Canadian resident on TN, working remotely and filing info

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b8res
Posts: 12
Joined: Thu Mar 14, 2013 10:28 pm

Canadian resident on TN, working remotely and filing info

Post by b8res »

I have a question regarding filing for the year of 2020, under the pandemic scenario.

My husband lives in Canada, was on TN Visa and commuted to work daily in michigan, until March 2020, when the border closed, where then he had to start working remotely from home in Canada, because he was considered a non-essential traveller and was forbiden to cross the border.

Many people here in canada are now getting letters from the cra stating that they owe all of their taxes to Canada since they were working from Canada, although their taxes were remitted to the USA by the employer.

I'm wondering how then one should file their taxes this year? Normally we did a proforma and 1040nr. Do we need to file to the IRS based on how many days present in US, and then expect a major return, while remitting full taxes to Canada? Or do we file as usual. I thought tax residency rules were exempt due to covid and the travel restrictions.is there anyway to indicate travel restrictions when filing?

Any advice about how to go about this correctly in advance of filling,to prevent creating more problems would be greatly appreciated.

Thank you as always:)
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian resident on TN, working remotely and filing info

Post by nelsona »

CRA is correct, in that you will pay tax FIRST to Canada/Prov on the work you performed IN Canada. Tax RESIDENCY rules are suspended. However, income-SOURCING rukes (where employment income is sourced WHERE the work was performed) still apply.

So, for your 1040NR, the US-sourced income will be your total wages, PRORATED for the number of days you worked in US over the number of days you worked in US. (You can still do the pro forma if you wish, but you might not want to, as we will discuss).

For Canada, as usual you will report ALL your income, as in past years. But you only get to claim credit based on the US days you report on your 1040NR, so your US tax credit will be very small. So making your US taxes smaller by doing pro forma may not make sense this year. You can claim all the FICA you paid.

You will be getting a BIG US refund, so you would want to file that as soon as possible.

You will owe lot to CRA, so file that as late as possible.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nelsona
Posts: 16947
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian resident on TN, working remotely and filing info

Post by nelsona »

FYI, as a legal US worker your spouse was NOT forbidden from crossing the border. However, because his travels were non-essential, he would have had to quarantine each time he crossed, which would have been rather inconvenient, maybe even so impractical as to be unworkable. At least he was able to keep working from Canada. But he could have forced the issue.

This was made clear long ago, as many with TNs -- regardless of the work they do -- enter US regularly.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
b8res
Posts: 12
Joined: Thu Mar 14, 2013 10:28 pm

Re: Canadian resident on TN, working remotely and filing info

Post by b8res »

Thank you so much for clarifying that!
elgoog
Posts: 38
Joined: Thu Sep 19, 2019 9:40 pm

Re: Canadian resident on TN, working remotely and filing info

Post by elgoog »

Questions regarding this since I am in the same boat.

1. Do you just report the prorated income on line 1a? Or do you have to file a separate form for this?
2. Do you also have to file Form 8833?

Thank you again for your help.
nelsona
Posts: 16947
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian resident on TN, working remotely and filing info

Post by nelsona »

1. You report the income on the wages line.
2. You can, but not required. It is good way to explain what you are doing.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
pencileveryone
Posts: 8
Joined: Sun Sep 22, 2019 12:10 pm

Re: Canadian resident on TN, working remotely and filing info

Post by pencileveryone »

@b8res

I'm very curious about this statement:

"Many people here in canada are now getting letters from the cra stating that they owe all of their taxes to Canada since they were working from Canada, although their taxes were remitted to the USA by the employer."

Did these people get these letters after they filed their canadian taxes? How does CRA know that these people worked in Canada? Are you suggesting that they're cross referencing with CBSA border entry data to see how many days you were in Canada?
b8res
Posts: 12
Joined: Thu Mar 14, 2013 10:28 pm

Re: Canadian resident on TN, working remotely and filing info

Post by b8res »

From my understanding, those who filed their taxes, got the response letters from the CRA. I'm not sure how cra is identifying the cross border workers who worked remotely, vs those who still went on site. How would they know? Thos is a very good question. I am having an appointment with a tax specialist this week and hopefully I can find out what criteria they are using.


But from my understanding, this problem of canada taxing its cross border workers who worked remotely has been brought up to parliament. An MP has asked for a resolution by end of march, not holding my breath on a solution.

Dear Nelsona,
Will the IRS give such a big refund without any hassles? I am having an hard time believing they will pay out easily and in a timely manner.
b8res
Posts: 12
Joined: Thu Mar 14, 2013 10:28 pm

Re: Canadian resident on TN, working remotely and filing info

Post by b8res »

From my understanding, those who filed their taxes, got the response letters from the CRA. I'm not sure how cra is identifying the cross border workers who worked remotely, vs those who still went on site. How would they know? Thos is a very good question. I am having an appointment with a tax specialist this week and hopefully I can find out what criteria they are using.


But from my understanding, this problem of canada taxing its cross border workers who worked remotely has been brought up to parliament. An MP has asked for a resolution by end of march, not holding my breath on a solution.

Dear Nelsona,
Will the IRS give such a big refund without any hassles? I am having an hard time believing they will pay out easily and in a timely manner.
nelsona
Posts: 16947
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian resident on TN, working remotely and filing info

Post by nelsona »

For 2020, there will be no changes. You get your refund and give it to CRA.

IRS will refund you what you put on your return. the 104NR has space to explain this issue.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
b8res
Posts: 12
Joined: Thu Mar 14, 2013 10:28 pm

Re: Canadian resident on TN, working remotely and filing info

Post by b8res »

Thanks so much. Very greatful for your input:)
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