Candian moving to USA, employed by canadian company

afata5 · Post by **afata5** » Mon Feb 01, 2016 10:44 am

Hey all,

Let me start off by saying that I appreciate the feedback that everyone gives on this board. It has been useful for a lot of information for me and has shed light on many subjects. I also know that this is not a "school" and that I need to do more research but I'm starting to get confused with all the different posts and answers, especially since it seems difficult to find my exact situation. So here goes and hopefully someone can help me out:

Currently:
- Canadian Citizen, in Canada working for a Canadian employer. Moving to Kentucky on Spousal Visa (aka: Allowed to work in the USA without an issue) at the beginning of the month of March.

- New twist: Last Friday- Handed in my letter of resignation to employer but employer refused and stated that they were willing to keep having me work for them while I live in the USA. This is very interesting to me as I love my job and get paid pretty well at the moment. I would make calls/telephone meetings while in the USA but would travel to Canada to visit all my clients (should be none in the USA).

So........

How does it work? I understand that there are treaties between Canada and the USA for this type of situation but I don't know really what it means.

What I currently understand:
I know that I have to file taxes in both Canada and the USA.
- Apparently, the taxes that I pay in Canada can be used as credits when I file in the USA. Does this mean that it all crosses itself out and there should be no extra tax to pay in the USA?
- Example: If I make 100k per year (CDN) and pay 48% income tax (Federal and provincial..example only). Does that mean that I take the money that I was taxed, convert it to USD and that's pretty much what I will be able to apply as a credit (or deduction?) on the total amount I earned when I file the US taxes?

- Note: Kentucky (where I'll be living) does not seem to have a Foreign tax treaty so I'm not sure how this portion works.

-RRSP - I currently have personal RRSP and company plan RRSP. I know there is alot of information on this section and I haven't researched it enough. I'm looking more into it now but from what I can see, I need to keep it in my RRSP (no withdrawl) and I should stop contributing as soon as I enter the USA otherwise i'll be taxed cause it is not recognized as a retirement plan by the USA. Again, I need to read more into this and there seems to be readily available information. Just wanted to include it in this email.

What other questions should I be asking? What preparations should I do before I cross the boarder? It's so foreign to me and if I had more time, I would be able to read more (and will). I'd really like to stay employed by my employer if there is a chance. Again, I know this is not a school and I need to do more research... and I am. I'm just looking for some help to jump-start where to look :).

Also, potentially dumb question: Should I instead ask to be an independant agent instead? Not employed but they pay me a certain amount a month instead and I deal with the rest? I'd like to avoid this portion as it seems complex but I don't know if it's more intelligent to do it this way....
Many thanks and sorry for the long post,

Al

nelsona · Post by **nelsona** » Mon Feb 01, 2016 4:57 pm

The major issue you face is that your Cdn employer cannot simply continue paying you like a Cdn employee. You are performing employment work on US soil as a US resident, and thus you need to be paid on a US payroll, with US taxes and FICA instead of Cdn taxes and CPP/EI.

This will avoid you having to pay Cdn taxes at all, and will bring the employer into conformity on US payroll taxes.

The RRSP issue is a sticky one, not because the plan is not recognized, but because you will now be on a US payroll. They would not likely set up a rrsp plan for your individual case.

Since this may be costly for the company, and your fringe benefits will be negligible (and if your spouse has medical coverage), you clearly would be better off as a contractor (with the company paying you more due to the cost savings, of course).

nelsona · Post by **nelsona** » Mon Feb 01, 2016 5:00 pm

The "come back to work In Canada" scenario does add a little complication AND increase your tax burden. It makes it even MORE beneficial to be a contractor, as any un reimbursed expenses would be deductible as well (not so as an employee).

afata5 · Post by **afata5** » Tue Feb 02, 2016 10:39 am

Thanks for the reply!

So, then how would that work? I would basically bill him a certain amount of money a month + expenses that I incur from traveling to clients in Canada?

Also, I currently have a company car (leased by my employer but that I drive full time)... is there a way I could keep that until the lease is over? (I've already checked, I can easily bring the vehicle into the usa because it is owned by the Candian company.. I wouldn't need to register it in the US).

For the RRSPs, I'd basically stop the contributions in Canada and start them in the USA instead... that wouldn't be so hard.

Thanks!

afata5 · Post by **afata5** » Tue Feb 02, 2016 10:41 am

Oh and it's for sure he'd have to pay me in CAD not USD... the main reason is that when the currency exchange rate goes back up, then so does the amount of money I make (I don't think it will drop significantly more). I can easily do a transfer at no cost (apart from prefferencial exchange rate) from the CAD account to a USD account via Royal Bank...

nelsona · Post by **nelsona** » Tue Feb 02, 2016 12:45 pm

You were an independent agent before, it works the same now. they would only have to withhold Cdn tax on the work you did in Canada. You would get it all back at year end.

The currency and remuneration is up to you both to negotiate.

The car is a problem. Why would the company let a contractor operate one of their cars, in another ountry no less. They would need to boos the insurance on it.

You would also need US insurance, and a US firm maight not want to insure a car that is not owned by a US entity.

orscalifornia · Post by **orscalifornia** » Mon Feb 08, 2016 4:43 pm

Al, thanks so much for posting this question. I'm in a similar situation. Everyone's responses have been really helpful!

I hope you don't mind if I piggyback off your question, however, to see if people have advice for what I should do in my similar-but-slightly-different situation.

The only major difference is that my husband worked in Canada the 1st 2 weeks of 2015, then moved to the US to marry me and was a CONTRACTOR for this Canadian company for 4.5 months, while awaiting his green card. He received his green card in mid-2015.

We are filing MFJ.

If I've understood correctly:
a) he will have to declare his income in Canada on Canadian tax forms
b) On the 1040 in America, we will add my wages and his wages together, and then use form 2555 to determine how much he can exclude on the foreign exclusion line. We can use 2555 because his tax home is still Canada (right???), and because he meets the bona fide resident test.

Is that right?

If so, then how do I determine (quoting from 2555 instructions) "the number of days in (his) qualifying period that fall within (his) 2015 tax year." The instructions say "Your qualifying period is the period during which you meet the tax
home test and either the bona fide residence or the physical presence test." I'm unsure if that's the first 15 days, when he was living and working in Canada, or the 15 days + the 4.5 months he contracted, or...the whole year?

I appreciate your advice in advance. Thank you all so much!

orscalifornia · Post by **orscalifornia** » Mon Feb 08, 2016 5:07 pm

Oh PS I forgot to add: To make things more complicated, during the first 3 months of being a contractor, he was taxed. So it was like he just continued working for them. During the last 6 weeks, he was a pure contractor, and was not taxed. :/

nelsona · Post by **nelsona** » Mon Feb 08, 2016 9:15 pm

Only the wages from before leaving Canada are eligible for 2555. Work performed while in US is never eligible for 2555, nor is foreign income earned while living in US. He does NOT have abona fide residence in Canada.

He gets to count only the days in Canada before coming down.

The taxes he paid doesn't really matter. he has to file a departure return for Canada and a full year one in US, so can get any taxes back if need be, on these.

His contractor income should not be taxed in Canada; it will be taxed as self-employed income for US purposes. But his employee income is taxable in both..

orscalifornia · Post by **orscalifornia** » Tue Feb 16, 2016 9:39 pm

A very belated Thank You, Nelsona, for this information. This is much clearer to me now.

It sounds like therefore my husband needs to file a 2555 as well as something for self-employed income in the US. I will look into that further.

orscalifornia · Post by **orscalifornia** » Tue Feb 16, 2016 9:48 pm

Just to specify: Does he need to file self-employed income in the US for the 3 months he was employed + 6 weeks he was a contractor? Or just for the 6 weeks?

It sounds to me like he has to do the following:
-File a 2555 for just the 15 days he worked in Canada
-Then add those 15 days + 3 month's salary to our joint wages earned for the year
-Then file something for self-employed income for those last 6 weeks.

Please correct me if I'm wrong. I want to be 100% sure. And I appreciate your help, once again.

nelsona · Post by **nelsona** » Tue Feb 16, 2016 10:44 pm

ALL income will be reported on 1040. wages, self-employed, foreign. everything.
THEN, 2555 will be used to exclude pre-arrival Cdn wages.
ALSO, SE form will be added to pay SE tax on SE income.

orscalifornia · Post by **orscalifornia** » Wed Feb 17, 2016 1:47 pm

Thank you again! This is so helpful.

I hope this information will also be helpful to anyone who searches for this in the future :)

nelsona · Post by **nelsona** » Wed Feb 17, 2016 1:50 pm

Doubt it. all this was previously posted and neither of you found those posts.