Canadian working remotely for Canadian Employer from US (TN/TD)

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mchang
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Joined: Tue Nov 20, 2018 2:09 pm

Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

I was wondering if you might be able to help clarify what the tax implications might be for my spouse and I for a very unique situation. My spouse is relocating to Massachusetts for work and is planning to apply for the TN visa (as his spouse, I would be applying for the TD visa). He will be applying for an SSN upon arrival in the US, but I don't think I will really have a need for one. I will be continuing to work for my Canadian employer remotely with regular visits to the Canadian office (who has confirmed with their lawyer/accountant that they can do so).

We are not sure of what our tax residency is as no one seems to have a clear answer for this specific case. I've read about the Closer Connections Exemption (IRS) and I think that based on the information in that form I would be considered to have closer ties with Canada. I'm not planning on getting a SSN/US credit cards/accounts; I'm planning on keeping my Canadian bank accounts (RBC USD account), I will work and be paid fully through my Canadian employer, and we don't and won't own property in either country. Where/how do I pay my taxes? Can you provide any advice for this situation?
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

You rax residency is quite simple, you will both be US tax residents, and Cdn non-residents on the day you move to US, because that is where you will be LIVING legally (you are not entitled to SSN, but that doesn't matter). Since you won't have a ho,e in Canada but will in US (doesn't matter if you own or not) you can't be a CDn resident.

Your Cdn wages will be taxable in Canada. That, and everything else will be taxable in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mchang
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

Thanks for your reply, that's helpful! So does that mean I pay taxes twice? Or does the treaty between US/Canada somehow protect me from that?
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

You will get credit on your US return for the Cdn taxes (and EI and CPP) that you pay.
Not a treaty issue, simple foreign tax credit. IRS Form 1116.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mchang
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Joined: Tue Nov 20, 2018 2:09 pm

Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

Great, thanks! One more question, what happens with an RPP (HOOPP)? I am currently paying into (and plan to continue paying into) an RPP with my Canadian employer. Are there any tax implications I need to be aware of with that?
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

You have a choice to
(1) make the contribs tax deductible in US (by reducing your wage amount on 1040) and then having the entire pension taxable in US when you later withdraw the funds, or
(2) you can ignore the US deduction now, and track these contributions as future non-taxable portion of your pension withdrawal if in US.

The problem with 2 is that you might end up paying a little more tax now in US (maybe), and if you don't live in US later on when you withdraw you won't recoup any saving.

I would only do (2) if you intend to become a US citizen, as you are more likely to be taxed in US later than as it stands now with husband only working temporarily in US.

Btw, be prepared for quite a high tax bill on your wages, because not only will you be paying normal Cdn tax on your wages, you will also be paying Mass. income tax (there is no credit given for any Cdn/prov tax), and may even have to pay a little fed tax (unless your Cdn/prov tax is fully credited on your IRS return, which is rare in your circumstances). So you may be looking at a 60% tax bite on your wages.

And TD is second class in many states, sincve you can't get SSN, sometimes unable to get Driver's license (which you must as a resident; your Cdn one goes invalid once you move), etc. You may want to look for a US job if eligible.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mchang
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Joined: Tue Nov 20, 2018 2:09 pm

Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

Poof, that's a bummer! I really like my Canadian employer, so I'm going to give this a try but yikes that double tax thing!! It looks like MA state taxes are just 5%, but it's still going to be an adjustment. I really appreciate all this information, it's very helpful, thank you!
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

Oh, I always heard mass tax was higher. 5% is not too bad.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mchang
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

Actually I was just looking at what qualifies for the foreign tax credit and it looks like provincial taxes are also eligible!

"A foreign country includes any foreign state and its political subdivisions. Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit."

https://www.irs.gov/individuals/interna ... tax-credit
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

Yes, but that is for the IRS. Trouble is, very few STATES give foreign tax credit. You will have more than enough Cdn/Prov/EI/CPP (reread what I said earlier about eligible taxes) to negate almost all your IRS tax, but not your state tax. I'll let you look up Mass. rules. Remember, you file TWO tax returns in US, unlike Canada (except QC).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by nelsona »

Good news, it appears that Mass allows you to take any leftover Cdn tax from your 1040 form 1116 and use it against your mass tax.
Line 30 of the Mass tax return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mchang
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Joined: Tue Nov 20, 2018 2:09 pm

Re: Canadian working remotely for Canadian Employer from US (TN/TD)

Post by mchang »

That's awesome!! **Huge sigh of relief** Thanks for looking that up and for sharing your knowledge on this!
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