US Tax implications for Canadian TN1 working 1099 in US
Moderator: Mark T Serbinski CA CPA
US Tax implications for Canadian TN1 working 1099 in US
I have been incorporated in Canada since 1996, working as an independent computer consultant. I have recently accepted a contract in the US in my area of expertise and obtained a TN1 visa. The US company is still in the process of setting my company as a 1099 vendor in their accounting system and advise me they are obliged to withhold 28% to 30% as US income tax payments unless I provide them documentation which exempts my company from this withholding. I will be drawing a salary from my Canadian company. In 2007 I will be in the US less than 183 days. In 2008 I will be comuting from Canada to the US four days a week, likely for the full year. However my family, home, bank accounts, car registration all remain in Canada. My questions are: (1) am I exempt from the 30% withholding, if so what forms to I need to complete? (2) do I need to file US personal and/or corporate taxes in the United States for 2007 and 2008? Any assistance is greatly appreciated. Thanks.
Under the current treaty, you are not required to pay US taxes, nor have US taxes withheld. You accomplish this by filling a Form 8233 and giving this to your client.
the number of days you spend right now is not important. You are maintaining your Cdn residence.
In 2008, you may need to file a 'closer connection' statement with IRS to show that despite being in US more than 183 days (if you are) that you are more closely tied to Canada. Form 8840. I would be trying to limit my days in US to less than 183 in 2008 if possible, just to avoid any problems. This includes ALL days, not just working days. but, in general, you are safe from US taxation.
You may, of course, be liable for state tax on your work in that state, as they do not usually follw the treaty.
I would point out, that in the next few years, the treaty will be amended such that spending more than 183 days in US on a project, regardless of calendar year *may* become taxable in US... but for now you are not.
the number of days you spend right now is not important. You are maintaining your Cdn residence.
In 2008, you may need to file a 'closer connection' statement with IRS to show that despite being in US more than 183 days (if you are) that you are more closely tied to Canada. Form 8840. I would be trying to limit my days in US to less than 183 in 2008 if possible, just to avoid any problems. This includes ALL days, not just working days. but, in general, you are safe from US taxation.
You may, of course, be liable for state tax on your work in that state, as they do not usually follw the treaty.
I would point out, that in the next few years, the treaty will be amended such that spending more than 183 days in US on a project, regardless of calendar year *may* become taxable in US... but for now you are not.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best