Commuting to Toronto from NY, How to deal with exchange, etc

[BruceP]

I am thinking of accepting an engineering job with a company in Toronto. I am not willing to permantently relocate to Toronto due to family reasons. I plan to commute to Toronto, acquiring an apartment in Toronto, and spending weekends back in NY State.

I expect to get paid starting in Jan 2007. All income for 06 is from the States. I might also be paid some US income for consulting.

My understanding is that I will file in both Canada and the US. I am expecting to pay 30.3% in Canada for income taxes. In the states, I will pay NY State taxes, but apparently will receive a credit from the IRS. If there is any consulting income from the states, I will pay US taxes on this normally.

Are there additional payroll taxes I should expect in Canada?

I will be paid in Canadian dollars in Toronto. How do I best exchange the majority of my income to US dollars, as that is the location of the vast majoirty of my financial obligations? Should I acquire a Canadian credit card to use in Canada when I am there?

I worry about the variation of the exchange rate. If it changes considerably with a stronger dollar, I will be making less income. I guess this is a "risk" to take with this situation. Of course, if the US $ continues to weaken, I will gain. The risk in something as essential as salary concerns me. It is not an investment were some risk is expected.


Thanks,
Bruce

[nelsona]

You should, of course, set up a Cdn bank account (for your pay to be directly deposited), and if possible, a Cdn credit card.

Use the Cdn credit card in Canada. This will avoid any fees.

The easiest way to bring the money to US, will be from time to time, get a bank draft from your cdn bank in US dollars, and simply deposit it in your US bank. Or, you could set up a US$ account along with your Cdn$ one at the same bank. Do any exchanges in canada as this will be far cheaper and quicker than doing these thru your US bank.

as to taxes, because you will likely be in Canada more than 183 days in 2007, you will be taxable on ALL your income in canada, regardless if it is earned in US or Canada. And because of your US citizenship, and your residence in NY, you will be taxable on ALL your income by IRS and NY as well.

There will be tax credits (canada will credit any US tax you pay on your US-sourced income, and IRS will credit you any Cdn tax you pay on Cdn-source income. NY doesn't give you any credit).

In canada, you will have EI and CPP to pay (that is unemployment and social security) and these are considered 'taxes' which you can take credit for on 1040.

Not much you can do to hedge aginst the US dollar rising: I guess the best thing you can do is to tell George to stay in Iraq, this will keep the US$ weak.

[BruceP]

Thanks for the advice.. I haven't found any good sources of information online about canadian bank "reviews", i.e. which bank should I go with? Does one generally offer the best exchange, dual us and cdn accounts, and lowest fees?

How much am I looking at for this EI and CPP? I have been told 31% for income taxes. I thought, apparently incorrectly, that this included the CPP. Are we talking another 10%? 20%? Ouch. Might be a deal breaker.

Thanks.

[nelsona]

If having a second place to live an commuting every week is not a deal-breaker, nor will CPP and EI.

As to the banks, they are pretty much the same. Go with the one that will give you the credit card you want.

You will get better exchange at a broker

[spocket]

I am in a similar situation, but the other way around (live in Canada, work in USA). You may find an easier/better solution depending on the banks you are dealing with, but here is what I found works best for me to transfer money between the 2 countries:

I use the online service from www.customhouse.com

It is quite convenient since everything is done online, by electronic fund transfer. At first, they game me a rate just slightly lower than going to my bank and making a check "from me to me" in Canada, but after contacting custom house and complaining, they change my "rate bracket" and now I have a much better rate than going to my bank, all from the comfort of my home. They will rather give you a better rate than losing your business since you would be using the service on a regular basis (every 2 weeks for me...).

Only downside: it takes about 3-4 days for the transfer to complete. But there is no additional fees from either my CDN or US bank...

Hope this helps.

[BruceP]

Thanks for the info...I will check them out.

So you have two different banks, one in the US and one in Canada.

Which banks? Any reason why not a single one with dual accounts?

[BruceP]

Nelsona....I have a question....Above you indicated that NY would not give me any tax credit. But what about NY Form IT-112-C, which apparently does give credit for provincial tax. What am I missing?

You know, I am a rocket scientist...and this IS so frustrating!

At least I can handle the miles to km conversion.....

Thanks!

[nelsona]

You need a bank on both sides of the border. There are no US banks which offer Cdn $ accounts.

Whether you get you US $ account in Canada or US is up to you, but I figure you must already have a US account in US.

[Pamela]

In Canada, the best bank to deal with for cross border exchanges is TD Canada Trust. You can open a Cdn $ account, a US $ account, get a Cdn visa card and a US $ visa card. Funds can be transferred easily back and forth, cards paid, all with the click of a mouse. You can even get a mortgage from them, wherever you live. It simplified things a lot for us when we lived in the States. And also, there is their discount brokerage arm, Waterhouse (Ameritrade in the States), which is easy to work with. No, I don't work for them, never have.