Consulting in the US

[bisrael]

I have an opportunity to consult for a US company, their office, 4 days a week (returning to Canada most weekends) and I'm wondering how best to structure the arrangement. I am currently employed by my own Ontario incorporated company, working exclusively in Canada.

Should the agreement be between:
- my Ontario company and the US company
- the US compnay and me as a self employed consultant
- as a Canadian on their US payroll.


Thanks in advance

[nelsona]

I'm quite sure that being an employee is the worst case, as it will give rise without fail to FICA taxes (which in itself is not that bad), but will likley result in a lower wage than cutting you a check, since they will reduce your pay by all the fringe benefits, none of which you need or can use as a Cdn resident. And you don't get any expense deductions.

Right now, if you establish no permanent establishemnt in US, and you spend less than 183 days in US in the calendar year, you will avoid all US tax.

The new treaty will make this harder, as it will require fewer than 183 days in any 12-month period, and the definition of establishment will be tighter.

The choice of which entity to pay, be it you or a company, comes down to liability.

[bisrael]

Do you forsee any challenges if the US company is paying alll expenses (lodging, mileage, meals, and health care)?

>The new treaty will make this harder

Can you direct me to a laymen's version of the new treaty?

Thanks again;

[nelsona]

I don't see why they would be 'paying' healthcare. You don't need insuarnce coverage, so get them to pay YOU instead of covering you.

Its too early to give you any laymen's synopsis. Search for "US canada treaty protocol establishment" and you will fing tax alerts from the big firms.

[bisrael]

The reason I suggested that the US Company would be paying for health care insurance was to ensure that I had medical coverage while outside Canada. Are you suggesting it makes more sense for me to purchase this coverage and just include it in "expenses" that would be covered by the US company?

[nelsona]

pretty much. Us health covergae is extremely expensive, and it will be reflected in the lowering of your offer if you insit that they pay for it. All other employee benefits (401(K), pension) are of little value to you -- at least until the treaty is ratified. Better to be a pure contractor (who rarely get medical covergae or medical expenses reimbursed).

Better to have no strings on the table, negociate a higher fee for your services, and pay the extra covergae with a Cdn blue cross covergae that supplements your Provincial health coverage. You would want to make sure that you are in canada the requisite days in any 12 month period.