Living in Canada and Employed by

Subject:        Living in Canada and Employed by US Company
Expert:         taxman at centa.com
Date:           Monday November 20, 2006
Time:           03:43 PM -0500
QUESTION:
Hello,
I'm a Canadian citizen who's returning back from the US at the beginning of
Dec and will be living in Vancouver.  I will continue to work for the US
company until the end of February.  My compensation will not change at all
but I will be living in Canada.
My question is whether or not I will be required to pay any Canadian taxes
on the income I earn for the time that I will be living in Canada.
Thanks for your time.
------------------------------------------
david ingram replies;
Yes, it is taxable in Canada FIRST. As you enter Canada, your primary tax
liability changes to Canada.
You will file a US 1040 but will have to decide whether to file a Dual
Status Return which means it can NOT be a joint return and you have to use
itemized deductions and will either not report or deduct the income earned
after coming to Canada.
OR
You will file a conventional US 1040 joint return reporting all the income.
However, the December income is now Canadian source and any tax you pay to
Canada will be a foreign tax credit on form 1116.
Your company should cease deducting any Fed tax, State tax, FICA or Medicare
deductions and pay you for Dec, Jan and Feb on a 1099 basis.
---------------------------
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