Remote work for US Corporation

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tl416
Posts: 8
Joined: Sat Nov 20, 2021 5:29 pm

Remote work for US Corporation

Post by tl416 »

Hello,

I am a Canadian citizen and current resident of Ontario. I am interviewing with a US based firm, for a consulting role that will be servicing clients mostly in the US (with some international). As the role will be 95% remote, with some occasional travel to the US, they do not mind if I stay in Canada. This employer does have a Canadian branch, and so there is the possibility of being employed in Canada and not requiring any work visas for the US. However they were upfront in needing to know where I intend to reside, as this will affect salary.

Assuming that I will be an employee (ruling out the options of working as a contractor, etc.), it appears that my choices are as follows:

1) Remain a resident in Canada, employed via their Canadian branch
2) Relocate to the US, presumably on a TN visa, and be employed in the US

Question 1: If my preference is to be paid in USD, I believe I would need to relocate to the US?

In this scenario, I would look to become a US resident and Canadian non-resident (I don't intend on severing my Canadian residential ties, as I see myself returning frequently throughout the year, and would like to maintain certain bank accounts and memberships).

Question 2: Does this set me up to have to pay taxes to both the US (resident) and Canada (non-resident, not emigrated) on my employment income?

Question 3: If so, is there any benefit to relocating to a tax free state (I am debating between California and Florida). My understanding is that any tax savings I would get from residing in a tax free state such as Florida would essentially be nullified, as the net result would be having to pay the balance of my "tax savings" to the CRA.

I don't have any assets, just registered accounts that I am prepared to close. I do have a Canadian corporation under my name, that I would like to keep for any side jobs, but from what I understand this would further complicate tax issues.

Would like to get some input and advice on what the best approach is, if my objectives are to be paid in USD and to minimize tax.

Thanks,
tl416
Posts: 8
Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

3RE: Question 2 & 4:
After doing some more research and reading, my understanding is non-residents of Canada only pay taxes to the CRA on Canadian sources of income only. And so there is a tax incentive in relocating to a tax free state.
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

Relocating would mean becoming a non-resident of Canada. That would NOT, however require that you give up accounts and memberships.

The tax treaty makes those who live and work in US, US tax residents regardless of how many ties they have in Canada.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tl416
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Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

Thanks.

Also, I assume it is not possible to be a non-resident in both the US and Canada? If my time is split between the two countries, yet I try to fail the respective 'substantial presence' tests of each country, I assume the treaty forces me to be a resident of one country?

I don't like the idea of being taxed on sources of income outside of my country of residence, but I'm under the impression that this is unavoidable.
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

No. Since you are a resident of Canada, you would need to establish tax residency elsewhere before CRA would accept that you are Cdn non-resident.

Besides, regardless of where you live or don't live, at a minimum you would pay tax to the country/state/province where the work is being performed.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

If you work as a contractor living in canada, the self-employed income you would earn from the US firm would not be taxed in US, so long as you spent less than half your time in US. It would only be taxed in canada.

Technically one cannot be an employee of the US entity and both live AND work physically in canada. US form would need to pay you thru a Cdn payroll or agency.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tl416
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Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

Right, understood.

I'm under the assumption that I would be an employee of that US firm. (I will have to ask whether they'll consider taking me on as a contractor, though I doubt they would).

What gets messy is some of my existing "side businesses" here in Canada -- I have a corporation under my name which is not generating business at the moment, and I do help out with a family business as well. I would prefer to maintain these if I could.

But if I relocate to the US and become a resident there, then that Canadian income from the side business would be subject to US tax.
tl416
Posts: 8
Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

As a follow up to my situation, I had consulted with Serbinski, and was advised to close some of my Canadian accounts (ie TFSA) so that I could emigrate from Canada and be considered a US resident for the 2022 calendar year.

My intent is to obtain my TN at this border later this month in January, and return to my residence in Ontario to begin employment remotely. I would then spend the next several weeks (months?) to find a suitable home in the US prior to relocating.

I understand that this is acceptable and would not pose any issues. But how long do I have to relocate to the US before it does become an issue? Is it to do with time spent in the US vs Canada for the calendar year?

Thanks
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

Until you actaully nmove, you will be Cdn resident. Once you move, you will be US resident. Closing financial accounts has no bearing.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tl416
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Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

[quote=nelsona post_id=527123 time=1641666143 user_id=30]
Until you actaully nmove, you will be Cdn resident. Once you move, you will be US resident. Closing financial accounts has no bearing.
[/quote]

What is the tax implication of this? I was under the impression that when I file my taxes for 2022, it is under the appropriate residence status for the whole calendar year.
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

No. Canada determines taxation based on residency dates, which can begin/end at any time in the year, based on residential ties. so, when you leave (ie. break primary residential ties) you will become emigrant for that year, beginning on that certain date, and then non-resident the following year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tl416
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Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

Appreciate the info.

As my residential ties have already been broken in preparation for the move, how would this date be confirmed and/or verified?
Could I not just use the date I obtain my TN visa as my departure date?

Thanks again.
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

You said you were current resident on Ontario. Which is it?
You have either moved to US or you have not. That si the only residential tie that matters.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Re: Remote work for US Corporation

Post by nelsona »

Getting TN doesn't make you non-resident. *Moving* to US on TN does.
Rereaed my responses. Fill in the date you moved. That is your departure date, and the date you stop reporting foreign income to CRA.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tl416
Posts: 8
Joined: Sat Nov 20, 2021 5:29 pm

Re: Remote work for US Corporation

Post by tl416 »

Just to put things into context -- yes I am currently a resident of Ontario. My intent was to start US employment remotely from Ontario in a month or so, then relocate to the US some time afterwards after sorting out housing.

At the time I thought that I would be considered a resident of the US for all of 2022 as I was advised (my interpretation of that comment at the time was that tax returns would not be affected by my departure date, but perhaps it was a misunderstanding?). But as you had pointed out, the CRA is interested in my income for part of the year that I was a resident of Canada, ie prior to my departure date.

Question: This leads me to believe I am liable to the CRA on my US income for the duration that I am working in Ontario, correct? As this is news to me, I am looking at how I can minimize this.

And so I am asking how my departure date is confirmed. For example, I plan on entering the US to apply for my work visa, and to view housing all prior to my actual relocation date. If the CRA were to verify my departure date with immigration, I would have prior entry dates.

Or, if there is no way around setting the departure date in my favor, then it would be in my interest to relocate sooner rather than later.

Thanks for your help, I hope that I have understood the implications of my departure date correctly, as of course this would affect my plans.
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