US Res. CDN Employer. Work in both US and Canada.

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
RedDevil12
Posts: 2
Joined: Sat Oct 13, 2018 2:43 pm

US Res. CDN Employer. Work in both US and Canada.

Post by RedDevil12 »

Here is the situation:

US GC and Canadian work permit holder living and resident in NJ, USA.
Working for Canadian Company since Mar 2017.
Split work time as follows (with variations week by week):
- Canadian office (c. 40%)
- Working from home in NJ (c. 30%)
- Traveling for business in US (c. 30%)
Canadian Company taxes me as if 100% of income was Canadian source (i.e. full withholding).
Filed US Federal, NJ State and Canadian (non-resident) tax returns for first time for 2017 in March 2018.

Find myself:
- Still waiting for large Canadian tax refund for 2017
- Paying estimated tax payments US Federal and NJ State for 2018
- Paying tax in Canada as if 100% of my income was Canadian source
i.e. effectively getting double taxed in the current year still out of whack for the prior year due to refund not coming through.

Is there a better way of doing this? For instance can I get a waiver for the Canadian withholding and pay estimated payments in Canada instead?

Appreciate any advice and help people can provide.

Thanks RD.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: US Res. CDN Employer. Work in both US and Canada.

Post by nelsona »

I assume you are dividing the income source 40-60, Otherwise, you would not owe tax in US.

The treaty, on Dependent Services (ie Employment), would apply here, and you would apply to the Cdn Govt (CRA) to send a letter to your employer allowing them to reduce the wages that are subject to withholding.
https://www.canada.ca/en/revenue-agency ... waiver4tax
Not sure what form this waiver would be sent on, if any, but essentially, you inform them that only 40% of your wages are Cdn-sourced, and should not be subject to withholding on the other 60%.
You would then only report that income on your Cdn return. (mechanically, you would report all wages, and then deduct the American-sourced wages on the treaty line 256. That is no doubt how you determined a large refund from Canada.
On your US return, you would report all income, but would take a foreign tax credit for the Cdn and provincial tax (and CPP and EI) you paid in Canada (as determined on your tax return) on the 40% wages that are cdn-sourced. You would need to pay quarterly installments to IRS and state to cover your tax to avoid penalties.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: US Res. CDN Employer. Work in both US and Canada.

Post by nelsona »

The delay in your refund maybe because of the line 256 deduction. Once they send you your assessment, you can then turn around and use this as proof that not all your wages are cdn-sourced.

You should try to work with your employer on this, with perhaps them asking Govt for relief from withholding for you.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
RedDevil12
Posts: 2
Joined: Sat Oct 13, 2018 2:43 pm

Re: US Res. CDN Employer. Work in both US and Canada.

Post by RedDevil12 »

Thanks Nelsona -- that sounds like a good solution. Now for hoping they hurry up with processing my return.
Post Reply