Tax considerations for Dual Citizenship, remote work for US company, while residing in Canada

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

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cjr
Posts: 3
Joined: Tue Aug 18, 2020 9:20 am

Tax considerations for Dual Citizenship, remote work for US company, while residing in Canada

Post by cjr » Tue Aug 18, 2020 10:01 am

Hello all,

I just stumbled on this board, what a great resource!

I'm a dual US/Canadian citizen, currently residing in the US, and I work remotely - as an employee - for a US company.

I'm looking at the possibility of moving up to BC, and my employer is open to the idea - if it's not too complicated for my employer.

My understanding is that it would be far more complicated *for the company* if I were to remain an employee, but not if I switch to being an Independent Contractor.

First question: is my understanding correct?

My understanding is also that I would pay US taxes first - as an Independent Contractor I'd owe Self Employment tax, but would qualify for the Foreign Earned Income Exclusion, so my tax responsibility to the IRS would be 15.3% of my taxable SE income - and that's it.

Second question: same as the first. Is my understanding correct?

My understanding is also that - because I'm a Canadian citizen, *and* I'd be a Canadian resident, I would owe Canadian Taxes as both a citizen and resident.

So we get to the point where I really don't even pretend to have any understanding. What would I owe BC and Revenue Canada?

As a sole proprietor/self employed individual: would I owe more or less straight Federal/Provincial Income Tax percentages from my taxable SE income?

Would I owe 10.2% CPP, or is that offset by the US SE tax paid?

Basically: how much of my income should I estimate going to BC/Canada taxation.

I want to make this easy and legal for my employer, as easy as possible and legal for me, and I want to have my financial ducks in a row in order to make an informed decision estimating my take-home income/monthly budget after such a big move.

Thanks.

cjr
Posts: 3
Joined: Tue Aug 18, 2020 9:20 am

Re: Tax considerations for Dual Citizenship, remote work for US company, while residing in Canada

Post by cjr » Tue Aug 18, 2020 11:01 am

BTW: I'm a software developer, if that makes ane difference, and I'm open to informed opinions regarding the pros and cons of

Incorporation in Canada (would this affect the US company paying for my services?)
Sole Proprietorship

Whatever makes everything cleaner!

nelsona
Posts: 16516
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax considerations for Dual Citizenship, remote work for US company, while residing in Canada

Post by nelsona » Wed Aug 19, 2020 7:25 pm

The moment you become Cdn resident, your self-emploment income becomes taxable in canada first, and become Cdn-sourced. You would no ;longer pay SE tax, but would pay CDn CPP. Ypu would claim tax credit on the CDn tax on this on your US return.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

cjr
Posts: 3
Joined: Tue Aug 18, 2020 9:20 am

Re: Tax considerations for Dual Citizenship, remote work for US company, while residing in Canada

Post by cjr » Thu Aug 20, 2020 8:43 am

Ah! Okay, I had it sort of backwards then...

Thanks!

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