QUESTION:
I live in Windsor, Ontario and work for an automotive company in Michigan,
USA. Since I work in USA I pay both Federal and State Taxes in the US. Do
I also need to file taxes in Canada? If so, how will that work in terms of
Federal and Provincial Taxs. What rates will apply?
Thanks,
SXXXXXX
================
david ingram replies:
Hopefully this answer to a prior similar question will assist you and of
course I WOULD BE PLEASED TO look after your Canadian, Michigan and US
returns by email, snail mail, fax or courier.
QUESTION:
Dear Sirs/Madams,
I would thank you and appreciate your valuable piece of advice on the
following:
MY CURRENT SITUATION:
---------------------
I have got an offer from an US company to work for them as a System Analyst
on contract basis in Dearborn, Michigan. The initial duration would be 9
months. It might get extended or might not be extended, depending on the
situation.
I will be relocating form Toronto to Windsor, Ontario and commute daily to
work in Michigan and come back home in the evening.
I am a Canadian Citizen. I will be working under TN1 visa for my prospect
employer in US. I already have my corporation operating in Canada.
My prospect employer is willing
a) either to pay net amount after the US tax deductions as monthly salary
for my service in US (ie. W2 BASIS ) OR
b) to remit money to my corporation in Canada without any tax deduction
(corp 2 corp basis), where as an employee of my corporation I would draw the
salary and pay taxes in Canada.
I don't have any thing connected in US such as mailing address or car etc.
I would be a daily a commuter to US from morning 9 to 5 pm.
MY QUESTIONS:
-------------
1) Can I choose option # B, ie.
b) remit money to my corporation in Canada without any US tax deduction,
where as an employee of my corporation I would draw the salary and pay taxes
in Canada.
2) Would the above option is legal under TN-1 Visa and Canada/US treaty.
I would appreciate your answer on the above and thank you in anticipation.
========================
david ingram replies:
Your first liability is to the United States and Michigan. Your "second"
liability is to Canada because you will be living in Canada.
Your corporation can NOT be paid. You do not have a visa to work for your
Canadian Corporation in the United States.
Your best bet is to be paid on a W-2 slip and pay the US taxes. Do NOT
participate in a 401(K)_ plan. If they have one into which they deposit
money on your behalf (matching funds), have them pay you the extra directly.
Then you can buy a Canadian RRSP when you file your Canadian return. After
calculating the US taxes, you will file your Canadian return and claim
credit for any taxes paid for Social Security, Michigan and US Federal
taxes. You will have more tax to pay to Canada.
If you are a married man and moving to Windsor so that your wife can
continue to work in Canada, you would pay less tax by moving to Michigan and
having your wife commute back to Canada. That way, you would get to file a
joint return in the US at a lower tax rate. Your wife's income would also be
included on the US return but there would be a foreign tax credit for the
taxes already paid to Canada.
Of course, if the job was only for 9 months, you would have another moving
expense which would eat up the immediate tax savings so your present course
of action is likely okay.
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