Canadian consultant working in US with TN under contract - international non-resident cross border expert income tax & immig
QUESTION:
Hello,
I am self-employed (incorporated business)
and work under contract for a US consulting firm. I am NOT an employee, but my
contract is long-term and exclusive.
I work 4 days a week in the US
(Illinois) on a consulting project (at a client's site) on a TN visa. I have
been doing this since September, 2006 (my incorporated business' fiscal year
ends in Sept 2007).
Do I need to pay US taxes even though I live in
Canada and my business is based there?
I am in the US less than 186 days a
year.
What if I work in multiple
states?
Thanks,
-------------------------------------------------
david
ingram replies:
If you have an actual long term conttract and are working
under a TN visa, you are illegal and can have your TN revoked by any single
Homeland security officer at the border.
Therefore, if you realy have a
long term contract, the border person can revoke your TN and ban you from the US
for 5 or 10 years under ER (Expedited Removal) for filing false
documentation to get your TN visa.
The terms of a TN visa are very clear
that the contract is a short term contract lasting a year or less although it
can be renewed for an indefinite time. This is the risk that all TN holders
take. Your contract is for a year or less and you have to be prepared for
an employer's not offering you anopther letter at the end of the year. If
they do not, you can't sue because you would be proving in court that the two of
you violated USCIS rules and could both be severely punished. Although you do
not need to be paid on a strict W2 basis with tax, medicare and FICA deducted,
you can opmnly to work for the employer who sponsored your visa. Anything
earned in the USA is absolutely taxable as an employee in the USA unless you
earn less than $10,000 under Article XV of the US / Canada tax treaty.
However, that article does NOT exempt you from Illinois state tax. AND,
you must file your Federal 1040NR witjh foprm 8833 in that case to claim the
exemption.
You are taxable in both Illinois and the US because you ware
working there at a fixed base. If you were working all over all of the
time, it would not be a fixed base but 4 days a week at the same site most of
the time is clearly a fixe base of operations and your TN visa is for you NOT
your Incorporated Canadian Company which is likely a waste of time and
accounting and legal fees under the circumstances.
You
should have filed a US 1040NR and an Illinois IL-1040 with schedule NR for
2006. Any tax you owed on these two tax returns would be a foreign tax
credit on your Canadian tax return by filling inform T2209 lines 431 and
433 on schedule 1 of the Federal return and form T2036 and line 47 47 of the
Provincial form 428.
If you were working all over the place and not at
the same place in your employer's premises on a three or four day a week basis,
you could be exempt from US federal tax under Article XIV of the US / Canada
Income Tax treaty. However, you stated you were at the client's sitre for 4 days
a week and that qualifies as a fixed base of operations.
Your Visa is for
'YOU' to work for whatever the name of the employer comapny in the US is.
It is NOT for you to work for a Canadian Company that you happen to own.
In fact, you can NOT officially get a TN visa for a company that you own.
(I say this a little tongue in cheek becasue I have seen them issued many times
but the paperwork never indicates that the visa holder owned the
company).
Remember that the US has a Subchapter S corporation where the
fees just flow through to the owners of the company and that is how you should
be treating your earnings in the US. If you are working in multiple
states, then properly, a separate return should be filed for each state.
Now, you might talk to another dozen tax consultants who tell you that you do
not have to file in the US (I think you already have) but I assure you
that they are incorrect as you have described your situation. Even if you were
exempt from tax because of Article XIV or Article XV, you STILL HAVE TO FILE THE
RETURN WITH FORM 8833 to calim the exemption and that exemption does NOT apply
to the state.
And, yes, I know of people who are doing what you are doing
and have not yet been caught by the US IRS. or Homeland Security. I also
know of dozens who have been caught and paid BIG penalties and interest bills to
the IRS when the situation catches up to them and been banned from the US for
five or ten years for filing false working visa papers.
The following are
the first rules for a TN visa
CHECK LIST for the TN Visa
*
An applicant for admission must establish Canadian
citizenship
*
The applicant must be entering the United States to engage in a
profession or occupation at a professional level under NAFTA
*
The applicant must be in possession of an offer or contract of
employment from a United States employer stating:
1)
The professional activity to be engaged
in
2) Purpose of
entry
3)
Remuneration
4) That the position is temporary
in nature and will not exceed one year (although it can
be renewed)
* The
applicant must provide documentation of his or her educational degree or
professional qualifications
* The
applicant must meet all licensing requirements
*
Employment need not be full-time
*
Permanent residence abroad is not a prerequisite
*
Maximum period of admission of a TN is one year
* TN
dependants accompanying the principal TN will be admitted under
the "TD" classification for the same amount of time as
the principal
* A $56
U.S. fee is required ($85.00 for renewal by mail)
* TN applicants are
not permitted to enter as a professional to participate in any way to
circumvent a strike
*
SELF EMPLOYMENT IS NOT PERMISSIBLE - This
means you can NOT set up an office and take multiple clients. You 'can' be
paid on a 1099 basis which means that you are responsible for both sides of the
16% Social Security taxes. If there is more than one US employer who wants
your services, you can obtain an individual TN visa for each one. In fact,
if you show up at the border with six legitimate job offers for a day a week
each (as an example) you can get all six TN visas at the same time for one
fee.
The following is a partial list
of some who qualify under a TN Visa. Please note that extensive experience can
equal a degree in many cases. All need a Bachelor or Baccalaureate degree unless
otherwise noted. In some cases, 3 or 4 years of practical
work in a discipline can count for one year of a University degree.
Therefore if the University BA requires 3 years, you need 9 or 12 years
of work experience to qualify.
* Accountants - RIA
or SIA or CPA or CGA or CMA or CA
** Actuaries (this
is one of two classifications added since 1989)
*
Agriculturalists
*
Agronomists
* Animal
Breeders
* Animal
Scientists
*
Apiculturist
* Architects - BA or
state / provincial license
*
Astronomers
*
Biochemists
*
Biologists
*
Botanists
*
Chemists
* Computer Systems
Analyst - BA or Post-secondary Diploma or Post-secondary certificate and three
years of practical experience. This does not get you to the USA, if your job is
programming a computer. An Analyst might spend a day a month
working on some modifications (in a testing mode for instance), but they better
not be thought of as a "programmer" within the company.
**** Computer
Software Engineer *** This is NOT here as an approved
occupation. However, Jackie Bednarz (US head of the NAFTA
Section 16 Working group in Washington stated specifically that if a recognized
University was to offer the degree, she would consider computer software
engineers under the ENGINEER classification when a recognized University granted
the degree. My understanding is that SFU and McGill are now
granting such degrees and that the Professional Engineers of British Columbia
have recognized graduates as members of their professional society.
Note that TC and TN's were being granted for this category on a sporadic
basis until the INS realized that no such "official" degree
existed.
Jackie Bednarz also pointed out
(She was part of the original negotiating team when the original FTA (Free Trade
Agreement) was being negotiated in 1985, 86, 87 and 88, there was no such thing
as the INTERNET, "web masters" and "web sites". When negotiating the job titles,
no thought was given to the computer revolution, other than the computer system
analyst designation, which at the time meant a main frame analyst for a
$1,000,000 computer.
(Thanks to Stuart Lynne and
Richard Pitt) (www.fireplug.net), the CEN-TA Group was an
official member of the internet as far back as 1986 and thanks to Bill Gates
himself (he told me to use Microsoft Xenix as my operating system) and Radio
Shack Model 16 computers, CEN-TA was using "email" between offices in Toronto,
Ottawa and Vancouver as early as 1983.
As another aside, Stuart Lynne and
Richard Pitt went on to found WIMSEY, the FIRST ISP in CANADA. Bill Gates became
quite famous as well.
* Dairy
Scientists
* Dentists - DDS,
DMD, or state / provincial license
* Dental
Technicians
*
Dietitian
* Disaster
Relief Insurance Claim Specialists - (claims adjuster employed by an
insurance company located in the territory of a party or an independent claims
adjuster) - BA and successful completion of training in the appropriate areas of
insurance adjustment pertaining to disaster relief claims; or, three years
experience in claims adjustment and successful completion of training in the
appropriate areas of insurance adjustment pertaining to disaster relief
claims
* Doctors - (see
physician further on)
*
Economists
* Engineers - BA or
state / provincial licensing
*
Entomologists
*
Epidemiologists
* Forester - BA or
state / provincial licensing
* Geneticists
*
Geochemist
*
Geologist
*
Geophysicists (including Oceanographer in the United States)
* Graphic Designer -
BA or post-secondary diploma and three years
experience.
* Hotel Managers -
BA in hotel / restaurant management; or,
post-secondary diploma or post-secondary certificate in hotel / restaurant
management and three years experience in hotel / restaurant
management
*
Horticulturist
* Industrial
Designer - BA or post-secondary diploma or post-secondary certificate and three
years experience
* Interior Designer
- BA or post-secondary diploma or post-secondary certificate and three years
experience
* Journalist BA plus
three years experience - (This category is no longer valid and has been left in
to explain the circumstances. As I understand it, journalists in general took it
as an insult that they had to have a BA degree, because, "most, if not all," of
the best known journalists do not have a BA degree.)
* Land Surveyor - BA
or state / provincial licenses
* Landscape
Architect
* Lawyer (including
notary in the Province of Quebec) - LLB, JD, LLL, BCL degree (five years); or
membership in a state or provincial bar
* Librarians - MLS
or BLS (for which another BA was a prerequisite)
* Management
Consultants - BA; or equivalent professional experience as established by
statement or professional credential attesting to five years experience as a
management consultant, or five years experience in a field of specialty relating
to the consulting agreement. I must make it clear
here. A Management Consultant is NOT a manager.
The surest way to lose your management consultant renewal is to show up
at the border with a business card with the title General Manager, Western
Region, or Human Resources Manager, or, or, or. A management
consultant could consult with the actual sales manager about sales techniques or
about selling into Canada. A management consultant could be
advising the actual human resources manager in hiring techniques or even
suggesting that one candidate is a better fit than another one.
A management consultant can do market research, gather and assemble data
and write a report to give to the manager. This is likely the hardest TN visa to
get but is also a very important one when it comes to serving the needs of the
US company.
Note that the management
consultant does NOT need a degree, just five years experience.
This is the perfect job description for the person with 23 years of job
experience who has never gone through the formal process of getting a university
degree in the discipline.
* Mathematician
(including statistician)
* Medical Laboratory
Technologist (Canada) / Medical Technologist (U.S.) - BA; or post-secondary
diploma or post-secondary certificate and three years experience
*
Meteorologist
*
Nutritionist
* Occupational
Therapist - BA; or state / provincial license
* Organic Chemist
* Pharmacologist
(Pharmacist) - BA; or state / provincial license
* Physician -
(teaching or research only), MD or state /provincial license. To work as MD, a
doctor must pass his MLE (medical licensing exam), which has three, parts
written over a year. After passing, he or she would enter the
U.S. under an H-1A.
* Physicist
(including oceanographer in Canada)
*
Physiotherapist/Physical Therapist - BA; or state
/provincial license
* Plant
Breeder
** Plant
Pathologists (This is one of two professions added since 1989)
* Poultry
Scientist
* Professional (most
recognized professions)
* Psychologists -
state / provincial license
* Range
Conservationist
* Recreational
Therapist
* Registered Nurse -
state / provincial license
* Research Assistant
(working in post-secondary educational
institution)
- * Scientific
Technician - Possession of: (a) theoretical knowledge of any of the
disciplines: agricultural sciences, astronomy, biology, chemistry, engineering,
forestry, geology, geophysics, meteorology, or physics; and (b) the ability to
solve practical problems in any of those disciplines, or the ability to apply
principles of any of those disciplines to basic or applied
research.
* Social
Worker
* Soil
Scientist
*
Sylviculturist
* Teacher
(College, Seminary, or University) (Post Secondary level only)
* Technical
Publication Writer - BA, or post-secondary diploma or post-secondary
certificate, and three years experience
* Urban Planner
(including geographer)
*
Veterinarian
* Vocational
Counselor
*
Zoologist
SUBJECT TO CHANGE
This list is subject to change
at any time. When talking to Dennis Olsen about updating the rules, I mentioned
a nurse who had found out that nurses could go south instantly in the late
1970's. She got a job offer from a Hawaii hospital, came back
to Vancouver, quit her job, sold her house, kicked out her husband, gave away
the dogs and showed up at the airport to move to Hawaii, only to find out that
they had closed the quota for nurses.
And then, as I was
writing this exact section of the book in March, 1995, I received a call from a
Doctor who had a job offer from the U.S., sold his house and Canadian practice,
only to be told that he did not qualify when he showed up at the border because
although a practicing family physician in Canada and fully qualified to go south
with a Green Card (a resident alien immigrant visa), he did not qualify as a TN
(can only teach or do research) and he did not qualify as an H-1B because he had
not written an MLE. This medical licensing exam is written in three stages over
a one year timetable. I guess he has to sue his immigration
attorney in Los Angeles. This attorney knew he did not have
his MLE, but charged him significant monies and told him he could get in
now!
Remember, NONE of
the foregoing confers permanent status. For permanent status, you must still
stand in some sort of line. However, it seems to be true that
if you are in the U.S. as a TN or as a L-1, your line moves much faster than if
you start from out of the country.
March 8, 1995 -
When a Canadian leaves Canada to move to the U.S., there is a departure
tax. This means that all of the Canadian's assets are deemed
"to have been sold" at fair market value the day before he or she leaves. If
there are "paper profits," tax is due on this paper profit although a bond may
be posted. The United States did not have this departure tax because the U.S.
citizen has to keep on filing U.S. FEDERAL INCOME TAX RETURNS while out of the
country for as long as they remain a U.S. citizen. If they gave up their
citizenship, they could own a million dollars worth of assets that they had paid
a dollar for and their "paper profit" would have just disappeared into the mist.
Section 352 of the new Legal Immigrant and Illegal Immigrant Responsibility Act
of 1996 states that the U.S. Citizen who gives up their citizenship to avoid
U.S. income taxation is also banned from ever returning to the U.S. for any
purpose.
I wrote the
previous explanation in 1989 for the CFTA ) Canadian Free Trade Agreement) and
then updated it a little for the NAFTA when Mexico was added in 1994. It
is downloaded from my website 30 to 300 times a
day.
The USCIS
(United States Citizenship and Immigration Service) has its own which you can
find at the state Department at: http://travel.state.gov/visa/temp/types/types_1274.html#3
Although this may have seemed to be very negative, I
hope it will help you stay out of trouble in the
future.
David Ingram wrote:
---------------------------------------------------------------------------------------------------------------
It is very unlikely that blind or unexpected email to me will
be answered. I receive anywhere from 100 to 700 unsolicited emails a
day and usually answer anywhere from 2 to 20 if they are not from existing
clients. Existing clients are advised to put their 'name and PAYING
CUSTOMER' in the subject and get answered first. I also refuse to be a
slave to email and do not look at it every day and have never ever looked at it
when i am out of town.
However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. As an example, as I
write this on June 28th, since June 16th (12 days), my 'spammed out' box has
7,118 unread messages, my deleted box has 2630 I have actually looked at and
deleted and I have answerd 63 email questions I have answered for clients and
strangers. I have also put aside 446 messages that I am maybe going to try
and answer because they look interesting.
Therefore, if an email is not answered in 24 to 36 hours, it
is lost in space. You can try and resend it but if important, you will
have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321
David
Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and
working Visa Specialists
US / Canada Real Estate Specialists
My Home
office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N
3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week
Vancouver (LA) time - (please do not fax or phone outside of those
hours as this is a home office)
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 www.centa.com. If you forward this message, this disclaimer must be
included."
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15
minutes to 50 minutes (professional hour). Please note that GST is added if
product remains in Canada or is to be returned to Canada or a phone consultation
is in Canada.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only - no self employment or rentals
or capital gains - you did not move into or out of the country in this
year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no
rental
$1,200 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.
$1,500 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
$1,600 would be for two people with income from two
countries
$2,800 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 $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
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 $800 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.
Just a guideline not etched in
stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand,
Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia,
Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida,
Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali,
Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent,
Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax
returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland,
Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax
Immigration Wizard Antarctica
Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6
NR-6 NR 6 Non-Resident Real Estate tax specialist expert
preparer expatriate anti money laundering money seasoning
FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border
transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income
Tax Convention
David Ingram
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Niagara Falls, income trust, Income Tax Treaty Convention
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