US Contractor - What do I file?

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hansol
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Joined: Tue Nov 22, 2022 10:09 am

US Contractor - What do I file?

Post by hansol »

I'm a US contractor doing work for a US corporation, but the work itself is in Canada (I work in site in Canada for a while, then go home for a while.) I have an LLC, which is a flow-through. Payments go to my personal bank account, which is a US bank.

I'm confused, because with the work being physically done in Canada, but me being self-employed, I'm assuming I have to file some sort of Canadian tax? Don't even know where to start. Thanks.
nelsona
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Re: US Contractor - What do I file?

Post by nelsona »

As long as you are not in Canada more than half your time over any 365-day period, you are not taxable in Canada on the income.
You would file a non-resident Cdn return, reporting your Cdn-based self-employment income, but would then exclude the tax on line 25600 to owe no income tax.

Like US, Canada has a form of self-employment tax (CPP), but you are exempt from that since you are a US resident paying SE tax. You may need to get a certificate of coverage of SSA to attach to your Cdn retunr to prove you are exempt. This would be the case whether or not you need to pay Cdn tax by virtue of the paragraph above (ie. spending too much time in Canada).

https://www.ssa.gov/international/CoC_link.html
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hansol
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Re: US Contractor - What do I file?

Post by hansol »

So probably a dumb question then. If I was only in Canada for 150 days, I don't pay any Canadian tax?
nelsona
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Re: US Contractor - What do I file?

Post by nelsona »

You did read my response? I think it answered what you need to do. The how will be for a tax preparer,
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hansol
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Re: US Contractor - What do I file?

Post by hansol »

Hi nelsona, sorry to be dense. I guess what I meant to say was how does the "Under 183 Day" thing get a contractor out of the tax on Canadian-Source income thing?

I've tried to read a few things (I know, that's always dangerous) and I'd guess your "Pay no tax" comments have to do with me not having a Permanent Establishment in Canada? I'm used to the US, where contractors here with US-Source income get taxed by USA.
hansol
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Joined: Tue Nov 22, 2022 10:09 am

Re: US Contractor - What do I file?

Post by hansol »

I meant to add in my last post that I got a T4A-NR with tax withholdings on it.
nelsona
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Re: US Contractor - What do I file?

Post by nelsona »

The treaty defines why you should or should not be taxed.
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FunTopic
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Re: US Contractor - What do I file?

Post by FunTopic »

From another thread:

You were not a Canadian tax resident, but had Canadian-source earned income. So Canada gets first right of taxation. If your TD1 was done right, you shouldn't owe anything additional to CRA, in which case filing 5013-R non-resident return is optional. On 1040, claim FTC/1116 general category; you'll have leftover credits to carry over.

So you can probably just take your T4A-NR as-is.
nelsona
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Re: US Contractor - What do I file?

Post by nelsona »

Contractors are not subject to Cdn taxartion, even on income earned in canada, unless they are in canada 183 days or more in a 365-day period -- as was already clarified.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
FunTopic
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Re: US Contractor - What do I file?

Post by FunTopic »

Except that this guy had withholding tax on a T4A-NR. So erroneously had tax withheld.

Also will be an issue filing a T1. A non-resident with no permanent establishment/no 183 days (very generally speaking) can't file a refund. A very (poor) equivalent would be a Canadian getting a 1099-INT with US tax withholding, and then filing a 1040NR return to get that withholding back. The IRS and broker would just laugh.

About the only option is to ignore/don't file a Canadian return, and file the US 1040 with an FTC based on the T4A-NR. Functionally it'll be the fastest resolution vs. waiting for a refund of the Canadian tax.
nelsona
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Re: US Contractor - What do I file?

Post by nelsona »

In both situations you mention, a refund would indeed be made. That is the point of filing a 1040NR of non-res T1, when you owe no taxes, and have paid some.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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