Canadian Corporation Fiscal Year questions

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Chiquet
Posts: 2
Joined: Thu Dec 29, 2016 6:25 am

Canadian Corporation Fiscal Year questions

Post by Chiquet »

Hi,

I started working on a TN visa since October through my corporation and I've been working on the assumption that my Corporation will pay taxes in Canada for the income receive in 2016 and will pay taxes in the US in 2017 as the contract will end in Sep.

Under that assumption, I had registered my corporation in the US as foreign corporation from Jan 1st 2017 and I will set payroll for myself and deduct expenses per diem for lodging, mileage and M&E.

However my corporation's fiscal year started in October so I have the following questions:
- Should have had registered my corporation in the US sooner (since the day I have everything: social security number, EIN, business number, etc.)?
- Should be requesting to the IRS a change in the fiscal year from calendar to my corporation's fiscal year? If yes, does this mean that I should pay taxes in the US for the first quarter instead of in Canada?

Thanks in advance for your help.
JGCA
Posts: 754
Joined: Thu Nov 18, 2010 3:05 pm
Location: Montreal, QC Canada

Post by JGCA »

You are using a CND corp to produce income from your business activities in the US so first of all is the Corp resident in the US. In 2016 it looks as if you were not in the US more than 183 days unless you have a permanent office in the US you could still claim its a non resident for tax filing in the US for 2016, you always use your CORP fiscal year end its the same corp and this will simplify tax filings. so for 2016 you file your regular CND T2 and file a 1120F with treaty protection in the US all tax will be paid to Canada since a treaty based 1120F pays no Federal tax.

In 2017 if you are going to be in the US more than 183 days and you also begin payroll then you will file a 1120F in the US pay tax in the US and then file a T2 in Canada and claim tax credit for the US corp tax paid.

Remember on the T2 if you are saying the income was earned in the US it will not be eligible for the small business tax rate in Canada whereas only CND sourced active business income is allowed at the reduced Federal rate of 11% on the T2 federally then you add in the provincial component tax ON for instance samml rate is 5% but id all income was earned in the US tax rate combined at hi rate is 28% so in 2017 it is good you took a salary which you will declare personally in Canada this will lower tha tax in the corp both in the US and Canada.
JG
Chiquet
Posts: 2
Joined: Thu Dec 29, 2016 6:25 am

Post by Chiquet »

Hi JG,

Thank you very much for your response!

Happy new year!
Post Reply