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: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Sat Jun 20, 2020 2:49 pm

Thank you for the reference, I found the explanation on https://serbinski.com/practical-applica ... treaty#103 now.

So, given it's likely I will exceed the treaty 183 day rule soon, I want to plan for how I spend the rest of 2020. I'll revisit this again next year after things finalized but here's my rough idea.

Assuming the above, I will remain US resident for 2020 and file 1040 full year as usual and form 8833 claiming (RRSP Article XVIII(7) + Article XV) and form 1166 on whatever amount I pay to CRA.

For Canada, I can file as non resident and reporting my US wages (prorated I suppose) only for the days I spent in Canada in 2020. Can I exclude other passive income (bank interest, capital gains...etc from US) ? I'm also assuming that the few weekends I spent in Canada from 2019 are not relevant for reporting other than calculating the 183 days rule right?

What's the recommended or official way to calculate the wages for reporting in this case? Can I simply divide my annual salary by 365 days and multiply by the days in Canada and then apply an average yearly IRS currency conversion rate?

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Sat Jun 20, 2020 5:24 pm

You count the number of days you work in the year (excluding vacation, etc) and count the number of days you work in canada. That will be the fraction.

As I have now said for the third time, you only report wages.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Sat Jun 20, 2020 5:26 pm

Not sure why you would need any Form 8833. Neither your RRSPs nor your wages need it.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Sat Jun 20, 2020 6:08 pm

I've always used 8833 for noting RRSP per treaty, in addition to FBAR and 8938. I thought that's the general form for declaring notes related to treaty articles, but thanks for mentioning I'll look more into it for 2020.

Now that I have a clearer picture on how my whereabout can affect my taxes for 2020, if I resume health coverage in Canada or take weekend contract work for Canadian company, will I still be non-resident in the eyes of CRA? I figure if I'm going to exceed 183 days treaty rule and report wages and pay into CRA, I may as well utilize the health care while I'm here.

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Sun Jun 21, 2020 8:20 am

Health coverage requires you to be Cdn resident. If your desire is not to re-establish Cdn residency, then you should not apply for OHIP, since that implies you have returned to Canada.

You are already razor-close on the edge of CDn tax residency, so taking work and applying for OHIP would definitely make you resident.
You could no longer say you were merely on an extended assignment for your US firm.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Sun Jun 21, 2020 11:22 am

My desire is to simplify tax reporting requirement for 2020, one way or another.

Since I already exceed SPT on US side I'll have to file as full year US resident anyway. With my payroll already being withheld for various taxes, I don't know how easily it is to convince IRS as being non resident and refund back such portion next year even if I claim closer connection exemption to Canada.

I'm currently sitting on ~140 days in Canada rolling 365 day period, thanks to this I still have a little time to plan how and where to spend rest of 2020 days.

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Mon Jun 22, 2020 6:36 am

Wages are taxable in US, regardless, so there is no point fighting it, or claiming closer connection. You simply report the income in both countries, and take foreign tax credit on your 1040 for the Cdn taxes you pay on the income you report in Canada. I have have saib now third time, you are just like any american who takes a medium-ter assignment in Canada.

You can't simplify, because you have chosen to make your situation complicated. Why did you come back to Canada in the first place?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Mon Jun 22, 2020 10:18 am

I came back because I had the mobility (only myself to consider since I'm single) and NYC Covid situation. There's a lot of unknown and worsening trend back in March.

Anyways, the tax situation end result will probably be the negligible given the high tax rate of NYC, it's just a hassle to account and report but that's why I'm planning now.

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Wed Jun 24, 2020 9:29 pm

So, I did some research and estimated calculation based on 2019 numbers. Please let me know if I'm missing or assuming incorrectly.

Assuming I have 200/250 work days in Canada excluding vacation, weekend...etc, I'll use 80% of the figures from W2 to calculate and apply a yearly average conversion rate.

Using ufile for canada, I'm filing as non-resident with foreign gross income reported on line 42900. I also include the total W2 deduction (federal, state, city, FICA) as foreign tax paid on T2209, this basically cancels out the basic federal tax and I will owe just the surtax of the total tax payable at 48%

So if I report a gross income of 100k for Canada, the basic federal tax is 18k and the foreign tax deduction is also 18k. Then the net federal tax to Canada is just 48% of the 18k at about 8k. There's no province portion to include as non-resident, or am I missing it? Couldn't find province related fields once I set my non-residency on ufile.

After that, I just include the same numbers for IRS on form 1116 as general wage, with the numbers converted back to USD and about 6k as foreign tax credit, which appears as refund using taxact.

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Wed Jun 24, 2020 10:06 pm

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.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Wed Jun 24, 2020 10:07 pm

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.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Wed Jun 24, 2020 11:19 pm

Thanks Nelsona

Yes I'm aware that the taxes withheld on US payroll are just estimates, in 2021 once I get the final W2 and other forms I'll have to do a side by side 1040 and non resident T1 to match the numbers on form 1116 and T2209. CRA will also want me to include the 1040 and my W2, plus my worksheet and explanation of calculation and treaty...etc.

I found the surtax reference on https://www.canada.ca/en/revenue-agency ... c520865221
but ufile keep calculating the 48% and doesn't add the T2203 so I will have to try another software or just do the form by hand, since this is just wages reporting it's relatively simple.

I calculated both US and Canada tax rates based my wage income from 2019, and US is actually higher so I think in the end it's going to be equal. I'll likely just have to move some money to Canada and pay first.

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Thu Jun 25, 2020 9:05 am

Just a reminder, in case my comment was confusing, the wages you report on your Cdn return are considered Cdn-sourced (otherwise you would not be reporting them). As such, you CANNOT claim any foreign taxes on the wages you report. Double taxation relief will have to come on your 1040.

The situation I described earlier is for Cdn residents performing work in US. Those wages woudl be US-sourced. Yours are not.
.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

jixca
Posts: 75
Joined: Wed Apr 06, 2016 9:12 am

Re: TN extended remote work in Canada

Post by jixca » Thu Jun 25, 2020 2:06 pm

Thank you, I was a little confused too because reading the guide of T2209 it seems to be for canadian residents only, so to confirm, as non-resident of canada for whole year and physically present more than 183 days, my reporting of US wages will need to be reported as other gross employment income without any tax/FICA but adjusted by currency and my time working in canada, and I can't report any foreign taxes paid using T2209.

This then nets me about 28k federal tax (based on 100k income) in ufile and turbotax are showing the same output. Basically I owe the federal amount of 18k + 48% of surtax ~28k, while there's no provincial portion. Looks like once the residency answer is chosen as non-resident for whole year then it's automatically calculated that way. I'll have to look into more about how to remove the surtax of 48% and replace it with provincial in the mean time.

For the taxes paid to CRA and then reporting on form 1116 for IRS, the credit cannot exceed the US tax liability relating to foreign earned income, but does that liability not include the state/city/FICA deduction? After conversion, I've put in 20k USD tax paid on 70k USD employment income on form 1116 but the net credit only came about 10k because the ratio of my canadian-reported wage/total US income is about 70% and then my total US federal tax-only also limits the credit. Basically, I'd only get 50% back of the taxes paid to CRA through form 1116 if my calculations are correct.

nelsona
Posts: 16414
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: TN extended remote work in Canada

Post by nelsona » Sat Jun 27, 2020 9:36 am

Again, you will pay PROVINCIAL tax on the wages, NOT the surtax. Please read the first 5 pages of the non-resident tax guide, which explains that WAGES are reported on a PROVINCIAL return.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply