I'm sure this question gets answered a thousand times a day, but I haven't found my specifics.
I am a US Citizen working for a Canadian company. Actually, technically I am working with/through a US company as a contractor, and 80% of the income is payable to me. We have 15% withholding in Canada, and charge GST. Both the company that I am working through/with and I each have registered for individual CRA numbers.
My primary residence is in the US and I have rented an apartment in CA. For about 4 months this year, I spent 4 days a week in CA, and returned home to the US on the weekends. For the past month or so, and continuing on, I work 50% of the time in the US (remotely from the CA company) and 50% onsite in CA.
As I understand it, I will be filing taxes with Canada for all of the revenue earned from the Canadian company, then claiming a credit on my US taxes for the amount I paid to Canada.
My question has to do with travel expenses and deductions. I have been advised that I should deduct my travel expenses from my CA return. To my thinking, it seems like I am better off deducting from the US. For example:
Earned in Canada - $100
Travel expenses - $10 (say deduction is worth $2)
CA Taxes: $35
US Taxes: $30
Scenario 1 (expenses to CA):
Pay $35 - $2 = $33 to CA
Pay $30 - $33 (tax credit) = ($3) from US
Scenario 2 (expenses to US):
Pay $35 to CA
Pay $30 - $35 (tax credit) - $2 = ($7) from US
I realize AMT and other stuff may come into play here but it seems to me better to claim expenses in US?
Also, if I do claim expenses in CA, can you use per diem or do you have to have receipts for everything (I believe US allows per diem) - it's hard to keep up with 7 months of McDonald's receipts.
Thanks (sorry for length).
US Citizen Working in Canada
Moderator: Mark T Serbinski CA CPA
"As I understand it, I will be filing taxes with Canada for all of the revenue earned from the Canadian company, then claiming a credit on my US taxes for the amount I paid to Canada."
Why? Your employer is a US company with no fixed base in canada, and you spend less than 183 days a year in canada, and are a US resident for tax purposes, then you should not be taxable at all in Canada. The withholding is merely a safety measure; you would get ity all back at tax time.
But, if the situation changes, and you ar etaxable in Canad, then you can use whatever deduction in BOTH returns. It makles little sense to use an eligible deduction on one return and not the other; otherwise your ededuction becomes meaningless.
Why? Your employer is a US company with no fixed base in canada, and you spend less than 183 days a year in canada, and are a US resident for tax purposes, then you should not be taxable at all in Canada. The withholding is merely a safety measure; you would get ity all back at tax time.
But, if the situation changes, and you ar etaxable in Canad, then you can use whatever deduction in BOTH returns. It makles little sense to use an eligible deduction on one return and not the other; otherwise your ededuction becomes meaningless.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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sounds like your US employer/client is billing the Canadian customer, and you bill the US company...correct?
From the information provided it would seem that YOU do not have to file any Canadian income tax returns, as pointed out by elsona.
The US company (your employer/client) will have to file a Canadian return to report its treaty exempt activities and recover the taxes withheld. NB!: this would not be true if the US company already or otherwise has a 'Permanent Establishment' (PE) in Canada; if they do already have a PE, your activities on their behalf might be taxable income in Canada for them (though you, personally, would still not have a Canadian file requirement based on the info provided).
Your US company employer/client may want to look at requesting a waiver from Canadian withholding taxes for treaty exempt activities. I think the form is R105 and if the request is approved, the Canadian customer would be authorized to not withhold, however, your US company employer/client would still have to report the treaty exempt activities on a Canadian tax return. It becomes a cash flow issue -- waive the withholding now or recover withheld taxes later. Either way, you still have to report the activities on a Canadian tax return.
From the information provided it would seem that YOU do not have to file any Canadian income tax returns, as pointed out by elsona.
The US company (your employer/client) will have to file a Canadian return to report its treaty exempt activities and recover the taxes withheld. NB!: this would not be true if the US company already or otherwise has a 'Permanent Establishment' (PE) in Canada; if they do already have a PE, your activities on their behalf might be taxable income in Canada for them (though you, personally, would still not have a Canadian file requirement based on the info provided).
Your US company employer/client may want to look at requesting a waiver from Canadian withholding taxes for treaty exempt activities. I think the form is R105 and if the request is approved, the Canadian customer would be authorized to not withhold, however, your US company employer/client would still have to report the treaty exempt activities on a Canadian tax return. It becomes a cash flow issue -- waive the withholding now or recover withheld taxes later. Either way, you still have to report the activities on a Canadian tax return.