I’m a Canadian citizen under TN visa in US since Feb. 21st, 2008. It is my first time working in US.
From Jan 1st, 2008 until Feb. 21st, 2008 I didn’t have any income in Canada.
Status in US:
•TN visa holder since Feb. 21st, 2008; first time working in US;
•I was hired by the US company as independent contractor in IT industry and NOT as employee; contract period is 6 months;
•I have no further income from any other sources in Canada;
•I’m paid a fixed amount per month by the US company;
•I’m responsible for all tax payments in US and Canada;
•I’m supporting all expenses: hotel, car rental, meal, travel;
•Currently I’m renting a place on short term base contract;
•My wife is in Canada and is working in Canada. My kid is in Canada with my wife;
•I’m not planning to move to US; after my contract term expires I’ll come back in Canada;
•I’m planning to visit my family in Canada on a regular base;
•Recently I receive my first cheque from the US company and I didn’t cash it yet;
•I didn’t open a bank account in US;
•I applied for SSN in US a few days after my arrival and I’m waiting to receive it;
Before engaging on my contract I was told that, regarding temporary work in US as independent contractor, if I wire all US income directly in Canada and not to cash it in US, fill the Cdn tax return and also keep paying anticipated taxes to Canada Revenue I will avoid double taxation.
Questions:
-Is what I have been told is true?
-How should I proceed In order to avoid double taxation?
-Where should I file the taxes for this period: in Canada only, US only or both?
-Where can I apply deductions for all my expenses when file the taxes: Canada or US?
Recently I heard that soon the Treaty convention between Canada and US will be ratified. Some articles have been already eliminated and the jury is still out on the technical details. After ratification, new rules may be applicable, and they may be applicable retroactive to January 1, 2008.
Question: What’s your opinion on this regarding the double taxation?
Any help would be greatly appreciated.
Canadian working in US under TN visa
Moderator: Mark T Serbinski CA CPA
It doesn't matter where you cash the check, and never has. This is a dangerous fallacy. If you are resident in US or taxable on your US income, where the money goes is immaterial. Whomever told you this may have had ulterior motives (like paying you less than they should).
Your residency status (your are a Cdn residnet by what you describe) and taxation is determined by the treaty, which,as you say, is changing with regards to independant contractors. The result will likely be that you are taxable in US (and Canada) on your US income, unless you work for less than 6 months. In any event, you may still be liable for state tax.
But this is not a 'problem'. You will still pay tax at the Cdn rate.
One thing you would want to do is make sure you get a 'compliance letter' from CRA regarding CPP. This will avoid you paying large self-employment tax.
If you are going to be more than 6 months, You may also be wanting to put aside 25% of your net for US taxes and/or advising the company that hired you to begin withholding.
Your residency status (your are a Cdn residnet by what you describe) and taxation is determined by the treaty, which,as you say, is changing with regards to independant contractors. The result will likely be that you are taxable in US (and Canada) on your US income, unless you work for less than 6 months. In any event, you may still be liable for state tax.
But this is not a 'problem'. You will still pay tax at the Cdn rate.
One thing you would want to do is make sure you get a 'compliance letter' from CRA regarding CPP. This will avoid you paying large self-employment tax.
If you are going to be more than 6 months, You may also be wanting to put aside 25% of your net for US taxes and/or advising the company that hired you to begin withholding.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
[quote="nelsona"]It doesn't matter where you cash the check, and never has. This is a dangerous fallacy. If you are resident in US or taxable on your US income, where the money goes is immaterial. Whomever told you this may have had ulterior motives (like paying you less than they should).
Your residency status (your are a Cdn residnet by what you describe) and taxation is determined by the treaty, which,as you say, is changing with regards to independant contractors. The result will likely be that you are taxable in US (and Canada) on your US income, unless you work for less than 6 months. In any event, you may still be liable for state tax.
But this is not a 'problem'. You will still pay tax at the Cdn rate.
One thing you would want to do is make sure you get a 'compliance letter' from CRA regarding CPP. This will avoid you paying large self-employment tax.
If you are going to be more than 6 months, You may also be wanting to put aside 25% of your net for US taxes and/or advising the company that hired you to begin withholding.[/quote]
Than you nelsona for your answer. It's very helpful and I this It's helpful for enybody using this valuble site.
What is a: 'compliance letter' from CRA regarding CPP ?
With my status here, I don't know if I'm considered as US resident...I did not renounce at my Canadian residence and I did not intent to move my residency in US. So, in this case, if I cash the money in US I'm still protected by the treaty?
Thank you for you precoius information and advice.
Your residency status (your are a Cdn residnet by what you describe) and taxation is determined by the treaty, which,as you say, is changing with regards to independant contractors. The result will likely be that you are taxable in US (and Canada) on your US income, unless you work for less than 6 months. In any event, you may still be liable for state tax.
But this is not a 'problem'. You will still pay tax at the Cdn rate.
One thing you would want to do is make sure you get a 'compliance letter' from CRA regarding CPP. This will avoid you paying large self-employment tax.
If you are going to be more than 6 months, You may also be wanting to put aside 25% of your net for US taxes and/or advising the company that hired you to begin withholding.[/quote]
Than you nelsona for your answer. It's very helpful and I this It's helpful for enybody using this valuble site.
What is a: 'compliance letter' from CRA regarding CPP ?
With my status here, I don't know if I'm considered as US resident...I did not renounce at my Canadian residence and I did not intent to move my residency in US. So, in this case, if I cash the money in US I'm still protected by the treaty?
Thank you for you precoius information and advice.
You are still Cdn resident, because of the ties you ahve in canada vs. those in US.
At some point, if you work longer than 183 days in uS, you may need a letter that you can use with IRS to avaoid Social security tax on your US earnings -- even if you may have to pay income tax.
SEE: http://www.cra-arc.gc.ca/E/pbg/tf/cpt56/README.html
At some point, if you work longer than 183 days in uS, you may need a letter that you can use with IRS to avaoid Social security tax on your US earnings -- even if you may have to pay income tax.
SEE: http://www.cra-arc.gc.ca/E/pbg/tf/cpt56/README.html
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing