Cross-border telecommuting: Self-employed OR Incorporate?

fannycao · Post by **fannycao** » Mon May 14, 2012 11:18 pm

Hi,

I'm a Canadian currently working in the US under H1B visa, I'm considering moving back to Canada to be closer to my family, and trying to work out a deal with the current company to see if I can continue working for them as a IT consultant remotely from Canada. I am required to be here 3 days every 3 weeks for business meetings and planning.

My question is that what is a better choice in terms of tax advantage: self-employed or incorporate? If deal works out, I will be making 100k+ and I was reading somewhere that the amount will make a difference between the decisions?

If I'm self-employed, do I need to file US taxes? I read somewhere that the company can issue me a 1042-S (NR for 1099), or they should give me 1099? Are they going to withhold taxes? Also, am I required to register a small business (GST number, etc) if i'm self-employed in this case?

The company also has a Canadian office, if I'm incorporate, can I still bill the US company for the work performed? Is there any tax implications?

Thanks!
Fanny :)

JGCA · Post by **JGCA** » Wed May 16, 2012 6:55 pm

you can incorporate in Canada and bill them for services as long as you are not in the US more than 183 days in any 365 day period you are non resident and will file taxes in Canada on all income. They have an office you say in Canada you will need then to charge GST since they are in Canada so you may as well bill the CND company to be easier and this way the income qualifies for teh small business tax rate since its CND source.

fannycao · Post by **fannycao** » Wed May 16, 2012 9:03 pm

For the purpose of minimize tax (I will maximize what's available to be expensed) as well as minimizing the probability of being audit (as that would create a lot of headache, paper work, etc), what's the best way? self-employed or incorporate?

ie, at what level of income would incorporate starts to make sense?
ie, does self-employed has less deductable items than incorpoate? Or they are the same?

JGCA · Post by **JGCA** » Thu May 17, 2012 2:11 pm

Its the same thing self employed is just not on payroll but it can be as subcontracting income to yourself or to a corp you own. There is no difference in allowable expenses if they are business related you can claim them, BUT a corp will cost you at least double in accounting and legal fees to maintain so its not receommended unless you are making a lot of income over $ 100K a year would pay in the tax savings or deferral available with a corp.

nelsona · Post by **nelsona** » Fri May 18, 2012 7:05 am

The only other reason to incorporate would be for liability reasons.

fannycao · Post by **fannycao** » Sun May 20, 2012 8:59 am

Hi, you guys mentioned there's "tax savings and earnings defer" that's available in corp but not in self-employed. Earnings defer I understand... What type of tax savings is available in corp but not in self-employed? My contract will be around 140K a year.

JGCA · Post by **JGCA** » Mon May 21, 2012 10:00 am

No tax savings in corp, its only defered the tax rules are almost identical in what is taxed and what is allowed as a deduction in general its the same for small business.