Legality of My Situation (US Citizen Working in Canada)

cpr · Post by **cpr** » Wed Apr 11, 2007 8:26 am

Reading from previous posts, I'm starting to feel like my situation isn't allowed for tax purposes. I'm a US Citizen married to a Canadian Citizen and we're living in Ontario. I work from home for a US company with no Canadian presence. This was allowed by my boss as a favor since my wife was not ready to move to the US when we got married...long story!

How would I ask my employer to convert my pay to Canadian and take out Canadian federal taxes if they have no presence here? In the event that this request is impossible for them to fulfill, what are my other options? How does the US/CANADA Tax treaty view my income? I know that the Canada Revenue Agency views my income as non-foreign since work was done in the country but does the IRS in turn view my income as foreign income per the Tax Treaty? Will I be able to report my income on a Form 2555? Thanks in advance!

nelsona · Post by **nelsona** » Wed Apr 11, 2007 9:12 am

Your income is Cdn-sourced, you will have to pay Cdn tax on the income FIRST. There should be no US tax, as you will be able to claim foreign wage exclusion.

But the company has to set payroll for you, or make you a contractor. 1000's of cdns work this way.

Your wages are subject to Cdn payroll taxes (UI, CPP) and NOT FICA.

cpr · Post by **cpr** » Wed Apr 11, 2007 10:53 am

Thanks for the quick response!

If the Payroll Dept at my company doesn't oblige to changing my pay to Canadian and getting in my company as a contractor is damn near impossible and not to mention they're on top of the list in the event of layoffs, is there any other option or legal loophole for me?

nelsona · Post by **nelsona** » Wed Apr 11, 2007 11:54 am

Its not a matter of legalities, its a matter of simplifying your life.

You will have to pay Cdn tax and payroll tax. If you don't get your firm to pay it, the government will. Or will ask you to pay employers share.

And you shouldn't be paying FICA either.

Also, even payroll tax aside, you face the prospect of having to pay Cdn tax in installments, and wait for a full refund from IRS.