My common law partner (we'll call him John) and myself just received our work visas to come up to Canada from the states. John received a positive LMO which gave him permission to get his visa at the border, and he is now on payroll at the company he works for. I got an open spousal work visa, which allows me to work anywhere in Canada as long as John is here working. The visas are currently for one year but we are already looking at how to renew them and stay at least two, maybe three or four years.
My first question is a seemingly basic one: does John get taxed twice? I know he will pay taxes in Canada, but I can't seem to figure out what happens in the US. While I appreciate any opinions on this matter, proof or a reference website for how you know would be great.
My second question is a bit more complex. I have the unique opportunity to design my own work setup. I can be on a contract, on salary, or paid hourly. I can be full time or part time. The organization is basically willing to do what I think makes the most sense. So tax-wise, what makes the most sense? What is the tax difference between being a full time employee and being a contractor? Is one better or less complicated as far as the double-taxes go?
It is the same organization that has hired John and is hiring me. Another 'solution' we threw around was basically providing me a stipend instead of a salary-- paying for things for me instead of a direct deposit. Any thoughts?
Thanks!
Choosing the right option: American working in Canada
Moderator: Mark T Serbinski CA CPA
You will both report his world income on both Cdn and US tax returns. However, various tax exemptions and credits on your 1040 will eliminate any US tax on Cdn income, and vice versa.
In the first year there maight be some sitaution where some credit may not cover all tax, but that problem will go away as time goes by. 99% of amereicans living in canada pay no US tax.
Genearlly, Cdn self-employeds pay much less tax than employees, so contracting is best. Be careful though, CRA (Cdn IRS) knows that self-employed is much less taxed, so they are wary of tjose that classify themselves as self-employed and work for only one client. They will often investigate whether you are really an employee iof the firm (ie. how much control of your time/efforts/directio do you control vs. employer).
But this would only affect the Cdn tax you pay, not whther or not you will be taxable in US.
In the first year there maight be some sitaution where some credit may not cover all tax, but that problem will go away as time goes by. 99% of amereicans living in canada pay no US tax.
Genearlly, Cdn self-employeds pay much less tax than employees, so contracting is best. Be careful though, CRA (Cdn IRS) knows that self-employed is much less taxed, so they are wary of tjose that classify themselves as self-employed and work for only one client. They will often investigate whether you are really an employee iof the firm (ie. how much control of your time/efforts/directio do you control vs. employer).
But this would only affect the Cdn tax you pay, not whther or not you will be taxable in US.
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
For "reference" on US taxation of citizens abroad, look at IRS website Pub 54(?) and IRS forms 1116 and 2555.
For advice on how to set up your work relationship with this cient, see a Cdn tax accountant. This is pretty common.
For advice on how to set up your work relationship with this cient, see a Cdn tax accountant. This is pretty common.
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