Moving to Canada, still working for U.S. company
Moderator: Mark T Serbinski CA CPA
Moving to Canada, still working for U.S. company
Hi I am hoping that someone can give me a little direction and advice. I am a U.S. citizen and co-owner of a business here in the U.S. I am going to be marrying a Canadian and moving to Canada. My job is such that I can perform it from anywhere so I will continue to work from Canada for my U.S. company. I know that I will need to file personal taxes in the U.S. but do I also file taxes in Canada for me personally. What about payroll taxes? Do I continue those as I do now or pay something to Canada? Thanks in advance for any help, suggestions, advice, etc.
You will continue to file in US because you are a citizen, however, because you will reside in Canada, you will have to also report world income in Canada. You can exclude upto ~$80K of wages from IRS, and/or get fgoreign tax credits on your 1040 to reduce any US tax burden to ~$0.
Your employment income will be first taxed in Canada and the province you live, and you will have to pay Cdn payroll taxes. Moreover your company will have to do Cdn withholding and pay its share of payroll taxes as well. There should no longer be any US/state withholding.
If you can convince IRS and CRA that this is merely a temporary arrangement (5 years or less), you *could* exclude yourself from Cdn social security (CPP) as long as you and your firm continue to pay US SS. For that period, you could choose to pay one or the other.
You might want to consider simply becoming a contractor for your firm.
Others may have some input as to how you, the company, can set up your, as the employee, most tax efficiently.
<i>nelsona non grata</i>
Your employment income will be first taxed in Canada and the province you live, and you will have to pay Cdn payroll taxes. Moreover your company will have to do Cdn withholding and pay its share of payroll taxes as well. There should no longer be any US/state withholding.
If you can convince IRS and CRA that this is merely a temporary arrangement (5 years or less), you *could* exclude yourself from Cdn social security (CPP) as long as you and your firm continue to pay US SS. For that period, you could choose to pay one or the other.
You might want to consider simply becoming a contractor for your firm.
Others may have some input as to how you, the company, can set up your, as the employee, most tax efficiently.
<i>nelsona non grata</i>
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Mark T Serbinski CA CPA
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When you become a resident of Canada, and are employed (by your company or any other entity) to provide services in Canada, you will also be subject to Canadian payroll tax withholding.
In this case, your U.S. company would apply for a Canadian business number and take care of the Canadian withholdings.
In the matter of Social Security, you should note that Canadian social security costs are considerably less than U.S. rates. If you already have your 40 quarters in, you should consider not applying for exemption from Canadian social security, to save some money.
Regards,
Mark T. Serbinski, CA, CPA
In this case, your U.S. company would apply for a Canadian business number and take care of the Canadian withholdings.
In the matter of Social Security, you should note that Canadian social security costs are considerably less than U.S. rates. If you already have your 40 quarters in, you should consider not applying for exemption from Canadian social security, to save some money.
Regards,
Mark T. Serbinski, CA, CPA
Indeed.
I would think it is rarely beneficial to exempt oneself, in either direction.
If you are a Cdn going down to US temporarily, by not exempting you are getting into the US system, and any payments you make are a foreign tax credit in canada anyways if you continue to live in Canada, so even though the cost is a 'little high' its kinda like the Cdn Gov't paying your SS contribution.
If you are a Yank going to Canada, and have ammassed enough quarters, the CPP you will get will be gravy.
The only hiccup, is that if you do get CPP, it will most likely cut down your SS, by the hostile Windfall Elimination Provision.
However, with the reforms to SS and CPP that are always promised (threatened?) it's hard to actually plan for exactly what you will get.
But having a finger in both pies is probablt best.
<i>nelsona non grata</i>
I would think it is rarely beneficial to exempt oneself, in either direction.
If you are a Cdn going down to US temporarily, by not exempting you are getting into the US system, and any payments you make are a foreign tax credit in canada anyways if you continue to live in Canada, so even though the cost is a 'little high' its kinda like the Cdn Gov't paying your SS contribution.
If you are a Yank going to Canada, and have ammassed enough quarters, the CPP you will get will be gravy.
The only hiccup, is that if you do get CPP, it will most likely cut down your SS, by the hostile Windfall Elimination Provision.
However, with the reforms to SS and CPP that are always promised (threatened?) it's hard to actually plan for exactly what you will get.
But having a finger in both pies is probablt best.
<i>nelsona non grata</i>
The other issue to watch out for is that your company (C corp, S corp, LLC, LPP??) may have a branch in Canada by virture of you being in Canada permanently. This can get very complicated depending on the type of US legal structure, your shareholdings, etc. Having a branch in Canada would require the filing of Canadian corporate tax returns (if a corporation) and the payment of tax on the profit earned from canadian operations.
The advice that you perhaps act as a consultant instead may also have some merit regarding this issue, but if are still making big decisions for the company, i.e. approving contracts in Canada, you may still have a problem.
Best to get professional advice.
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Regards,
Carson Hirner
The advice that you perhaps act as a consultant instead may also have some merit regarding this issue, but if are still making big decisions for the company, i.e. approving contracts in Canada, you may still have a problem.
Best to get professional advice.
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Regards,
Carson Hirner