Working on a TN and 1099

This is a second answer given to the same email.   I answered it two times because i looked at it in different ways from different directions.
 Hello David,

I found your contact information on the Internet
(, in a posting
that closely reflects my situation.

I am currently working on a TN visa in the US and just in the process on
moving to another project. However, lawyers from the hiring agency insist
that I *have* to work as a W2 employee and I know that this is not true. My
intent is to work as 1099, which means that billing goes through my Canadian
company (incorporated in Ontario). From your post (link above), I know about
tax considerations I have to keep in mind.

Would it be possible to hire you for a consultation so that you can explain
to the lawyer at the hiring agency that 1099 can be done on a TN visa and
how? I do not anticipate any issues with issuing of the TN visa because I
have done it many times before. This issue I am writing you about is tax

Thank you in advance. Below is the email that hiring agency shared with me.
It contains lawyer's contact information. From his email and suggestion #2,
I see that he has not dealt with TN before, otherwise he would not suggest
obtaining a TN visa without a TN letter from the US company. It would be
great if you could provide clarity on the tax situation and what exactly has
to be specified in the contract between NueVista and my company to avoid any
hassles with the IRS. Thank you in advance.



Here is the lawyer's response:

From: xxxxxxxxxxxxxxx]
Sent: Monday, August 06, 2007 10:57 AM
To: xxxxxxxxxxxx

8 CFR 214.6(b) prohibits him being on a 1099 if sponsored by xxxxxxxxx.
trying to get cos. to sponsor for TN under a 1099 is an old scheme designed
to avoid taxation in either country and remains quite popular but, the IRS
can some back on XXXXXXXX for the tax obligations if you participate in the
2 options
1) sponsor as a TN and employee him not as a contractor on a 1099 but, as an employee W-2 or
2) contract with his company directly and let him deal with obtaining the TN via his own company but, provide no TN
support letter but, you can sign a contract with his co. (not with him) and
then pay his co. directly and issue a 1099 to his co. as you would any other
If you decide option #2, I recommend that you let me review any
contract or other document he wishes you to sign. xxxxxxxx

david ingram replies:

I wish that every question I answer was perfect.  However, I have answered this so many times that I lose track of what has been said and what has not been said.

The legal advice that your potential employer was given about paying your corporation is / was correct. 

I have continuously said in numerous emails that you cannot work on a TN and have your Canadian Corporation paid unless:

1.   There are several owners of the Candian corporation so that 'you' are not the only or controlling shareholder. AND

2.   Your Canadian corporation obtains the TN. 

If these two factors are not met, you can be paid as an individual on a 1099 as an employee with no benefits and this is not uncommon. However, if you are the soul owner of the Canadian Corporation, you can NOT do what you suggest.  In rereading the answer you quote, it does appear that the person is the sole owner of his corporation but I obviously did not think that at the time.

This older Jan 2004 answer on my site gives you more

----- Original Message -----
Sent: Tuesday, January 13, 2004 2:24 AM
Subject: W2 or 1099 or Corporation for TN holder in the US.


Can A person on TN status be paid as 1099 contractor?
Can A person on TN status do Canadian corp. to US corp. billing instead of on
david ingram replies:
A person on a TN can be paid on a 1099 as an independent contractor but can only do services for the company for which he was issued the TN.
A Canadian Company can get a TN to supply an employee to a US company.  In that case, he could be paid from Canada but would have to be an independent contractor again because his or her tax liability is to the United States for the work performed in the US.  You cannot get a TN, work in the US and be paid form Canada and not file a US return plus a return for the state or states you performed the services in.
You can NOT work for your Canadian corporation in the US if you do not have the TN through your Canadian Company.  If the TN is issued throught the US employer, they can NOT pay your Canadian Corporation.  You hafve been working illegally as i understand your situation.

It sounds like you have been illegal with your last arrangement.

However, I disagree with the legal opinion that you can not be paid on a 1099 basis as an individual.

At least half of the TN's that we do returns for are paid on a 1099 basis because of the temporary nature of the assignment.  Howrever, they are paid as an individual and are only allowed to work for that employer so are really employees without benefits.  For most people, this is a DISADVANTAGE because they are then required to pay both halves of Social Security which is a pretty heavy price to pay. 

If you wish to be paid as a corp to corp basis, you will have to get your TN through your Canadian company.  Although this is not really legal as they are not supposed to issue TN visas for one person corporations, it does happen.

However, since you are earning all the money in the US, you WILL owe tax on all the money to the US and suffer the expense of a whole bunch of expensive accounting.  It will save you nothing legally and cost you a couple of thousand extra per year for accounting and your tax return.

The fact that the last company did it differently, does not make it right and the last thing you want to do is fool around with US Homeland Security.  If HS decides that you are stretching the truth on a TN application, the Homeland Securty Officer is within their right to arrest you, detain you, throw you in immigration jail for 5 days, make you post $5,000 bail and ban you from the US for 5 or 10 years with what is called an EXPEDITED REMOVAL.

If you are ever challenged at the border, do not make a fuss no matter when your plane leaves, etc.  Ask the officer to explain what he or she feels is deficient and ask for permission to return to Canada and rectify or get the information that they need.  Whatever you do, don't argue.

Hope this helps.

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