Telecommuting for U.S company from Canada

rsargant · Post by **rsargant** » Sat Feb 04, 2012 9:54 am

Hi,
I will be returning to Canada but staying on with my U.S employer. They have setup a CDN payroll for me. This could be a stupid questions but will the income I receive from that arrangement be considered "effectively connected with a U.S trade or business" and therefore reportable on a 1040-NR return (despite the fact I will be paid as a CDN and receive a T4) ?

JGCA · Post by **JGCA** » Sat Feb 04, 2012 10:33 am

Your working in Canada for a wage on a T4, its Canadian source from Canada. You need to file a CND tax return for US its depends if you are a US citizen or GC holder otherwise you now reside in Canada and file CNd returns.

rsargant · Post by **rsargant** » Sun Feb 05, 2012 12:43 pm

That's what I thought initially and exactly how I would like it to work...

Then I started thinking that it was a stretch to say that the income isn't effectively connected with a U.S trade or business seeing as its a U.S business that started the CDN payroll for me and only me. There is no canadian business that really owns this payroll AFAIK.

I have confirmed that I will receive a T4 and not a W2. If that is sufficient to make it a "canadian source" from tax perspective then I guess thats all that matters.

JGCA · Post by **JGCA** » Mon Feb 06, 2012 2:29 pm

right use the t4 to file in canada

FLcanuck · Post by **FLcanuck** » Sat Feb 18, 2012 6:56 pm

I will be under similar situation soon, I will be working for a US employer remotely from Canada. However, I still need to discuss how I will be paid. I don't think my US employer will setup a CDN payroll for me because they don't have any office in Canada. What is the best way to handle my pay in this situation? Followed are some options I was thinking of:

1. Get paid directly thru my private Canadian company in USD (however, I am not sure how the taxation will work in this situation, I will be in Canada for the majority of the year, is this just like contracting for Canadian companies?)

2. Get paid by the US employer through US bank account with US taxes/SS/etc deducted. And then file 1040NR and T1 in Canada with foreign tax credits.

If someone can help me with the best option for me, I will appreciate it. Thanks

nelsona · Post by **nelsona** » Sat Feb 18, 2012 8:11 pm

If you live and work in canada, you CANNOT be paid as a US employee. So your only options are Cdn employee payroll, or self-employed contractor.
Your option 2 is not permitted.

FLcanuck · Post by **FLcanuck** » Mon Feb 20, 2012 9:26 pm

Thanks nelsona. So, if I go with the option of using my canadian incorporated company, what information do I have to provide the US company for setting up a corp-2-corp contract? When I spoke to the US company, they said I need to provide them with the articles of incorporation and an EIN. For my canadian company, I just have a business number/HST number, do I provide that to them instead? Again, your help is really appreciated.

nelsona · Post by **nelsona** » Mon Feb 20, 2012 9:45 pm

Look over 1042-s for instructions.

FLcanuck · Post by **FLcanuck** » Tue Feb 21, 2012 12:02 am

Does 1042-s also apply when the recipient is a Canadian company? In my case, am I the recipient or is my Canadian incorporated company the recipient?

nelsona · Post by **nelsona** » Tue Feb 21, 2012 1:30 pm

Yes. Since your firm is doing business ion US, you need to file a "protective" 1042-s, just in case IRS should ever conclude that you are running a businees in US, you will not be penalized (only taxable).

But for now, this is a zero income report.

JGCA · Post by **JGCA** » Wed Feb 22, 2012 7:44 pm

Its always advised to file any protective forms when a copr is involved 1020F , 1042 etc . its the best approach to at least have take a position this also starts the time clock from when they can assess you.