TN extended remote work in Canada

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca »

After spending the weekend reading thru the non-resident return guide, I got a better understanding of the reporting requirements.

Basically, one reports the prorated US-wages to CRA and pay the federal and provincial taxes. The only difference with a resident return is not including other income like interest or capital gains. There's no CRA credit to claim so the sum of taxes to be paid is going to be large and will need to be plan/timed properly with IRS return with form 1116.

I was confused earlier when reading through the guide and assumed my US-wages are foreign, but for my case of exceeding 183 days while keeping non-residency, it's Canadian sourced income (as others, not on the foreign income section) in ufile and turbotax.

Now, I'm assuming I don't need to prepay the CRA taxes by installment right? While the estimate tax for 2020 can be up to 40k and exceeds the 3k limit for ON, I did not file for 2019/2018 and thus has not met both requirements per https://www.canada.ca/en/revenue-agency ... html#fctrs, after all, this is still up in the air and I may not exceed the 183/365 days in the end.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona »

Thanks for repeating what I told you a few times already.

As to making installments, you can make them if you wish. You may also want to increase your exemptions on your W-4 for the rest of the year, as you will grossly overpay your US taxes if the income "becomes" Cdn-source, eligible for 1116.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca »

I try to summarize the conclusion, for my own reference on steps to take next year in filing 2020 taxes, as well as to help anyone in the similar situation :)

I'm keeping track of the days present in Canada, and until I exceed that I probably wont' do anything. Afterwards, I'll have to calculate and possibly consider filing as resident of Canada if the benefits (health coverage, other credit or deductions) may overweight the cost (the hassle of declaring assets in 2020 for arriving/departing, and tracking market value of them)
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona »

Remember, those 183 days accumulate between the first day you returned to canada -- until next year on same date. Sometimes, you can hit the 183 days in the next tax year, and have to back-file a return for the previous year. So be prepared for that.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
FIRELife
Posts: 5
Joined: Thu Sep 03, 2020 12:02 pm

Re: TN extended remote work in Canada

Post by FIRELife »

This super helpful,

Thank you Nelson and Jixca for posting. @Jixca, I am in the same boat - quarantining in Canada and US employer is fine so I am on US payroll. I plan to stay at least the whole year.

To summarize (Hope I don't annoy you Nelson):

Even if I still more then 183 days, I can still be a non-resident of Canada but need to pay taxes for the time I was here (this is really important to me as I want to take advantage of the cost-basis for Capital Gains when I do officially move back to Canada since that is based on the date I become a resident again).


@Jixca do you want to connect off of this forum as we both go through this super unique and complex process?
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona »

Whether you become resident of Canada depends on residential ties to compared to your US ones, and not days in canada. If you become more tied to Canada than US, you become resident that day, which could be the first day you return to canada. So if you are not wanting o become resident of Canada, you need to keep as many ties in US as paoosible and as little as possible in Canada (whcih would include not getting an appartment or house to live in)
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca »

Agree with above.

There is another thread (viewtopic.php?f=2&t=299631) that has some CRA updates which may excluding counting the March-September 2020 period in 183 day calculation, but I think to keep being non-resident while in Canada one still has to avoid many things which will become impractical eventually (health insurance, renting or purchasing home, and also Canadian income if one starts to work locally even just a little) while also keeping all ties in US.

Personally I've paused the clock by leaving, until there's more clearer CRA position on this I'm taking the conservative approach. It's not clear yet if one needs to explicitly report to CRA for 2020 on the Covid waiver/exception or just not file for 2020 as per usual for non-resident with no Canadian income to report.
FIRELife
Posts: 5
Joined: Thu Sep 03, 2020 12:02 pm

Re: TN extended remote work in Canada

Post by FIRELife »

Thank you both.

That makes sense - I have no ties to Canada other than bank account/credit card (no investments). In the US, I still have an address, all my net worth there (investments, savings), and am still on US payroll.

I am actually totally fine with filing Canadian Taxes in 2020 (it would be nice though to save some $$). What is important to me is to be deemed a non-resident for 2020 because for my US Stock investments, I came back in March and that would be ugly if I want to take advantage of the Cost-Basis for Capital Gains Taxes when moving back to Canada. I actually plan to come back to Canada to be a resident in 2022.

Let me know if you two have any more thoughts on my situation. Appreciate it!
SarcasticSeal
Posts: 1
Joined: Thu Sep 17, 2020 9:00 pm

Re: TN extended remote work in Canada

Post by SarcasticSeal »

Also wanted to extend thanks to @nelsona and @jixca for this discussion.

I'm in a very confusing boat this year as I moved to California on a TN visa in Feb 2020 and cut ties to Canada aside from RRSP. Unfortunately with the pandemic, I have temporarily moved back in Sep 2020 but still have all my ties in the US with plans to move back to California once restrictions are eased. I contributed to Roth 401(k), Roth IRA, and individual brokerage accounts during this time.

Would I still be eligible to file a departure return for Canada in 2020 in this scenario? I have established no ties in my temp move back (e.g., health insurance, rental property, phone line, investments). I am worried that becoming ineligible for NR in Canada will lead to my Roth 401(k) and Roth IRA contributions being deemed "Canadian contributions" and thus not be eligible for deferral under Article XVIII.
jixca
Posts: 86
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca »

You should start a new thread, your situation is quite unique and differ from those that have already established non residence prior to 2020.

I would calculate carefully on both scenarios in terms of tax burden to US and Canada, especially with any assets sold with capital gains. 2020 isn't over yet so you have some room to plan and choose.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona »

There has been guidance provided by CRA on being starnded in Canada due to COVID. Even if this doesn;t apply to you, the notice also explains how one becomes CDn resident by being in Canada for prolonged period.
See other threads on this.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
heiwang88
Posts: 13
Joined: Mon Nov 09, 2020 12:12 am

Re: TN extended remote work in Canada

Post by heiwang88 »

jixca wrote:
> After spending the weekend reading thru the non-resident return guide, I
> got a better understanding of the reporting requirements.
>
> Basically, one reports the prorated US-wages to CRA and pay the federal and
> provincial taxes. The only difference with a resident return is not
> including other income like interest or capital gains. There's no CRA
> credit to claim so the sum of taxes to be paid is going to be large and
> will need to be plan/timed properly with IRS return with form 1116.


@jixca, what is this non-resident return guide that you speak of? Would you have a link? Thanks.
bluesky
Posts: 31
Joined: Sun Mar 29, 2020 11:01 am

Re: TN extended remote work in Canada

Post by bluesky »

nelsona wrote:
> First, in addition to the fed tax you won't use the surtax, but you will
> use the provincial tax for the province you are in. The instructions on the
> non-resident guide tell you to use the province's return, not the non-res
> return (ufile might need to be tweaked for this). Second, your US tax used
> for the foreign tax credit will be the prorated tax you figure on your US
> tax return next spring, not what is being currently withheld.
>
> Generally, those required to report US wages on a CDn return do not pay any
> Fed tax, as it is usually about equivalent and the credit erases that, but
> they pay almost all of the provincial tax.

HI nelsona, do we use total W2 fed tax + SS tax + medicare tax to calculate the tax rate to apply to the foreign income? And this is entered in 43100 on T2209? This is substantially more than the calculated basic federal tax calculated in the line below (2).
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona »

You never use w-2 to detemine tax. You use your completed US tax return. W-2 can be used for FICA and applied only to wages,
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Post Reply