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Dear Sir,
Presently and in the past my husband has been contracted by a Canadian Company to work in the U.S. under a B-1 Visa. As we are paid by a Canadian company in Canadian dollars we must claim all income to Rev. Canada. All our expenses during our stay are in America and I am unsure if our present accountant is taking everything into account (he may not truly understand our situation). For instance all extra clothing is bought for business, can the U.S. exchange on the Canadian dollar be taken into account as a business expense, as we income split can I take on some expenses. Would changing our situation to company, registered company, corporation etc. be more to our benefit?
Also, according to our visa we must still pay our own mortgage, telephone etc. as the terms of this visa forbid us to rent out. Is this considered a deduction?
None of this has been addressed by our accountant (if he needs to?) so we are looking for an accountant with the experience we need . As we own a home in Vancouver, I was wondering if you take on new clients?
I would greatly appreciate your advice.
Regards
SXXXXXXXXXX
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david ingram replies:
>From what you have told me, your husband is taxable in the US FIRST and likely not in Canada.
You pay tax where you perform the work, not where it is paid from.
That is the tax rule.
The immigration rule is quite different. To work in the US under a B-1 Visa, your husband must maintain his house in Canada ready for him to return at a moment's notice. He must be paid by a Canadian Company and doing work for the Canadian Company only. He cannot be doing anything for an American Company except maybe auditing the books of an American subsidiary or branch of the Canadian parent.
And a B-1 Visa is not for people to move to the US with their family. The family would usually if not always remain in Canada.
In addition, the state where your husband is working will demand a tax return as well unless he is Florida, Nevada, Texas, Alaska, etc.
The following is taken out of my 1989 BORDER BOOK - you can find the whole section at www.centa.com - click on [Entering the USA]
B-1 - BUSINESS VISITOR
One of the few paper B-1 visas I have seen issued (I have one as well) was for a lady client who decided to rent an apartment in Los Angeles because she was there for a week each month and she wanted a base of operations from which to sell her Canadian business's services. The problem was that when she went to ship a bunch of her furniture down, U.S. immigration officers would not let her enter because it looked like she was moving to Los Angeles. She had to produce copies of her Canadian documentation showing a current phone hooked up, a current mortgage for her residence in Canada before the INS officers would let her or her furniture across the border. One of her problems was that she had business cards with her that showed a Los Angeles address. She was hardly trying to "sneak" across with a truck full of furniture, but it sort of looked like it.
If you are in the States working at investment activities or trading in international goods or services, this may be for you. The Border Immigration people do not like to issue B-1 or B-2 visas to Canadians as it implies a more official status (i.e. persons with the paper visa often think they have a "working visa" when they do not). But if there is a good reason, they will, if requested on BENT knee, issue a paper visa. Persons generally covered include, but are not limited to:
* Advertising Personnel
* Bankers
* Bus Drivers taking passengers in or out of the U.S. but not between two U.S. destinations. (I was told by a U.S. Immigration Officer on May 21st, 1991 that this is not "automatic" either. Bus drivers in this situation are there by the "grace of the immigration officer" and may be rejected at will. A regular "Canada to Reno or Atlantic City" tour bus driver might want to get an official status B-1.
* Chartered Accountants, CGA's, RIA's (but only if paid by Canada and looking at the books of a subsidiary for instance) to work there in an occupation, you would need a TN visa explained further on.
* Combine owners directing crews
* Computer Specialists
* Customs Brokers
* Dentists
* Doctors
* Engineers - An engineer from Montreal was challenged by INS for his activities in the U.S. He was calling on businesses in the U.S., getting work, and taking it back to Montreal where the actual work was done. INS determined that his activities in the U.S. amounted to a sales activity (legal) and that the work was being performed in Canada.
* Installers, repair or maintenance personnel performing installation or repair of imported machinery. There MUST be an existing service contract or warranty problem. The warranty or service problem must be from the original sale of the product. A Canadian company cannot sell a warranty service into the U.S. and send their service technicians into the U.S. for this new contract.
* Interpreters
* Investment Brokers
* Lawyers
* Market Researchers
* Professionals of many sorts (check with INS)
* Public Relations Personnel
* Real Estate Agents (only as an investment advisor / looker - this does not allow the person to negotiate a deal except on their own account). Note, an INS officer at Blaine did not like Realtors listed in this category in the book. I was going to take it out, but an INS officer at Vancouver Airport thought it was fine. This is another reason for getting a paper visa and making it official.
After all, it is far more likely that the INS office at Blaine has had a problem with Realtors ducking down to Whatcom County than the airport has had with Realtors heading to Phoenix or Hawaii. NOTE! The Realtor who does this may find him or her self in violation of the local Real Estate Laws of the State he or she is operating in. A Washington State Realtor, for instance, is not allowed to come to British Columbia and negotiate a deal and be paid because he or she is not licensed in BC. I do however, have "dual citizen" Realtor clients with licenses in Washington and BC.
* Sales Agents taking orders or negotiating contracts (Note - the sales agent cannot deliver the goods or pick up the payment for the order - payment should be mailed to Canada by the American purchaser).
* Tour / Travel Agents and Guides (but only with a Canadian tour which starts in Canada - no one can join the tour once across the border).
* Translators
* Truck Drivers delivering or picking up goods within the U.S. (NOTE! They may not transport goods between two U.S. points. The driver may NOT unload the truck.)
In the Case of a B-1, the salary must be paid from Canada and the stay is expected to be short. Short is not defined but likely means two or three days or a couple of months at most. Remember, if you earn money in the U.S., even if paid by Canada, you should be filing a U.S. 1040NR tax return. If you earn less than $10,000 U.S., you do not pay federal tax. However, if you are working in California, even if paid from CANADA, you must file a California 540NR and will likely be taxable. 42 other states have a requirement to pay state income tax returns as well. The tax paid to the U.S. in both cases is deductible on the Canadian Return as a foreign tax credit.
B-2 - Temporary Visitor for pleasure
No paper usually required or issued for Canadians, but this is what we receive automatically as Canadians. This is a six month visa for a visitor to the U.S. on vacation. The holder of this visa cannot work or go to school.
B-1/B-2 - Temporary visitor for Business & Pleasure under 101(a)(15)(B) If you are going to Florida to play golf and check out some real estate investments while there, TELL the INS officer at the border. You will get a paperless B1/B2. Telling them you are going to play golf when you are checking out a pre-arranged business opportunity is illegal and can result in imprisonment and the seizure of your car, motor home, or truck and fifth wheel trailer.
After all that, I would be glad to assist you with your State, US 1040 or 1040NR and your Canadian and Quebec returns.
You should make up a schedule of where you have been in the last three years and send it to me.
You are not alone in this by the way. A company in North Vancouver called NORAMTEC had dozens of people in the US working under TN visas. They were being paid from Canada, not filing US returns and claiming overseas employment tax credits on their Canadian Returns. It was really hard on some of their employees when they were caught. And it always amazed me that the IRS and CCRA did not just go through the whole list.
Another major Canadian Company had 30 different employees working in Arizona over a fourteen year period. Only one of them ever filed his US return ( he is my appointment at 11 AM today) and that was because he was married to an American and I just did it routinely. Then the legendary $^&$%^% hit the fan when a US border patrol agent looking for illegal Mexican workers drove into their compound in the Arizona desert and found a dozen Canadian SUV's and pickup trucks (no cars for these boys) with Canadian licence plates. The typical person ended up $50,000 US dollars in the hole by the time they were finished and the company went into receivership.
I guarantee that your husband has to file a US and likely state return FIRST. It is not more tax because you get credit for the US taxes on your Canadian returns but it stops penalties and interest from accumulating.
You should likely do a phone consultation with me. The fee for an hour is $350.00 Canadian and we can schedule an evening or weekend. Then you will likely want to go back and stand the company human resources person up against a brick wall and shoot them.
My favourite though was a Hewlett Packard employee about 10 years ago. The HR director actually reprimanded my client for filing his US return and "rocking the boat" I will agree that most people in your position are not filing their US returns. However it is YOUR disaster when you are caught and the company ALWAYS denies any responsibility.
And I can compare it to overnight parking regulations. North Vancouver City has a rule that you cannot leave a vehicle on the street in the same position more than 72 hours and they actually have a vehicle with a licence plate reader and a GPS reader that drives around scanning licence plates. Well, my wife's motorhome has its licence up high past the scanner's vision. I started leaving it in the same position for a week until they towed it the first week in December. However, I got away with it from June 22nd to about Dec 4th and that was a 33 foot motorhome with signs on it sitting on a street with a space age parking person going by a couple of times a day. And it was not caught by the parking people. It was tagged because a civilian complained about where it was parked
In another case, a client in Ottawa had his car impounded in Hull because he was parking it overnight outside his girlfriend's apartment and the powers that be figured that he was one of those people trying to register his car cheaper in Ontario while actually living in Quebec.
Hope this helps you get on the right side of the authorities
And, if it makes you feel any better, you are a typical client of our office. We specialize in the transborder, expatriate type of returns that most accountants never see and cannnot be expected to understand at a moment's notice and are truly not worth the effort (on an individual basis) to understand properly.
Contact information follows.
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
[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:
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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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