Hi all, first post. I'd appreciate some insights.
I live in the USA where I have an income and file taxes, and was offered a consulting position (this would be in addition to my regular US income) at a Canadian employer for a project that could last a few months to 2-3 years hence. They gave me two options for payment:
Option 1 is to be an employee of theirs, which means Canadian $ income, and I am obligated to pay into their pension plan. I assume this means I also have to pay taxes in Canada, as well as the USA, on that income. I did this once before, about a decade ago, and I recall losing a lot of money during tax time. In fact, I think I may be eligible to recover something, though my memory is vague.
Option 2 is to be a freelance contractor. Get paid in US dollars as an independent contractor. They will deduct 15% withholding for work done in Canada, although probably 80-90% of my time working on this project will happen in the USA. I don’t know what happens to the withheld money or how it's recovered. Also unsure if I will need to file taxes in Canada.
Which seems to be the better option from a financial standpoint? Is that also the option that will mean less headaches in terms of filing taxes?
Which option is superior?
Moderator: Mark T Serbinski CA CPA
By a WIDE margin, being a contractor would be FAR better than being an employee.
AS a contractor, you will not have to pay into their benefits, nor have payroll taxes deducted, which will be of little value to you as an American resident.
And it would all be subject to Cdn and provincial income tax if you were an employee.
As a contractor, you won't even owe Cdn taxes, you will get any withheld at year-end by filing a non-resident return and excluding all the income.
Then, you will treat all this income as if earned in US.
AS a contractor, you will not have to pay into their benefits, nor have payroll taxes deducted, which will be of little value to you as an American resident.
And it would all be subject to Cdn and provincial income tax if you were an employee.
As a contractor, you won't even owe Cdn taxes, you will get any withheld at year-end by filing a non-resident return and excluding all the income.
Then, you will treat all this income as if earned in US.
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