Live and Work in Canada and Employed By US Company

[dkearney]

Hi, great site.
Here is my situation:
- I am employed full time by a US company on a TN visa; I am a straight employee not a contractor
- My current project which I have been on over the last 2 yrs enables me to work from home the majority of the time. I travel to the USA for 4 days a month to the state of MA; total of 48 days in USA per year; before my current engagement I traveled to the US every week, but with my current project I am able to work from my home most of the time.
- My employer currently only deducts US federal taxes, no state taxes are deducted.

I have been doing a lot of research and I am totally confused as it appears that there are 2 ways to do my taxes and I am not sure which one is correct.
1) File my US federal taxes and on my Canadian taxes claim all the taxes I paid to the US as a foreign tax credit. So in this scenario the US gets the federal taxes and Canada gets the rest.
OR
2) File my US federal taxes and apply to the IRS to get a refund of most of the federal taxes I paid since I performed most of my services while in Canada (i.e.: only 4 days a month in USA). Of course this refund would go straight to the CRA.

Which one is correct for my situation?
Thanks for your time.

[dkearney]

Not sure if this makes a difference, but my company deducts US federal, social security and medicare taxes.

[nelsona]

Since you are a Cdn resident, you will report ALL income there. Since your work is done in both countries, Canada will only consider a portion of the income as foreign.

It will be complicated, but you will essentailly pay IRS aqnd MA tax on what you earned while in US. And you will pat CDn/prov tax on everything, and reduce it by the US tax mentionned above. Canada will NOT accept that all this money was earned in US, and you should also be paying CPP/EI.

Don't forget MA tax.

[dkearney]

Thanks, I think I will get Serbinski to handle this one.