Canadian Contractor with US work
Moderator: Mark T Serbinski CA CPA
Canadian Contractor with US work
Hi - I'm trying to determine if I need to file with the IRS. I'm a Canadian consultant, sole proprietor, who has started doing some work with American businesses, all done over the phone or Internet - I wouldn't be visiting the US at all. I would not be considered an employee. One business has just sent me a W8 form to fill out and return - which would be completely inappropriate. I'm not sure if I should return a 8233 (personal services performed IN the US), or a W–8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding), or something else all together! And what should I submit, if anything, to the IRS? thanks for any assistance! Sarah
There is no W-8 form, so I don't know what they sent you.
You really shouldn't have anything to fill out, as they should simply be cutting you a check. period.
However, your goal is to not have withholding, so I would be filling an 8233, disregarding that the work is not being performed in US.
If you do eventually get some taxes withheld, then filing a 1040NR at year-end, quoting the treaty, will get it all back to you.
You really shouldn't have anything to fill out, as they should simply be cutting you a check. period.
However, your goal is to not have withholding, so I would be filling an 8233, disregarding that the work is not being performed in US.
If you do eventually get some taxes withheld, then filing a 1040NR at year-end, quoting the treaty, will get it all back to you.
Oops, my mistake, they sent me a W-9 form along with my cheque paid in full. Something I haven't been able to get a straight answer on yet - if I don't have anything withheld, should I still file a return with the IRS? If so, which one? The BDO website said: "We strongly encourage all clients to comply with IRS filing requirements. In most cases, this involves simply filling out a return or statement, with no actual tax owing." thanks for your help, Sarah
Hi! I am in a similar situation. Since August 2004, I've been working from Canada (I'm a Canadian citizen, no green card, no U.S. citizenship) for a U.S. employer as an independant consultant. They didn't withold any money because they say that the income is not from US sources (IRS publication 519, page 12, table 2-1): salaries, wages and other compensation is from US source if the work was performed in the United States. I called the NRA (Non-Resident Alien) phone line at two different times and both operators told me that it was correct. I did not have to report the money to the IRS because the money is not subject to US income tax (because the work was done outside the United States). Both operators said it, I repeated that I worked for a U.S. company and they repeated that it didn't matter, I was working from Canada and was taxable in Canada on the income, not in the U.S.
Now, my situation is a little more complex because before I moved back to Canada, I had been under TN status for 4 years (since January 2000) and only moved back to Canada in March 2004. So, I'm a "dual status alien" for 2004. I filled out a statement (IRS publication 519 page 10) that establishes my residence termination date to March 30th. So, Before March 30th 2004, I was a US resident while after March 30th, I became a non-resident alien. Now, if anyone has the answer to the following question, I'd be very grateful: I phoned the IRS again because I wasn't sure whether I should fill out a 1040 or a 1040NR. I thought I could fill out a 1040 for the first 3 months of 2004 when I was a resident and enter my W2 and capital gains on the 1040 (the 1040 has a lower tax rate than the 1040NR). But the IRS/NRA operator told me that I had to fill and 1040 AND a 1040NR. Basically fill out the 1040 up to line 36. Then take line 36 of the 1040 and report it to my 1040NR (it seems wrong). That means that my income is taxed on my 1040NR as a non-resident. It ends up being 500$us more in taxes. I thought my first 3 months would be taxed as a resident!!! Anyone agree? But for now, I'll take the 500$ hit unless someone knows how to file the return... I thought I simply needed to file a 1040 with the mention "dual status return" at the top. But I'm not sure how to declare my 2004 capital gains income that were made in December 2004 (while a non-resident). Should I fill out two returns? One 1040 with my W2 income. And one 1040NR with my capital gains?
Thanks for any help!!!
Pierre
Now, my situation is a little more complex because before I moved back to Canada, I had been under TN status for 4 years (since January 2000) and only moved back to Canada in March 2004. So, I'm a "dual status alien" for 2004. I filled out a statement (IRS publication 519 page 10) that establishes my residence termination date to March 30th. So, Before March 30th 2004, I was a US resident while after March 30th, I became a non-resident alien. Now, if anyone has the answer to the following question, I'd be very grateful: I phoned the IRS again because I wasn't sure whether I should fill out a 1040 or a 1040NR. I thought I could fill out a 1040 for the first 3 months of 2004 when I was a resident and enter my W2 and capital gains on the 1040 (the 1040 has a lower tax rate than the 1040NR). But the IRS/NRA operator told me that I had to fill and 1040 AND a 1040NR. Basically fill out the 1040 up to line 36. Then take line 36 of the 1040 and report it to my 1040NR (it seems wrong). That means that my income is taxed on my 1040NR as a non-resident. It ends up being 500$us more in taxes. I thought my first 3 months would be taxed as a resident!!! Anyone agree? But for now, I'll take the 500$ hit unless someone knows how to file the return... I thought I simply needed to file a 1040 with the mention "dual status return" at the top. But I'm not sure how to declare my 2004 capital gains income that were made in December 2004 (while a non-resident). Should I fill out two returns? One 1040 with my W2 income. And one 1040NR with my capital gains?
Thanks for any help!!!
Pierre
The IRA agent was correct, except for the cap gains
If you wasnt to be taxed as a resident you MUST then file the <u>entire year</u> as a resident, otherwise you are dual-status, as you noted.
This was the same treatment you had when you arrived iun US.
In your case, it is advantageous not to have to file as a resident for the second half as you can then exclude from US tax the contractor work.
Of course, you are quite free to include EVERYTHING on a 1040 if you wish, and then claim foreign tax credits.
However, be warned that if you do file a full 1040 you will be expected to pay self-employment tax (along with all other taxes) unless you have a certificate of complince from HRDC that you will pay CPP on that contractor income.
The cap gains, since they were earned while residing in Canada, are <u>not to be reported in US at all</u> if you file a dual-status return.
So you 1040 'report' (its not going to be your return) will include all income until march. And your 1040NR return will include all the 1040 income plus any US-source income after that date (no interest, no capital gains) but not your contract income, as this is specifcally excluded by article XIV of the treaty (you will indicate this on one of the back pages of 1040NR).
For Cdn taxes, don't forget to include only your income from post-return to Canada (as self-employed income, paying CPP etc), and calculate your capital gains basedon the value that your investments had the day you arrived, not when you bought them. This is part of the deemed aquisition rules.
You should be looking at the newcomers guide from CRA
<i>nelsona non grata... and non pro</i>
If you wasnt to be taxed as a resident you MUST then file the <u>entire year</u> as a resident, otherwise you are dual-status, as you noted.
This was the same treatment you had when you arrived iun US.
In your case, it is advantageous not to have to file as a resident for the second half as you can then exclude from US tax the contractor work.
Of course, you are quite free to include EVERYTHING on a 1040 if you wish, and then claim foreign tax credits.
However, be warned that if you do file a full 1040 you will be expected to pay self-employment tax (along with all other taxes) unless you have a certificate of complince from HRDC that you will pay CPP on that contractor income.
The cap gains, since they were earned while residing in Canada, are <u>not to be reported in US at all</u> if you file a dual-status return.
So you 1040 'report' (its not going to be your return) will include all income until march. And your 1040NR return will include all the 1040 income plus any US-source income after that date (no interest, no capital gains) but not your contract income, as this is specifcally excluded by article XIV of the treaty (you will indicate this on one of the back pages of 1040NR).
For Cdn taxes, don't forget to include only your income from post-return to Canada (as self-employed income, paying CPP etc), and calculate your capital gains basedon the value that your investments had the day you arrived, not when you bought them. This is part of the deemed aquisition rules.
You should be looking at the newcomers guide from CRA
<i>nelsona non grata... and non pro</i>