Income source for remote work

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curiousremoter
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Income source for remote work

Post by curiousremoter » Tue Sep 01, 2020 10:07 pm

Hi,

I was reading the tax treaty, specifically Article XV and was curious of the following scenario for someone who is US green card holder and Canadian citizen. This person is employed by a US corporation with a primary job site in California.
- The person is working remotely for the US firm while staying in Canada for 30 days at end of 2019
- The person is working remotely for the US firm while staying in Canada for 160 days at start of 2020

My understanding is that that income would be taxable in Canada due to the 183 day rule that covers both years. However, which country would get precedence? Is it Canadian sourced income that is taxable to Canada before the USA or visa versa.

If this person is a California resident and the income is Canadian sourced, it seems like it could cause double taxation since only the USA federal tax could be offset using tax credits. Is there any way to avoid the double taxation?

Please let me know if anything here is incorrect.

nelsona
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Re: Income source for remote work

Post by nelsona » Fri Sep 04, 2020 6:57 pm

Wages are sourced to the location the work is performed. In many cases this may not necessarily mean that it is taxed in that jurisdiction, but it ia always sourced there.
A resident of a particular jurisdiction ALSO has to report and pay tax in their place of residence.

The source jurisdiction would get first crack at the taxes, the second would give credit for the taxes paid to the first, if any.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

curiousremoter
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Joined: Tue Sep 01, 2020 9:50 pm

Re: Income source for remote work

Post by curiousremoter » Mon Sep 07, 2020 12:37 am

Thanks for the reply!

What are your thoughts on the best way to mitigate the California double taxation? I believe I can not claim foreign-tax-credit for Canadian sourced taxed income that was also taxed as a California resident.

I think the best solution might be to use IRS FTC carry back to deduct excess Canadian taxes from my 2019 USA return, but I did not fully investigate this approach.

nelsona
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Re: Income source for remote work

Post by nelsona » Mon Sep 07, 2020 6:35 pm

I don't look at state taxes, especially Cali, which seems to tax anyone for everything, if they spent time in that state, so you are on your own there.
Another reason why those living and working in canada as employees, should be paid by CDn payroll.

And just because Cali tax has been withheld from your pay, does not mean that it was correct for your employer to do so.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

curiousremoter
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Joined: Tue Sep 01, 2020 9:50 pm

Re: Income source for remote work

Post by curiousremoter » Thu Sep 10, 2020 10:39 am

The California FTB seems to have very far reaching tax abilities, unfortunately.

One more question for calculating income by source, I saw in other threads the formula is (Canada working days) / (total working days), but is there any special handing for bonuses?

For example, if a bonus is received in early 2020 for USA sourced work done in 2019, would that still count as part of the Canadian sourced income for 2020 based on the above fraction?

Having trouble finding clarification on the CRA website.

Thanks

nelsona
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Re: Income source for remote work

Post by nelsona » Thu Sep 10, 2020 7:48 pm

Your foreign portion, for IRS and CRA purposes, is days working outside country vs days working inside country, over entire wages/bonus/etc. You exclude sick days weekends, vacation and holidays.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

scottheflin589
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Re: Income source for remote work

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oscarprice85469
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Re: Income source for remote work

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curiousremoter
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Re: Income source for remote work

Post by curiousremoter » Sat Sep 19, 2020 11:00 am

For form RC267, would 401k contributions be multiplied by the Canadian days fraction for that form also?

Is this example correct? $18000 401k contributions and 50% days in Canada -> $9000 on RC267 line 1.

nelsona
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Re: Income source for remote work

Post by nelsona » Sun Sep 20, 2020 9:03 pm

No. There is no prorating of 401(k) or RRSP. You put what you contributed. It's not based on when you did it or how heavily you contributed when you were in or out of Canada.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

cullen
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Re: Income source for remote work

Post by cullen » Sun Sep 20, 2020 9:39 pm

Generally, if you work remotely for a California based company as an independent contractor you will be subject to California tax. They do not follow the treaty

This court case last year nailed that down. Some other states will follow
https://ota.ca.gov/wp-content/uploads/s ... 1619_1.pdf
Joe

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