1040NR
Moderator: Mark T Serbinski CA CPA
1040NR
I am a Canadian citizen with a TN visa. I work in the US during the work week and return to Canada every weekend. I work for myself. My business is incorporated in Ontario and I file and pay all taxes in Canada. The US clients pay my company directly and do not withhold any tax. I also have two bank accounts in the US. I have been in this arrangement for the last 5 years. I have not filed any US tax for this period. I was told that I did not have to file any US taxes because my wages are paid directly to my company in Canada and my interest income from my US bank accounts are exempt from taxes. Is this correct? Another Canadian friend of mine told me that I need to file a 1040NR regardless of my exemption status. Please advise! If I did have to file taxes, what are the penalties for the 5 years of no filing? My tax home is Canada.
Genreally, until 2009, you were exempt from US tax, and did not need to report unless it was to get withheld tax back. Youare correct that the fact that you were being paid as a contractor allowed you to do this.
However, beginning in 2010, the fact that you are in US for more than 183 days in any 365-day period makes you taxable in US, on this contractor income, even though you live in Canada. Effectrively, the treaty change has removed the reporting an d tax exemption for "long-term" contractors such as yourself.
It would not have been wrong to file 1040NR in the past, but now it will be required.
The interst income would still be exempt.
However, beginning in 2010, the fact that you are in US for more than 183 days in any 365-day period makes you taxable in US, on this contractor income, even though you live in Canada. Effectrively, the treaty change has removed the reporting an d tax exemption for "long-term" contractors such as yourself.
It would not have been wrong to file 1040NR in the past, but now it will be required.
The interst income would still be exempt.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
THis applies for the 2010 tax year.
However, it may also mean that your client, who has not been withholding tax form your payment, may now be required to do so, since you are a foreign contractor with no treaty exemption.
However, it may also mean that your client, who has not been withholding tax form your payment, may now be required to do so, since you are a foreign contractor with no treaty exemption.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thank you once again for these prompt responses. Will my clients now have to withhold taxes in 2010? What I have currently is a business to business contract. I invoice my clients and they send payment directly to my Canadian company. I have a Canadian accountant who files all my corporate taxes in Canada.
The problem is your presence in US. This is establishing a deemed permanent establishment.
So, either your fimr should be paying tax in US, or you, as an employee of that firm, should be paying US tax.
have your accountant look into this, and mention the change to the treaty, which he may not be aware of.
So, either your fimr should be paying tax in US, or you, as an employee of that firm, should be paying US tax.
have your accountant look into this, and mention the change to the treaty, which he may not be aware of.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing