Hi
I need some guidance on a number canadian-us tax issues. To begin iwht here is my stuation: My husband and I lived and worked in the US on a TN visa for six years, we moved back to Canada in June 2007. We are both Canadian citizens. My husband quit his job when we moved back to Canada but I continued to work for the US company remotely from Canada. My status with the company changed from employee to independant consultant when I moved back to Canada. I will need to travel to the US very infrequently - at most 4 times a year.
Here are the list of questions that I have:
1. Since June 2007, I have billed the company for my hours and they have paid me a check and have not deducted any withholdings, which I believe is correct.
2. The company wants to submit a 1042S to the IRS for the payments they have made to me in Canada. Is this correct...should they be filing this form. Is there another form they should file?
3. Do I need to provide the US company with any forms such as Form 8233 or W-9, W_8?
4. Since we were living in the US for part of the year, I assume that we will need to file a US income return. Which one do we file? Do we include only the income earned until June as shown on our W2? or do we include the income for the whole year?
I appreciate any and all guidance that you can provide.
Best Regards,
Rose
Canadian & US tax issues
Moderator: Mark T Serbinski CA CPA
1. This is correct. If they were withhoding, you should give them an 8233.
2. This is fine.
3. You could file an 8233 with the employer, but they don't seem to mind not withholding so why bother.
4. This is your most important issue. As a departing resident, you have 2 choices. These are essentially the same options you had in the year you moved TO US.
1. You can elect to say you became US non-resident in June, you would then both file 1040NRs, on which you would include all income before June, and US-source income only after that date. You would be allowed to exclude the contrator portion of your income based on the treaty. using this method, however, means that you will both be filing maried separately, which is usually higher taxrate
2. The best way in all likelihood, will be to file as if you left on dec 31. You would file jointly, reporting all world income, and then (A) excluding your contract income, and husband's wages by form 2555 and/or (B) including all world income and then applying the foreign tax credit rules of several Form 1116 to reduce your US tax based on tax you paid in canada including all CPP and EI.
Unless you had some weird capital gain issue, I'm quite confident that #2 will give you the best result. It then becomes a matter of determining if you exclude your wages/contract by 2555 or not. you will have 1116 forms to fill either way, for interest, cap gains etc.
2. This is fine.
3. You could file an 8233 with the employer, but they don't seem to mind not withholding so why bother.
4. This is your most important issue. As a departing resident, you have 2 choices. These are essentially the same options you had in the year you moved TO US.
1. You can elect to say you became US non-resident in June, you would then both file 1040NRs, on which you would include all income before June, and US-source income only after that date. You would be allowed to exclude the contrator portion of your income based on the treaty. using this method, however, means that you will both be filing maried separately, which is usually higher taxrate
2. The best way in all likelihood, will be to file as if you left on dec 31. You would file jointly, reporting all world income, and then (A) excluding your contract income, and husband's wages by form 2555 and/or (B) including all world income and then applying the foreign tax credit rules of several Form 1116 to reduce your US tax based on tax you paid in canada including all CPP and EI.
Unless you had some weird capital gain issue, I'm quite confident that #2 will give you the best result. It then becomes a matter of determining if you exclude your wages/contract by 2555 or not. you will have 1116 forms to fill either way, for interest, cap gains etc.
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
Thanks so much for the quick reply. A couple of last questions:
1. Does the company need to file anything with the IRS for payments made to me in Canada? Can they simply file a 1099? I want to ensure that they are doing everything correctly as well.
2. I have usually always done my own tax returns - would i be able to use Turbo Tax for the US return and Quicktax for my Canadian return? Would both softwares have all the necessary forms or should I get a professional to prepare both returns?
3. Can you recommend a tax professional in the Toronto area.
4. Lastly, I assume the tax return deadlines remain the same for both countries - April 15 for the US and April 31 for Canada.
Again, thanks for all your help.
Rose
1. Does the company need to file anything with the IRS for payments made to me in Canada? Can they simply file a 1099? I want to ensure that they are doing everything correctly as well.
2. I have usually always done my own tax returns - would i be able to use Turbo Tax for the US return and Quicktax for my Canadian return? Would both softwares have all the necessary forms or should I get a professional to prepare both returns?
3. Can you recommend a tax professional in the Toronto area.
4. Lastly, I assume the tax return deadlines remain the same for both countries - April 15 for the US and April 31 for Canada.
Again, thanks for all your help.
Rose
1. Nothing they do will affect you.
2. Yes, if you file a full-year 1040. The US tax pacjkages do not handle 1040NR.
3. No.
4. You get an automatic extension when living outside US, but just get them done about the same time and be done with it in March.
2. Yes, if you file a full-year 1040. The US tax pacjkages do not handle 1040NR.
3. No.
4. You get an automatic extension when living outside US, but just get them done about the same time and be done with it in March.
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
For canada I do know that ufile.ca works. Since you ahven't filed in canada for 6 years, I would just use start using ufile.ca every year
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