canadian working virtually for a US company

[jhillier]

I haven't seen this specific question posted, and am hoping you can help me out. I am working for a US company from my home in Canada.

a) As I am resident in Canada and earn the income from my home in Canada, my assumption is that I need only to file a Canadian income tax return. The US company is not withholding taxes.

b) do I need to file a US return?

c) Is there any different way to treat my tax situation that would be advantageous to me ? (eg. as a canadian company with a US client?)

[nelsona]

a) Correct
b) No
c) No

[kingjulien]

Are you a US citizen? Who pays into CPP or FICA?

[nelsona]

If you live in either country, you pay into that social security system.

Cdn self-employed residents pay both ends of CPP. They do not pay FICA, -- even if working/commuting to the US -- as they are Cdn residents, and the Totalization agreement applies.

This would be true regrdless of the Cdn residents citizenship.

This is a separte discussion from the treatment of income and income taxes.

[kingjulien]

nelsone, you said he isn't required to file a US tax return. I didn't see him mention that he was NOT a US citizen.

[nelsona]

If he was a US citizen, he would ALREADY be required to file a US return. Nothing in his post (and this is HIS post, not yours) would indicate an additional need to file a US return nor that he was a US citizen.

As I said, even if he was a US citizen, he would not be required to pay fica -- he would pay Cdn CPP.

[jhillier]

Thanks for the speedy response.

Yes, I am a Canadian citizen. The only CDN employee of a small company based in NY. They aren't taking any deductions for CPP / EI or federal / provincial tax. So it seems kind of weird and its nice to know that I am not missing something.

[kingjulien]

You are paying into the CPP, right?

[jhillier]

Won't that adjustment occur when I pay my federal taxes?

[nelsona]

If they are not withholding, then you are not an employee, you a contractor.

If they are really wanting to treat you as an employee the absolutely MUST set up a Cdn payrol lfor you,, with Fed/Prov/CPP/EI withholding, OR they MUST have you work in the US.

[nelsona]

.. and if you are a contractor, you will be responsible for paying Cdn tax during the year, not just at year end, by quarrterly installments.

[kingjulien]

You really need to find out in what capacity you are working.

[jhillier]

So if I make 25 k through the year, and claim this as "income" does it really matter whether I am an employee or a contractor? And as a contractor, don't you need to demonstrate that you have multiple clients? Otherwise the federal government just treats you as an employee anyway.. So why does it matter so long as you claim the income and file your taxes?

[nelsona]

It is your firm that will be in trouble, for not collecting your taxes (and not paying their payroll taxes). And you will be on the hook for paying your Cdn taxes late -- by being required to makke quarterly payments.

CRA can even make you pay both ends of CPP.

[nelsona]

there are many factors that determine whether the person you are working fpr is an employer or not. Read RC4110.

If they are then you both have responsiilitiers as regards taxes and CPP. If they are not employer, then that is all on your shoulders.