1099 as US Citizen living in Canada (PR)

[siixfeetsmall]

I am a US Citizen currently residing in Canada (Permanent Resident). A US-based company would like to hire me for a project (temporary, contract-based engagement). They believe that the way to do this would be to pay me directly and then issue a 1099 at the end of the year. I have worked as a formal W2/T4 employee for my entire life, so I am not very familiar with self-employment procedures in the US nor Canada at this point.

Can someone please assist me with understanding:

1. What are the CPP/EI/SS taxes associated with an engagement like this? Does paying into CPP when I file my T1 tax return suffice?
2. Would I need to start making quarterly payments to the IRS? (in all years I've lived in Canada so far, the FTC has eliminated any tax owed to the US)
3. In Canada, if my *total* employment income is OVER $30K CAD for the tax year, but income from *contract-based work* is LESS than $30K CAD ... do I need to worry about registering or incorporating a Canadian business and/or HST/GST?
4. ... are there any other gotchas or suggestions those with a better understanding of the Canada-US Tax Treaty can help me understand before committing to this sort of engagement?

Thanks in advance!

[nelsona]

Would this work be performed in US or Canada or Both?

[siixfeetsmall]

nelsona wrote:
> Would this work be performed in US or Canada or Both?

I would be working on the project from home in Canada (Ontario in case the province makes a difference).

[nelsona]

So, to answer your questions:

1. Yes, you will pay CPP (not eligible for EI) when you file. You will also need a certificate of compliance from CPP to avoid having to pay Self-employment tax in US (you will file a schedule 3 and schedule SE as well in US.

2. You won't owe tax on this income in US. It is foreign income, and you will get credit for Cdn taxes by filing form 1116 to IRS, so no need to pre-pay any taxes. You might consider prepaying your CDn taxes on the income however.

3. Whether you incorporate is a business decision. Work done for a foreign client is not subject the GST/HST (but you may need to register a GST number if your business income is more than the threshold).

[Wintheiser]

Navigating this type of cross-border engagement can be tricky, but here are some insights based on your situation:

1. For CPP/EI/SS taxes: If you are self-employed in Canada, you'll pay into CPP when filing your T1 return. However, the U.S. doesn’t require SS contributions for non-residents under the Canada-US Tax Treaty.

2. You may need to make quarterly estimated tax payments to the IRS, as you'll be considered self-employed in the U.S. with a 1099. This depends on whether the foreign tax credit (FTC) continues to offset your U.S. tax liability.

3. In Canada, exceeding $30K CAD in total income (including employment and contract work) may require registering for HST/GST, even if your contract income alone is under that threshold.

[nelsona]

I would ignore that previous post, as each point has incorrect information.