Need help understanding the TN visa for IT contracting

[roark_theman]

Hi,

I am pursuing an opportunity for IT contract work in Michigan, starting February next year. My family will stay in Canada and I plan to visit during the weekends. Plan is to work from Mon-Thurs in US and return back to Canada on Thursday.

1) Can I work as a contractor, with the US firm paying my Corporation here in Canada? From what I read here, it seems OK. Please confirm. Are IT contract vendors allowed to sponsor TN visa?

2) Do I need to deal with US taxes if my Canadian Corporation pays me? Will I be considered a resident of US, if I am working from Mon-Thursday? If it is considered as four day stay, then I will probably cross the 183 day rule. Will I be filing IRS taxes for my corporation too?

3) Will I be paying taxes on my TFSA, RRSP and RESP to IRS? Do I need to close these accounts to avoid IRS hassle?

4) Do I need to report my wife's income to the IRS?

5) Is it better to work as a contractor or as a FTE?

Appreciate any help in these matters.

Thanks
Roark

[nelsona]

1. Yes.
2. If you keep under the 183-day rule (in ANY 365-day period) you will not have personal income tax to deal with, nor corporate. You will have to fiel a "protective" corporate return, just to ensure that yo uare no liable for tax. If you stay more than 183-days per 365 you will trigger US tax, so try REALLY hard to avoid this.
3. No, you will remain a Cdn resident by treaty due ti all your Cdn ties, you would at most be liable for US tax on US-source income.
4. No
5. For a person stil living in Canada, it os better to be a contractor since you don't really benefit from US perks, and can ask for higher remuneration because of this, Also you are exempt from US fica social secr=urity payments as a foreign contractor.

[roark_theman]

Appreciate your inputs.

Things are changing a bit. They prefer FTE and want me to join as early as possible, before the end of the year.

If FTE, my corporation would not be involved in the transaction. As for my personal taxes, I may need to file 1040NR for this year.

Many many thanks regarding TFSA, RESP and RRSP. As per the treaty, I do not need to pay any taxes on them or disclose the details to the IRS, as I will always be filing 1040NR. That's a great relief. Hope I understood it right.

As an FTE, do I need to pay FICA, SSN taxes, even though I will be a resident of Canada? Should I be contributing towards my 401K and not RRSP? I will be contributing towards SSN, FICA without any benefit?

Thanks again.

[nelsona]

You will have to have fica withheld as an employee.
As to 401(k), you can contribute, and the contribution will be deductble in Canada, and reduce your RRSP limit. There is a form to file in Canada.

[roark_theman]

Thanks for all your help. This is what transpired after that last conversation.

I signed up for FTE working Mon-Thu, while the family stays back here in Canada. I will be working in Michigan.

I am filling the W-4 forms as requested by the employer. I think I cannot claim dependents or child tax credits.

Is there any form (US/Canada) that I need to file before taking up this employment? Do I need to identify/specify on any form that I am a Non-Resident alien?

[nelsona]

How you choose to have your deductions made by thecw4 are really meaningless
You will determine your actual tax at tax time
But, as cdns your wife and kids can be claimed
Worry about this at the beginning of the 2017 tax year

Nothing special to report to IRS, fir Canada nothing changes, you remain a cdn resident taxpayer

[roark_theman]

When you say as Cdns, wife and kids can be claimed, can I add up the number of kids and give my self extra points, while filling w-4? My wife is working and may not be eligible for W-4 score. Even if I am filing 1040NR, can I claim my kids as dependents and get child tax credits in US? Kids will not even reside in US.

With the new liberal government tax policy, we don't get anything for kids in Canada.

Nelsona,

On another note, is there someway you charge consultation? For the great service you do here, I wish there is a way it can be appreciated. Thanks so much. Appreciate your help.

I was reading your posts going back to old threads. Tremendous job. Kudos.

Basically, consulting through Canadian corp is the best way to work for US companies, if the person plans to be a resident of Canada. Not sure whether this is still true, if the person has to stay more than 183 days.

Thanks again.

[nelsona]

As I said, you will be able to get exemption for your spouse and kids on 1040NR, but this has very little to do with W-4. Just file that as simply as possible, it really doesn't matter for this year. Given how you will file, with special treaty provisons, there is no way that your w-4 withholding will be accurate. You can give your self as many points a s you want as long as you don; owe too much at end of the yeat (next year, this year doesn't count).

There is a difference between being TAXED in the US, and being RESIDENT in US.


Yes consulting would be best, and remaining Cdn resident would be best, and you would have no worries about this, due to your family and residence situation. Your contract work would only be taxed in US if you stayed more than 183 days in ANY 365 day period (not just calendar year). You would stillavoid SE tax due to your Cdn residency (getting certificate for paying CPP).

But you are en employee, so this makes you both taxable in US and liable for FICA, regardless of here you live.

Someday I hope to start a sideline, but, of course I would never use this site to promote or request any business or compensation (unlike some unscrupulous pros have done here).