Canadian employee (T4'd) working in the US - tax question

Elgoo · Post by **Elgoo** » Tue Jan 18, 2011 10:31 pm

Hi, I've been trying to figure out if I qualify for CAN-US treaty exemption under XV(2)b. But I seem to be getting conflicting answers from the IRS and CRA; both of which seem to offer advice favoring their own positions of course lol.

Anyways, here are some facts about my situation:
- I am a Canadian citizen/resident and work as an employee of a Canadian management consulting company.
- One of our Canadian clients purchased a US sub and I went down to the US on a TN for 60 days in 2010. The TN was applied for by our counterparts in US; though the US Consulting company is a separate distinct entity from the Canadian consulting company.
- I was paid out of the Canadian office the entire time and was T4'd for the entire year's salary. Note that I was paid more than $10,000 in wages over the 60 days.
- Also, the Canadian consulting company billed the Canadian client for my time while I was down in the US.

Now where I get confused is that I am not sure if I meet the 2nd of the condition of XV(2)b:
".........and the remuneration is not borne by an
employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State."

Do I meet this criteria for exemption under XV(2)b? I'm a bit confused because the US counterpart applied for my TN visa though the Canadian company paid my wages.

If I do qualify do I just file the 1040NR and 8833? I am completely looking at this wrong?

Hopefully someone can kindly shed some light on my situation.

Thanks in advance!

nelsona · Post by **nelsona** » Wed Jan 19, 2011 6:13 am

You have no US tax liability.
The fact that you got a TN is unimportant. You were in essence working in the field for the Cdn firm. The TN was merely a convenience to aviod border hassles.
Tax liability in US would only kick in after 6 months.

And since no US tax was withheld, there is no need to file anything in US (ie. you don't need to apply for a refund).

Elgoo · Post by **Elgoo** » Wed Jan 19, 2011 10:17 am

Thanks for the quick and very helpful reply!

By the way, do you think I will run into any issues with the IRS with not filing since in 2009 my company's accountants actually filed a 1040NR for me (and incorrectly it appears)?

I was in the exact same situation in 2009 but they reported that during the 28 days I was there in 2009 had US source income, even though I was on Canadian payroll. They just chose to use the <10,000 section of XV(2)a to avoid taxes.

I am hoping this doesn't raise eye brows with the IRS. I wish my company got someone with more expertise to help with tax filings :(.

Anyways, thanks again!

nelsona · Post by **nelsona** » Wed Jan 19, 2011 10:54 am

Nope. 1040NR implies non-residence. No need to continue to show non-residsence.

Elgoo · Post by **Elgoo** » Wed Jan 19, 2011 11:07 am

Ok thanks for the clarification!

nelsona · Post by **nelsona** » Wed Jan 19, 2011 12:21 pm

Just one addition.

If your firm is continuously sending different employees down to the US on this project, it *might* be triggering taxation on your income (and everybody else that is going down) regardless of how little you stay.

But this was a feature that came into effect in 2010, so the 2009 filing was unnecessary, and is probably still unnecessary.

Elgoo · Post by **Elgoo** » Wed Jan 19, 2011 12:57 pm

On this particular project, I was the only one sent down on this project. But the firm does frequently send other people to the US on completely separate clients/projects. I suppose this is different?

nelsona · Post by **nelsona** » Wed Jan 19, 2011 3:03 pm

yes that is different.