US citizen working offshore for Canadian Corporation while living in the USA

QUESTION: Hi-
I'm a US citizen about to take a job with a Canadian based company.
I'll continue to live in the US, but will work overseas mostly, but on
occasion in Canada. I'm looking at the possibility of opening a savings
account with a Canadian bank for deposit of my pay to take advantage of the
current exchange rate differential of change. First, can I do this?
Second, if I can, are there Canadian tax implications? I'm aware I'll have
to pay tax to the US.



david ingram replies:

There should not be any problem with your opening a Canadian bank account,
particularly if your employer wants to make direct deposits. Your
employer's bank should open an account for you under the circumstances.

What you really have to worry about is Canadian income tax and social
services deductions.

If you are going to continue to live in the US and are not going to be away
from the US for more than 330 days a year, you will still be taxable in the
US on all of your income. If you are away for 330 out of 365 days, you can
exempt up to $80,000 a year by filing form 2555.

Your biggest problem is that you do NOT want the Canadian Employer to deduct
Canadian tax, CPP or EI from you because your first tax liability is to the
offshore country or countries you are working in if they have a tax rate
(Libya does, Dubai does not for instance). Your second tax liability will
possibly be to Canada if you earn more than $10,000 in Canada (ART XV of US
/ Canada Tax Treaty). And your third and always tax liability will be to the
USA.

You should likely spend $400 Canadian and buy an hour of my time so that you
know where you are going.

In your situation, it would seem to me that having a Canadian Account will
be disruptive to your life. And remember, once you open it, if you ever
have more than $10,000 US gross in all of your foreign accounts, you must
report them all to the Department of the treasury each year on form TDF
90-22.1. Failure to file this form for each foreign account carries a
possible penalty of up to $500,000 plus five years in jail (an obvious
attempt by the US gov't to stop their citizens from hiding money in foreign
accounts).

This answer a previous question might help you.


My_question_is: US-specific
Subject: Canadian Bank Accounts
Expert: [email protected]
Date: Sunday June 12, 2005
Time: 03:53 PM -0700

QUESTION:

I have joint bank accounts with my common-law husband. Do I have to report
these on my US tax return?

===============================
david ingram replies:

you have to report any foreign accounts on form T DF 90-22.1 if the total of
all accounts is over $10,000 and you are:

1. A US citizen or green card holder living anywhere in the world or

2. You are living (legally or illegally) within the geographic boundaries of
the United States.

I am assuming here that the total of all balances (including your RRSP
accounts) is over $10,000. If all your accounts combined do not add up to
over $10,000 US dollars, you do not need to fill in T DF 90-22.1 but you DO
need to report any earnings on schedule B of your 1040. Pay attention to
the two questions at the bottom of Schedule B.