Commuting from Canada to the US

flanderingham · Post by **flanderingham** » Mon Jan 23, 2006 1:45 pm

Hello, I am a dual US/CDN citizen legally able to work/live in either country. My family and I are planning on moving back to Canada and in order for me to retain my US based job I will commute each day into the US for work. My understanding of this is that as long as I am physically in the US performing my work there is no Canadian tax issue for the company I work for. The company is a major international company with separate entities in each country , so they have ABC Canada and ABC USA both paying corporate taxes in their respective countries only. I am planning on leasing a small office(out of my own pocket) for me to work out of in the US so I wouldn't be at an actual ABC US facility performing my work(this is the only option for me) . It has been mentioned to me that I may have to work at an actual ABC US facility in order for this to work because of possible corporate tax issues. Is there any restriction on where I actually work in the US or is it the physically in the US that is the only factor ?? Also is there any restriction on how close I must live to the border , also mentioned to me that I must live within 50 miles of the border. Thank you for any assistance.

nelsona · Post by **nelsona** » Mon Jan 23, 2006 2:36 pm

Because you are a US citizen, there in no way for you to avoid US taxation on your income.

The provision for Cdn contractors to work in US and exclude there income from US taxation does not apply to US ciizens. It is correct that for this to have worked (if you were a Cdn citizen only, for example) would be to work out of THEIR office, not yours.

You appear, however to be an employee, so even if you were not american, you could not benefit ferom this scheeme.

You will be paying US and State tax, as well as FICA on your US-sourced income, and reporting this income in Cnada as well, taking credit for the US tax paid/owed on your Cdn return.

There is no reason/benefit for you or your firm to have you work in a separate location, unless doing this will save on commute.

flanderingham · Post by **flanderingham** » Mon Jan 23, 2006 2:43 pm

Thanks Nelson, yes I am an employee and the working from a separate location is my only option as there is no facility close enough to the border to go to. It seems though that is the only question my HR department is trying to determine , do I have to be in a company facility or can I work from anywhere as long as I am on US soil. I currently work from home in the US so that's why it is a viable option , I basically just need a location on US soil with a high speed internet connection, thus I would rent an office just over the border.

nelsona · Post by **nelsona** » Mon Jan 23, 2006 2:50 pm

Seems like a very expensive proposition that does not save you ar your firm any money whatsoever.

Why not just get payrolled in canada? Your 401(k) contributions are of little value, your healthcare premiums don't get you anything.

In fact, working from your own home in canad would definitely benefit your tax costs without adding to your expenses.

You should just become a contractor, and save your money, or transfer to ABC Canada for their benefits, or just have them payroll you separately, since they already have a corporate presence in canada.

I fail to see what you firm is thinking about avoiding.

flanderingham · Post by **flanderingham** » Mon Jan 23, 2006 2:59 pm

Would love to do any of the options you mention ... however. This is strictly a personal decision on our part to get back to Canada to be with family as both my wife and I are from there. There are no "transfers" between the two companies , so I would have to resign my position at ABC USA and get hired by ABC Canada (which of course there are no positions in the CDN city we are going to) . Tried to explore all the options and this one seems to be the only one that allows me to retain my job with ABC US and still live in Canada seeing as I have to be physically in the US to perform my work in order to keep the position. So it is not being looked at as a cost saving measure in any way , simply a way for us to get back to Canada and maintain my position. Outside of the cost of the move and commute , if I am having "normal" deductions taken off my US paycheck and using them as deductions on my CDN return we feel that any resulting CDN tax owing is worth it to live where we really want to.

nelsona · Post by **nelsona** » Mon Jan 23, 2006 3:32 pm

Like I said, there is nothing that prevents ABC US from having you as an employee of the US firm , working in Canada.

They would simply pay you as a Cdn employee (on a cdn payroll, not necesarily ABC Canada payoll). it would not necessarily have to be as part of the Cdn corporation, but could be.

Sincxe they do not care tha tyou show up at the office, I don't see why they would insist that you be physically in US.

But, don't miss my point of simply becoming a contractor. There are no fringe benefits that The US firm is currently giving you that would actually benefit you while in canada.

Since you obviously want/need to be in Canada, why spend 60-70 hours a week either in US or commuting there -- and paying extra for that privilege?
Work from your home in Canada. 1000's of Cdns work for US firms in this arrangement ALL the time, some as employees, some as contractors.

I just don't think you and tyour firm really have "Tried to explore all the options"

flanderingham · Post by **flanderingham** » Mon Jan 23, 2006 3:42 pm

Based on what they have told me , if I were to live in Canada and work from my home that would equate to them opening a Cdn branch office and thus ABC USA would be subject to Cdn corporate tax. Becoming a contractor greatly reduces my job security.As I said this is purely a personal decision so "big coporate ABC USA" isn't exactly jumping through hoops to help me.

nelsona · Post by **nelsona** » Mon Jan 23, 2006 4:30 pm

The fear of having CRA declare you a branch is becoming more and more of a concern, bu t Idon't know why.

I've known many salesmen living in Montreal who were singl-man operations, being paid as employees of US firms. I'm quite sure that these companies were NOT exposing themselves to Cdn/Qc corporate taxes, and if they were, it wasn'y much of a financial concern.

Like you say though, your firm may just not want teh headache. You will have them instead.

At the very least you will have to INSIST that they file a 'working conditions' form for you with CRA, otherwise none of your expenses for the commute/office will be deductible in canada

cakeman · Post by **cakeman** » Fri May 04, 2007 4:10 pm

Hi Nelson

I am reviving this old post since it is similar (but not exact) to the one I posted concerning my W4, and I was looking forward to some sort of response.

I am in this man's position. My question is less one of paying too much tax to the US, as to retaining my job. My employers do not want to do the 1099 contractor option or the Canadian payroll option. Period. As a permanent resident of Canada with my wife, with income sourced in the US, will the CRA demand that I pay my income tax to them and not to the IRS (and thus I am double taxed)? Will they contact my employers asking that they withold Canadian tax (and thus forcing them to fire me)?

To retain my work, must I move my family to the US? Thanks again.

nelsona · Post by **nelsona** » Sat May 05, 2007 1:47 pm

Probably

cakeman · Post by **cakeman** » Sat May 05, 2007 3:09 pm

Well I suppose that is a "probably" to all my questions. I guess I was hoping that I could have my W2 withholding in the US, while paying my own quarterly installments to CRA each year, then getting the US tax back through the 2555 and 1116. No go, huh?