I have a question , that I haven't found a clear answer on anywhere so far.
I've searched everywhere , so as a last resort I'm asking a question here now. ( I like to research as much on my own first)
Scenario
1) Canadian going to work on a TN Visa working for USA Company (HQ in California)
2) Living Full time in Canada
3) Working on Projects majority Remote, but sometimes onsite
4) Applied for USA SSN Number
I understand as an Employee I would be paid in USD and receive a W2 , Fill out my Canada Taxes with Foreign Tax Credit info and fill out the following forms
1040NR - U.S. Nonresident Alien Income Tax Return
Form 8840 -Closer Connection Exception Statement for Aliens
Form 8833 - Disclosure of Treaty Based Position
Form 8233 Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual
So here is my question.
What does a USA company do for State Taxes & Federal Taxes since I don't live in a USA State.
Do they just deduct Federal Taxes or do they use their HQ of California as my Home State and fill out my W2 accordingly.
Or do they have to create a Canadian Business Entity? They are not keen on Independent Contracting
I appreciate anyone's response. I know its a lot easier if you move to the USA, but that's not in the cards right now, and I don't want cut ties to my Canadian Residency.
TN Visa , State Tax on W2? Living in Canada .
Moderator: Mark T Serbinski CA CPA
Why would you need form 8840 and form 8833?
You don't meet SPT, and you aren't taking a particular treaty position. Don't over think this.
And if you are paid on W-2, you are an employee, NOT an independent contractor, so no 8233 either.
So, looks like you have a much simpler case than you thought.
Since you ar occasionally working in US, it is acceptable to be a W-2 employee based in cali. If you were strictly working remotely in Canada, then you would be better off being a contractor, or being paid corp=to=corp.
You don't meet SPT, and you aren't taking a particular treaty position. Don't over think this.
And if you are paid on W-2, you are an employee, NOT an independent contractor, so no 8233 either.
So, looks like you have a much simpler case than you thought.
Since you ar occasionally working in US, it is acceptable to be a W-2 employee based in cali. If you were strictly working remotely in Canada, then you would be better off being a contractor, or being paid corp=to=corp.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
You would need to ask the company how they deal with their travelling employees. Essentially you pay tax where you work and where you live. Their address does not necessarily mean that all their employeeds pay cali tax. They may assign sourced to where you are working. Ask them.
Your employment income is US-sourced and taxable in US. No question. You will have to decide if it is cali-sourced as well. Or if you will need to file a return in each state that you work. I purposely do not answer questions about state taxation as they vary too much.
If you don't want this arrangement then you should become a contractor (either 1099 or corp-to-corp), in which case you won't have to pay tax in US at all. Then you would need form 8233.
Your employment income is US-sourced and taxable in US. No question. You will have to decide if it is cali-sourced as well. Or if you will need to file a return in each state that you work. I purposely do not answer questions about state taxation as they vary too much.
If you don't want this arrangement then you should become a contractor (either 1099 or corp-to-corp), in which case you won't have to pay tax in US at all. Then you would need form 8233.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Karan,
I'm actually in a similar situation on a TN VISA working for U.S. Company on W-2 while living in Canada full time.
I lived in U.S. for 5 years and filed U.S. taxes as resident Alien while being non-factual resident in Canada (so I didn't have to file taxes in Canada). When I moved back to Canada, I then had to file U.S. 1040NR and Canadian T1 return, (after being educated by an accountant that this is how it's done). This way on my Canadian Tax filings, I was credited the taxes I paid in U.S. based on NAFTA rules, so net taxes paid were essentially same as working for a Canadian company. Only difference is more paperwork.
FYI, I didn't bother with any of the other forms you mentioned (88xx and 8233) and never had any problems.
I'm actually in a similar situation on a TN VISA working for U.S. Company on W-2 while living in Canada full time.
I lived in U.S. for 5 years and filed U.S. taxes as resident Alien while being non-factual resident in Canada (so I didn't have to file taxes in Canada). When I moved back to Canada, I then had to file U.S. 1040NR and Canadian T1 return, (after being educated by an accountant that this is how it's done). This way on my Canadian Tax filings, I was credited the taxes I paid in U.S. based on NAFTA rules, so net taxes paid were essentially same as working for a Canadian company. Only difference is more paperwork.
FYI, I didn't bother with any of the other forms you mentioned (88xx and 8233) and never had any problems.
The accountant was correct in how to file if you got a W-2. The problem is that paying a non-resident who is not working in US by W-2 is not correct. This is avoidance of Cdn payroll taxes.
Same in the other direction: paying a US resisnt working in US on a T4 is also illegal.
Same in the other direction: paying a US resisnt working in US on a T4 is also illegal.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Ok, Nelson please help :)
This is the exact situation that needs some further clarification.
I will be an employee of a USA Corporation ie W2 . Continuing to Live in Canada as a Resident full-time , visiting USA Customers 1-2 days a week in multiple states for site discoveries and sales calls etc... The remaining portion of work will be done remotely in Canada.
I just need to understand how do I pay the State taxes , since its might be multiple states for very small time periods. I know I will pay USA Federal Taxes, and figure out my 100% CPP/EI myself.
I know , independent contractor would be the best answer, or move to USA.
Please let me know.
This is the exact situation that needs some further clarification.
I will be an employee of a USA Corporation ie W2 . Continuing to Live in Canada as a Resident full-time , visiting USA Customers 1-2 days a week in multiple states for site discoveries and sales calls etc... The remaining portion of work will be done remotely in Canada.
I just need to understand how do I pay the State taxes , since its might be multiple states for very small time periods. I know I will pay USA Federal Taxes, and figure out my 100% CPP/EI myself.
I know , independent contractor would be the best answer, or move to USA.
Please let me know.
I've been further researching as per usual, and I just need a confirmation now that I understood correctly.
As a Non Resident Alien , who will not meet the SPT requirements the following will apply.
1) Employer will set me up as employee
2) Employer will Withhold US Federal Taxes with each Payroll
3) Employer will issue W2 at end of Year
and Finally based on research on STATE Taxes.I would fill out a Part Year NR Form if De Minimus Services are not applicable.
(Copy and paste from another site)
Employees Must Be Subject to State Income Tax for Withholding to Apply
Because withheld taxes are taxes the employees personally owe, you won't have to withhold a state's income tax on a given employee's wages unless the employee's income is subject to the state's tax. This usually requires that the employee be a resident of the state, or be a nonresident who derives income from sources in the state.
De Minimus Services May Be Exempt. Generally speaking, merely performing de minimus services in a state as an employee will not alone cause the employee to be subject to the state's income tax if the employee's principal place of employment is outside the state.
Bear in mind that not all states have a de minimus exception and that the time period will vary dramatically from state to state.
Have I Understood this correctly?
As a Non Resident Alien , who will not meet the SPT requirements the following will apply.
1) Employer will set me up as employee
2) Employer will Withhold US Federal Taxes with each Payroll
3) Employer will issue W2 at end of Year
and Finally based on research on STATE Taxes.I would fill out a Part Year NR Form if De Minimus Services are not applicable.
(Copy and paste from another site)
Employees Must Be Subject to State Income Tax for Withholding to Apply
Because withheld taxes are taxes the employees personally owe, you won't have to withhold a state's income tax on a given employee's wages unless the employee's income is subject to the state's tax. This usually requires that the employee be a resident of the state, or be a nonresident who derives income from sources in the state.
De Minimus Services May Be Exempt. Generally speaking, merely performing de minimus services in a state as an employee will not alone cause the employee to be subject to the state's income tax if the employee's principal place of employment is outside the state.
Bear in mind that not all states have a de minimus exception and that the time period will vary dramatically from state to state.
Have I Understood this correctly?