Many thanks to the principal contributors and others who participate in this forum. What follows below is a somewhat generic case where an American couple arrives in Canada but continues to work with US-based employers. This subject has been covered at length in various postings. "Next Steps" (below) are based on our understanding of these previous postings. Clarifications or corrections to "Next Steps" are much appreciated.
Profile:
1. Married couple (U.S. citizens) submitted application for permanent residency on September 2006. Physicals conducted June 2007.
2. Couple entered Nova Scotia on July 1st with 2 children. Wife on student visa. Husband on visitor visa.
3. Couple continues to work for firms based in U.S. (i.e. no Canadian presence). Husband and wife worked out of home office in U.S.
4. Household income $150K with $110K/$40K split.
5. The following holds true for both husband and wife since arriving in Canada:
...a. Paid as employees (i.e. not contractors).
...b. Contributing to Roth IRA.
...c. Contributing to 401K
...d. Company matching 401K
Next Steps:
1. Immediately change employment status from ‘employee’ to ‘contractor.’ After the switch over, company matches to 401K and profit sharing will appear on 1099 as taxable income. (We recognize this should have been done prior to departing the U.S.)
Q1-a. Is it possible to still contribute the maximum amount to our 401K this year?
Q1-b. If it is possible, is it a matter of writing a check or is it simply not possible to contribute the full $15K because we were only half-year residents?
2. Apply for Individual Tax Numbers from CRA (i.e. not eligible for SIN until PR is granted.)
Q2-a. Given that we’ll be working as contractors, we'd assume that quarterly payments to CPA will be required. Correct/Incorrect?
3. File return with CPA for all income earned since arriving in Canada on July 1st. (i.e. wages, interest, capital gains). A byproduct of the return is a foreign tax credit used when filing with the IRS.
4. Do ONE of the following: file 1040 (full year) and use a foreign tax credit to offset taxes owed to IRS or file a 1040NR.
Q4-a. We're not clear on the implications of filing a 1040 vs a 1040R. Generally speaking, when would you file a 1040 vs a 1040R?
Note: The fact we delayed in cutting over from a W-2 to a 1099 means that we’ve overpaid the IRS. We’d expect to get it back only after filing (and claiming the all important foreign tax credit.)
5. Stop Roth IRA contributions. Canadian residents are not technically permitted to trade a US-based firm irrespective of citizenship or visa status. (We deal with Vanguard.)
Q5-a. Prior to the most recent amendment to tax treaty, Roth IRAs were considered taxable in Canada so there would be no benefit to making contributions. Recent forum contributions indicate the Roth may be treated identically on both sides of the border. Is our read correct/incorrect?
6. Begin contributing to an RRSP at the earliest possible point in time. We understand that we cannot contribute to an RRSP this first year.
Q6-a. In the likelihood that we don’t receive PR until the next calendar year, would we still be able to contribute to an RRSP?
7. Rollover 401K (established with current firms) to IRAs in our existing Vanguard portfolio.
Q7-a. Based on Forum information, this is not possible because we’re not permitted to do anything but sell once we reside in Canada. Have we got the correct understanding?
b. If we cannot “legitimately†roll over to an IRA, and there’s no avenue for mapping it to a RRSP equivalent, then it would appear that the money needs to remain in the current account until we retire in 2+ decades. Correct/Incorrect?
8. Follow up with a tax professional (e.g. Mark).
US Citizens Working in Canada on Student Visa (PR pending)
Moderator: Mark T Serbinski CA CPA
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
Probably a few too many questions, but I'm in a reasonably good mood:
General: you are fully taxable in canada from July 1, You remain taxable in US of course due to citizenship. You cannot work from canada without work authorization from Canada, telecommuting is not permitted without status.
1. Once you are contractors your 401(k) ends, you cannot contribute to it. In any event, Any contributions you make are not deductible in Canada, after you became taxable on July 1.
2. Since you are working and living in canada, you should have SINs, see the problem?
3. Correct for CRA. For IRS you will probably use Form 2555 instead of foreign tax credit (unless you have kids). You will be reporting your income in both countries forever.
4. You will never file 1040NR, that is for non-citizenss.
5. You should no longer Roth. Even the new treaty rules do not permit Cdn residents from contributing to Roth and having it treated like Roth. You should still be able to manage your Roth, vanguard is making its own rules on this. Leave them as is for now, until rules are clear. In any case, you should keep yor Trad IRA and rollover IRA in separate accounts.
6. You can only get RRSP deduction starting in 2008.
7. Rolling over is good. But given the problems you are having with Vanguard, fing a firm that will allow trading.
Forget rolling to RRSP, this is a waste of effort.
General: you are fully taxable in canada from July 1, You remain taxable in US of course due to citizenship. You cannot work from canada without work authorization from Canada, telecommuting is not permitted without status.
1. Once you are contractors your 401(k) ends, you cannot contribute to it. In any event, Any contributions you make are not deductible in Canada, after you became taxable on July 1.
2. Since you are working and living in canada, you should have SINs, see the problem?
3. Correct for CRA. For IRS you will probably use Form 2555 instead of foreign tax credit (unless you have kids). You will be reporting your income in both countries forever.
4. You will never file 1040NR, that is for non-citizenss.
5. You should no longer Roth. Even the new treaty rules do not permit Cdn residents from contributing to Roth and having it treated like Roth. You should still be able to manage your Roth, vanguard is making its own rules on this. Leave them as is for now, until rules are clear. In any case, you should keep yor Trad IRA and rollover IRA in separate accounts.
6. You can only get RRSP deduction starting in 2008.
7. Rolling over is good. But given the problems you are having with Vanguard, fing a firm that will allow trading.
Forget rolling to RRSP, this is a waste of effort.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
Thanks much for your reply. I wanted to follow-up on one point you made, regarding our being ineligible to work in Canada without status
Canada Customs (i.e. boarder crossing) understood we were entering the country my wife's student Visa. They indicated I'd be able to continue to work for my U.S.-based firm on a visitor visa. I could not, however, seek employment in Canada.
Last week, we contacted Canada Revenue, who instructed us to fill out form T1261 (i.e. application for a Canadian Revenue Agency Individual Tax Number for Non-Residents). One only fills out a T1261 when one is not eligible for a SIN (which -as you pointed out, we're not).
This morning I contacted the International Tax Division of Canada Revenue to confirm that we're in fact in compliance with Canada's work regulations. Based on their feedback, we're legally able to live in Canada and work in the U.S. while my wife is on a student visa and I'm on a visitor visa.
I also asked the CRA about making quarterly payments (i.e. since we're contractors we've got no withholding). They indicated we need not make estimated payments prior to submitting our first tax return (due April 30th). After filing our return, CRA will send us a schedule of quarterly payments.
[Side Note: Principal reasons for entering Nova Scotia in advance of receiving PR was to get our 6-year old into French Immersion (public school) - which we did. A side benefit was that our new daughter (born 10 days ago) would hold Canadian citizenship from the get-go as does our 6-year old boy.]
Information regarding Form 2555 noted. Thanks!
Canada Customs (i.e. boarder crossing) understood we were entering the country my wife's student Visa. They indicated I'd be able to continue to work for my U.S.-based firm on a visitor visa. I could not, however, seek employment in Canada.
Last week, we contacted Canada Revenue, who instructed us to fill out form T1261 (i.e. application for a Canadian Revenue Agency Individual Tax Number for Non-Residents). One only fills out a T1261 when one is not eligible for a SIN (which -as you pointed out, we're not).
This morning I contacted the International Tax Division of Canada Revenue to confirm that we're in fact in compliance with Canada's work regulations. Based on their feedback, we're legally able to live in Canada and work in the U.S. while my wife is on a student visa and I'm on a visitor visa.
I also asked the CRA about making quarterly payments (i.e. since we're contractors we've got no withholding). They indicated we need not make estimated payments prior to submitting our first tax return (due April 30th). After filing our return, CRA will send us a schedule of quarterly payments.
[Side Note: Principal reasons for entering Nova Scotia in advance of receiving PR was to get our 6-year old into French Immersion (public school) - which we did. A side benefit was that our new daughter (born 10 days ago) would hold Canadian citizenship from the get-go as does our 6-year old boy.]
Information regarding Form 2555 noted. Thanks!
Patrick
CRA has no jurisdiction on immigration matters.
I would check with immigration canada (not the border guard) about this.
Telecommuting is new territory; you need to get CIC official position on it.
Checking e-mails while on vacation (tourist visa remember) is not the same as working out of your home in canada
I would check with immigration canada (not the border guard) about this.
Telecommuting is new territory; you need to get CIC official position on it.
Checking e-mails while on vacation (tourist visa remember) is not the same as working out of your home in canada
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Forget about 2555. Since you have kids, you will want to use the foreign credit method, so that you get the child tax credit on your 1040.
You will want to get your duaghters US status up-to-date. Get her SSN soon as you need it to to use on your 1040. You may have to go thru some procedure to get her US citizenship recognized (like CDns who have kids in US do). No point waiting to do this.
A visitor visa, by the way, is granted based on maintaing a foreign residence.
You will want to get your duaghters US status up-to-date. Get her SSN soon as you need it to to use on your 1040. You may have to go thru some procedure to get her US citizenship recognized (like CDns who have kids in US do). No point waiting to do this.
A visitor visa, by the way, is granted based on maintaing a foreign residence.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
At the border we figured we were in good standing because we spoke with staff who where responsible for issuing our visas. Staff had access to our file with Immigration Canada had and could see where we were at in the immigration process. My hope is the staff issuing visas was sufficiently knowledgeable and we've got no surprises ahead. We'll follow up with the Immigration forum and Immigration Canada as you suggested.
Thanks for the reminder regarding getting our daughter a SS#. We went through the same thing with our son - when we lived here 5 years ago.
Given that we've got children, we'll plan on taking the Foreign Credit Method approach in lieu of Form 2555. Thanks much.
Thanks for the reminder regarding getting our daughter a SS#. We went through the same thing with our son - when we lived here 5 years ago.
Given that we've got children, we'll plan on taking the Foreign Credit Method approach in lieu of Form 2555. Thanks much.
Patrick
Just want you to be sure.
If this situation was reversed, you would NEVER be able to do what you werre doing.
US would never let you enter on tourist visa without a viable foreign residence. Neither would they let you do any work on US soil on a student visa (except for pre-approved student work).
many think that telecommuting is not working in the country of presence. They are incorrect.
As for the temporary number from CRA, many non-residents need to report income even though not eligib;e for SSN. This does not mean that you have permission to work.
You wouldn't ask the IRS if you were working legally would you? they deal with taxes.
If this situation was reversed, you would NEVER be able to do what you werre doing.
US would never let you enter on tourist visa without a viable foreign residence. Neither would they let you do any work on US soil on a student visa (except for pre-approved student work).
many think that telecommuting is not working in the country of presence. They are incorrect.
As for the temporary number from CRA, many non-residents need to report income even though not eligib;e for SSN. This does not mean that you have permission to work.
You wouldn't ask the IRS if you were working legally would you? they deal with taxes.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
Thanks for your response. Information below is not germane to the tax issues and really should be posted elsewhere, but I do not want others reading this to assume that they cannot do precisely what we've done in terms of entering Canada on a student visa and visitor visa respectively and continuing to work with US-based firms. A few final points:
1) As I mentioned previously, we met with staff at the border (i.e. St Stephen's NB) who are responsible for issuing visas. We were in an office environment - and not queued up in a line of cars.
2) Customs Canada and Immigration Canada are co-located at St Stephens, NB and other border crossings.
3) We assume that staff who issued our visas and accessed our immigration file were from Immigration Canada. Staff in St. Stephen's accessed our file with Immigration Canada and hence could confirm we were in the process of obtaining our permanent resident (PR) visas.
4) We assume the Canadian government trains immigration staff working at St. Stephens and other locations to issue Visas in accordance with Canadian law.
5) My wife and I were clear with staff regarding our intent regarding telecommuting. We told staff the names of our employers and named the cities in which they were based. We also provided them with our copy of the immigration package we submitted to Immigration Canada (in Buffalo) in September 2006.
6) Previously, when we lived in Canada 5 years earlier and I was a graduate student, my wife was legally able to work as an accompanying spouse. When I told them I'd only be working with my US-based firm, they indicated I would not require a work authorization.
7) My wife subsequently entered Canada on a student visa and I entered on a visitor visa which is valid for 3 years.
8) Shortly after arriving in Canada in July we updated Immigration Canada in Buffalo with our address, provided them with our Student/Visitor visa numbers and told them of our intent to continue working with our present firms. (We're required to keep them abreast of our whereabouts.) In our PR application package (submitted Sep 2006; accepted May 2007) we also told them of our intent to remain with our current firms after entering Canada. No red flags were raised. In fact, we received the go ahead to do our physicals earlier than expected.
9) From a public policy and revenue perspective, it would be nonsensical for the Canadian government to have a policy against allowing someone in our situation into the country. We're not taking a Canadian jobs, we pay for healthcare through a university-sponsored plan (cheaper than my employee contribution in the U.S.), and we'll contribute approximately $33-38K in taxes annually (depending on how we itemize, use RRSPs etc.)
10) We've met a second American couple in Halifax who have done exactly the same thing we have done. (i.e. they've applied for PR, and arrived early on a student visa).
11) The US immigration context is completely different for reasons I should not into since this is a tax forum.
12) To summarize: We've spoken with people at Service Canada, Immigration Canada, and Revenue Canada. None of the staff in any of these agencies have raised red flags or in any way expressed concern regarding our actions.
13) I'd like to thank you again (Nelson) for your postings relating to cross-border tax issues on this forum. The postings have made this forum an valuable resource for someone in our situation sorting our a myriad of new issues. At the same time, I think it appropriate down this thread pertaining to immigration, as the subject is more appropriately dealt with elsewhere.
Best Regards,
Patrick
1) As I mentioned previously, we met with staff at the border (i.e. St Stephen's NB) who are responsible for issuing visas. We were in an office environment - and not queued up in a line of cars.
2) Customs Canada and Immigration Canada are co-located at St Stephens, NB and other border crossings.
3) We assume that staff who issued our visas and accessed our immigration file were from Immigration Canada. Staff in St. Stephen's accessed our file with Immigration Canada and hence could confirm we were in the process of obtaining our permanent resident (PR) visas.
4) We assume the Canadian government trains immigration staff working at St. Stephens and other locations to issue Visas in accordance with Canadian law.
5) My wife and I were clear with staff regarding our intent regarding telecommuting. We told staff the names of our employers and named the cities in which they were based. We also provided them with our copy of the immigration package we submitted to Immigration Canada (in Buffalo) in September 2006.
6) Previously, when we lived in Canada 5 years earlier and I was a graduate student, my wife was legally able to work as an accompanying spouse. When I told them I'd only be working with my US-based firm, they indicated I would not require a work authorization.
7) My wife subsequently entered Canada on a student visa and I entered on a visitor visa which is valid for 3 years.
8) Shortly after arriving in Canada in July we updated Immigration Canada in Buffalo with our address, provided them with our Student/Visitor visa numbers and told them of our intent to continue working with our present firms. (We're required to keep them abreast of our whereabouts.) In our PR application package (submitted Sep 2006; accepted May 2007) we also told them of our intent to remain with our current firms after entering Canada. No red flags were raised. In fact, we received the go ahead to do our physicals earlier than expected.
9) From a public policy and revenue perspective, it would be nonsensical for the Canadian government to have a policy against allowing someone in our situation into the country. We're not taking a Canadian jobs, we pay for healthcare through a university-sponsored plan (cheaper than my employee contribution in the U.S.), and we'll contribute approximately $33-38K in taxes annually (depending on how we itemize, use RRSPs etc.)
10) We've met a second American couple in Halifax who have done exactly the same thing we have done. (i.e. they've applied for PR, and arrived early on a student visa).
11) The US immigration context is completely different for reasons I should not into since this is a tax forum.
12) To summarize: We've spoken with people at Service Canada, Immigration Canada, and Revenue Canada. None of the staff in any of these agencies have raised red flags or in any way expressed concern regarding our actions.
13) I'd like to thank you again (Nelson) for your postings relating to cross-border tax issues on this forum. The postings have made this forum an valuable resource for someone in our situation sorting our a myriad of new issues. At the same time, I think it appropriate down this thread pertaining to immigration, as the subject is more appropriately dealt with elsewhere.
Best Regards,
Patrick
As isaid, tehre is a Cdm immig forum just below this one. feel free to post there.
My main point was to warn you that getting immigration advice from CRA is unwise (I'd almost say getting tax advice from them would be unwise too).
For example, you said you will be becoming a contractor. Thus you would be setting up a Cdn company, and working for it. See how this is no longer "working for a US company"?. Also, the border magent may have heard you say "I will still be working for my US employer", without hearing the more correct statement "I will be working for my US employer IN CANADA".
Do you really think that the civil service in canada is better than the US?
The immig laws of canada or of course much more reasonable than those on the US (I unfortunately have only had to survive the US laws). Almost everthing is. There are the same principles however.
In any event, I wasn't giving you immig advice, I was suggesting you confirm with an immg atty, or with others more familiar with Cdn immig laws (I simply walk in, myself) your correct position.
My main point was to warn you that getting immigration advice from CRA is unwise (I'd almost say getting tax advice from them would be unwise too).
For example, you said you will be becoming a contractor. Thus you would be setting up a Cdn company, and working for it. See how this is no longer "working for a US company"?. Also, the border magent may have heard you say "I will still be working for my US employer", without hearing the more correct statement "I will be working for my US employer IN CANADA".
Do you really think that the civil service in canada is better than the US?
The immig laws of canada or of course much more reasonable than those on the US (I unfortunately have only had to survive the US laws). Almost everthing is. There are the same principles however.
In any event, I wasn't giving you immig advice, I was suggesting you confirm with an immg atty, or with others more familiar with Cdn immig laws (I simply walk in, myself) your correct position.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
Thanks for your follow-up. Regarding my status as a contractor, I may be required to go back have my visa updated to allow me to work - which I can legally do under my wife's student visa. Recall she was in the reverse situation 5 years back. Bottom line is I may have to follow-up with Immigration Canada regarding working as a contractor, but we should be fine given that I'm legally able to work as an accompanying spouse in Canada. If Immigration Canada concludes that I can only work at the local fish and chip shop (rather than my present position), then I'll answer your question about the Canadian vs. US civil service decisively. LOL.
Best,
Patrick
Best,
Patrick
Patrick
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
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Patrick M.
- Posts: 8
- Joined: Sat Oct 20, 2007 1:14 pm
- Location: Nova Scotia
As it turns out, Immigration Canada already answered the question regarding my telecommuting while accompanying my wife (who entered Canada on a student visa). All I needed to do was look at my visa.
I had not noticed prior to posting earlier, but my visa contains an accurate description of my circumstances - namely that I'm an accompanying spouse, my wife holds a study permit, etc. The visa goes on to say that "client is still currently employed by <my firm's name> based in <my firm's location>" and that I'll be working "long distance".
I also looked at the visa issued to my wife when she accompanied me to Canada when I was in grad school here. Her old visa reads "Employer: Any Employer"; "Occupation: Open EA", meaning she could work anywhere during the three year period covered by the visa. I could have done the same, but I declined knowing that I'd continue to work with colleagues south of the border.
I had not noticed prior to posting earlier, but my visa contains an accurate description of my circumstances - namely that I'm an accompanying spouse, my wife holds a study permit, etc. The visa goes on to say that "client is still currently employed by <my firm's name> based in <my firm's location>" and that I'll be working "long distance".
I also looked at the visa issued to my wife when she accompanied me to Canada when I was in grad school here. Her old visa reads "Employer: Any Employer"; "Occupation: Open EA", meaning she could work anywhere during the three year period covered by the visa. I could have done the same, but I declined knowing that I'd continue to work with colleagues south of the border.
Patrick