I'm a Canadian citizen that moved to the US last year while on maternity leave, and am here under a NATO 2 visa. I have my EAD and my SSN. I've been working for the same Canadian company for 7 years, working in the project management world. I'm currently in discussions with my employer regarding the possibility of tele-commuting for this Canadian company while in the US, for the duration of my husband's military posting (2 more years). Since the summer of 2015, spouses of Canadian military members hold a 'factual resident of Canada status' (not sure if this means anything in my case). My question is, while in the US, is there a form I can fill out or a treaty I can refer to in order to be exempt from paying US taxes?
Thanks
Cdn tele-commuting for Cdn co. while husband posted to US
Moderator: Mark T Serbinski CA CPA
Your spouse is of course exempt from US tax on his govt services income. He would file a 1040NR, which has plenty of space to indicate the treaty exemption he has. Any non-govt-wage US-source income he would have would be reportable.
You, too, benefit from this status (not because of any change in CRA policy), and would do the same, reporting only US-sourced income on the 1040NR.
HOWEVER, since you are physically in US, and if not working for the Govt, the work you are doing by telecommute IS US-sourced, so you would be subject to US tax on these wages. Wages are sourced where you physically do the work.
You, too, benefit from this status (not because of any change in CRA policy), and would do the same, reporting only US-sourced income on the 1040NR.
HOWEVER, since you are physically in US, and if not working for the Govt, the work you are doing by telecommute IS US-sourced, so you would be subject to US tax on these wages. Wages are sourced where you physically do the work.
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Interesting - maintaining my residential ties to Canada requires that I pay taxes in Canada and based on the information you are providing I also need to pay taxes in the US. When speaking to the Department of State it was suggested that I get an EAD, an SSN and speak to a certified accountant that specialized in US/Canada taxing, but these were only recommendations. It would seem that there is a lot of grey area when it comes to tele-commuting, especially as a military spouse.
vleblanc
The grey-area is in the immigration area, which for you, with an EAD, is completely fine.
Most people living/working cross-border file and pay tax in both countries, this is nothing unusual. It is simply that some of your income will be taxed first by US, and all of your income will be taxed in Canada, with credit given for the US tax you pay.
It shouldn't result in any extra tax, just a more complex filing -- which would be the same for someone commuting to work in US every day, but still living in Canada. That is essentially what you would be doing.
Your other choice is to NOT treat yourself as Cdn resident and pay tax only in US (only your spouse is really FORCED to remain a Cdn deemed resident because of his job). However, you would lose any benefits that were intended by allowing military spouses to retain Cdn tax residency (CCTB, GST, etc).
Most people living/working cross-border file and pay tax in both countries, this is nothing unusual. It is simply that some of your income will be taxed first by US, and all of your income will be taxed in Canada, with credit given for the US tax you pay.
It shouldn't result in any extra tax, just a more complex filing -- which would be the same for someone commuting to work in US every day, but still living in Canada. That is essentially what you would be doing.
Your other choice is to NOT treat yourself as Cdn resident and pay tax only in US (only your spouse is really FORCED to remain a Cdn deemed resident because of his job). However, you would lose any benefits that were intended by allowing military spouses to retain Cdn tax residency (CCTB, GST, etc).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
It is a pendulum kind of thing. Years agop, when one spouse was a deemed resident (Cdn givt worker abroad) the spouse was automatically considered a resident.
This was determined to be unfair for the family, since their spouse's foreign income became subject to Cdn tax. So the regs were changed in order to NOT automatically make spouses deemed residents, but instead, look at their cases individually.
The result was that some spouses were being determined to be non-resident, triggering all that goes along with this: deemed disposition of property, loss of some social benefits, TFSA contribution room, etc.
For a spouse with no income while abroad this was punitive: thus the new measure. But for a spouse who IS earning income while abroad, there are great advantages to being non-resident, particularly if that country has a lower tax rate than Canada.
You are in that situation, so you will have to decide.
This was determined to be unfair for the family, since their spouse's foreign income became subject to Cdn tax. So the regs were changed in order to NOT automatically make spouses deemed residents, but instead, look at their cases individually.
The result was that some spouses were being determined to be non-resident, triggering all that goes along with this: deemed disposition of property, loss of some social benefits, TFSA contribution room, etc.
For a spouse with no income while abroad this was punitive: thus the new measure. But for a spouse who IS earning income while abroad, there are great advantages to being non-resident, particularly if that country has a lower tax rate than Canada.
You are in that situation, so you will have to decide.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing