Working remotely for a US company from Canada on L1A status

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

Post Reply
szbjsh
Posts: 9
Joined: Fri Nov 13, 2020 12:04 pm

Working remotely for a US company from Canada on L1A status

Post by szbjsh »

Hi all,

My payroll transferred to our US affiliate company in March 2020 via L1A status but I continue to work from Canada remotely due to Covid-19 for the reminder of 2020 (I was only in the US for a week in total in 2020). I am a W2 employee. Therefore for 2020, I will be a non-resident alien of US and a tax resident of Canada. I will file 1040 NR and form 8833 on the US side. On the Canadian side, I will continue to file as a tax resident claiming my US income and US taxes paid (after currency conversion). I have contributed to 401K in the US. From my research, on Canadian return, I have to add back 401k contributions to the foreign employment income on Canadian return, but these contributions is deductible via Line 20700 – Registered pension plan (RPP) deduction.

Is my understanding correct? Am I missing anything? Thank you very much!
nelsona
Posts: 16655
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Working remotely for a US company from Canada on L1A status

Post by nelsona »

There is a form for Cdn residents contributing to a 401(K). Since you are technically "on assignment" in Canada and not commuting, you must use form RC268 to determine how much of your 401(k) contribution is deductible in Canada. You do not use form RC269, since you did not earn the wages in US.

To be clear, your wages, although from a US employer, are taxable in Canada FIRST, since employment income earned while in Canada is taxable in canada first. You should not be taxable in US at all.

So, you will file all your income in Canada, and pay tax. You will file a 1040NR simply to get your withholding back.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
szbjsh
Posts: 9
Joined: Fri Nov 13, 2020 12:04 pm

Re: Working remotely for a US company from Canada on L1A status

Post by szbjsh »

nelsona wrote:
> So, you will file all your income in Canada, and pay tax. You will file a1040NR simply to get your withholding back.

Thank so much, do I need to file form 8833 too in addition to 1040 NR to get the withholding back?
szbjsh
Posts: 9
Joined: Fri Nov 13, 2020 12:04 pm

Re: Working remotely for a US company from Canada on L1A status

Post by szbjsh »

nelsona wrote:

> So, you will file all your income in Canada, and pay tax. You will file a
> 1040NR simply to get your withholding back.


My US employer withheld both federal and California taxes. May I ask if 1040NR would get my California withholdings back as well?
nelsona
Posts: 16655
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Working remotely for a US company from Canada on L1A status

Post by nelsona »

You do not need to file 8833. 1040NR has sufficient spaces to explain your situation.

For Cali tax, you would need to fije a state return, and see if you are taxable there or not.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
szbjsh
Posts: 9
Joined: Fri Nov 13, 2020 12:04 pm

Re: Working remotely for a US company from Canada on L1A status

Post by szbjsh »

nelsona wrote:
>
> For Cali tax, you would need to file a state return, and see if you are taxable there or not.

Thanks. I have only been in the US (California) for 6-7 days in total for 2020 and my principle residence is in Canada for this whole time. So I think I am a non-resident of California or USA and should get my Cali withholdings back?

As well, I expect a large sum owing to CRA in 2021 when my 2020 return is filed. Should I repay some tax now to CRA via tax installment?
nelsona
Posts: 16655
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Working remotely for a US company from Canada on L1A status

Post by nelsona »

As I said, you would need to file your Cali tax. Cali has different rules on what is taxable in their state, and is not government.

I would wait in sending money to CRA at this point. You will be paying in installments next year, whether self-imposed or not. You might as well wit to get the IRS refund before paying.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
nelsona
Posts: 16655
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Working remotely for a US company from Canada on L1A status

Post by nelsona »

... and is not governed by treaty.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
szbjsh
Posts: 9
Joined: Fri Nov 13, 2020 12:04 pm

Re: Working remotely for a US company from Canada on L1A status

Post by szbjsh »

thanks Nelsona. I see that it's often not recommended to work for an American company (W2 employee) while working and living as a resident in Canada. But this is my first year transferring to the US and I have stayed in Canada due to Covid-19 (I do plan to move south next year once the pandemic is over).

But I am just wondering what are some of the possible consequences from CRA or IRS if someone does this long term? Say, someone get a TN visa and come back to Canada immediately and work remotely from Canada as a W2 employee for 3 years?
llll
Posts: 10
Joined: Sun Dec 27, 2020 7:37 pm

Re: Working remotely for a US company from Canada on L1A status

Post by llll »

szbjsh wrote:
> thanks Nelsona. I see that it's often not recommended to work for an
> American company (W2 employee) while working and living as a resident in
> Canada. But this is my first year transferring to the US and I have stayed
> in Canada due to Covid-19 (I do plan to move south next year once the
> pandemic is over).
>
> But I am just wondering what are some of the possible consequences from CRA
> or IRS if someone does this long term? Say, someone get a TN visa and come
> back to Canada immediately and work remotely from Canada as a W2 employee
> for 3 years?
I am interested in finding this out as well.
ND
Posts: 173
Joined: Thu Feb 21, 2013 5:28 pm

Re: Working remotely for a US company from Canada on L1A status

Post by ND »

Also Contact Marc Pavlopoulos marc@syndesus.com to explore PEO
Syndesus is an Employer of Record (also known as a PEO – Professional Employer Service) in Canada who legally employs Canadians in Canada to work for US companies.

Syndesus collects and remits all Canadian employer and employee taxes to the CRA. You would get an offer letter from Syndesus which exactly mirrors what you have in the US. Which means you get a T4, and that you are eligible for provincial healthcare (because you are now a Canadian taxpayer). The US employer pays the monthly fee for its service. There is no cost to the Canadian worker.
Post Reply