
available for your use and came back once a month to visit, you would =
likely still be taxalbe in Canada.
Goto www.centa.com and read US/Canada Taxation. In particular, read =
Article IV of the Treaty and read Judge Teskey's decision in the Dennis =
Lee Case.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321=20
[email protected]
www.centa.com www.david-ingram.com
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. If you forward this =
message, this disclaimer must be included."
This from "ask an income tax and immigration and bankruptcy expert" from =
www.centa.com or www.jurock.com or www.featureweb.com. Canadian David =
Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems for the =
United States, Canada, Mexico, Great Britain, the United Kingdom, =
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Canadian and Mexican and any of the 43 states with state tax returns, =
etc.
income tax wizard wizzard guru advisor specialist consultant taxman =
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Taxman and Tax Guru and wizzard wizardYour name has been added to our =
email list because of an enquiry we have received, we may not answer =
your question but=20
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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