US citizen in Canada, how do I avoid double-taxation?

[clay]

Sorry if this is a repeat question, as I've been searching for an answer but have had a lot of trouble finding any clear answer.

I am a US citizen working in Canada for the past year or so as a freelance contractor (non-resident), but have a permanent base in the US. I talked briefly with an international tax specialist and he informed me of the US-Canada Tax Treaty, and that with a permanent base in the US I am required only to pay US taxes.

My Canadian income taxes were automatically deducted from my paychecks here in Canada, so I am wondering how it is possible to have that money refunded from the Canadian Revenue Agency. I obtained my ITN (tax number for non-residents), but I don't know what the next step would be.

As well, would it be wiser for me to pay taxes in the US, or in Canada? It appears Canada withheld almost $3000, while I owe slightly under $2k to the IRS. Would Canada refund the entire amount withheld, or only a portion?

Sorry if the information in this post comes off as extremely ignorant. This is actually my first time paying taxes, and needless to say, my employment situation has made it a little bit more difficult if I want to avoid double-taxation.

Thanks for any help, it would be greatly appreciated!

[nelsona]

If you are non-taxable in canada, and I would agree with the acct assessment, then you need to file a Cdn return, reporting NO income, and getting the tax back. This should have been cleared up while being paid, so that nothing would have been withheld, but is easliy fixed.


Then, you report all the income and pay tax in US.

[clay]

Thank you very much Nelsona. The company I was working for had some questionable practices, so I am not surprised that it may have been mishandled by them.

[Carson]

[quote="clay"]Thank you very much Nelsona. The company I was working for had some questionable practices, so I am not surprised that it may have been mishandled by them.[/quote]

You should ask them NOW whether they are treating you as an employee, and if they intend to issue you a T4 slip (Canadian equiv of a W-2). If so, but you are just a self-employed contractor, you better clear this up before a T4 is issued. It will be much tougher to clear up after a T4 is issued.

OR, were they just withholding 15% from your invoices and will issue you a T4A-NR slip?

[clay]

[quote="Carson"][quote="clay"]
OR, were they just withholding 15% from your invoices and will issue you a T4A-NR slip?[/quote]


To clear this up, they did withhold 15% from my invoices and I did receive a T4A-NR from them.

Is that 15% refundable?

[nelsona]

I was going to pose this Q as well. If they are withholding CPP and EI from your payment, then you arfe gettin ga paycheck, which makes you an employee.

There are remedies to this even if they do issue you a T4, especially if it was less than $10,000 but if they were withhodoing 15% as NR withholding, this is fine.

[nelsona]

Yes the 15% is refundable, by filing a non-resident tax return, and reporting that the income was not taxable. (repoert the income and then deduct it on line 256).

[Carson]

[quote="nelsona"]Yes the 15% is refundable, by filing a non-resident tax return, and reporting that the income was not taxable. (repoert the income and then deduct it on line 256).[/quote]

Yup, except I would explicitly reference the Treaty, article XIV - Independent Personal Services, as the reason it is not taxable.

[clay]

Thanks for all the help! It is all making sense to me now.

I have just one question about filling out my non-resident tax return:

Since I received a T4A-NR, where do I report my income on the tax return? Do I have to report that under the "Self-employment income," and include a T2032 with my return?

OR, do I just report the income from my T4A-NR in the "Employment income?"

I see no mention of T4A-NR on the return

[nelsona]

The t4-nr might have info on the back. If it is self-employment income, it should be reported as such.