Canada / US / New York Income Tax Filing for TN visa holder
This question is a two-parter which required more information to answer - it is all here with the names removed to give anonymity.
=======================
Hello David
I am a Canadian (from Ontario) working for a NY Company under a TN visa as a Management Consultant
I am in my 2nd year here. Last year I used the services of Protax(?) in NYC and they prepared my US income tax return. I prepared my own Canadian tax return. This year, I'm looking at tax of approx $100k Cdn ($50k US, $30k Cdn) on an income of approx $220k Cdn. Besides maximizing my RRSP, I was hoping to find someone who could offer ways and means to greatly reduce this tax burden.
The guy I used last year had no knowledge of the Canadian tax system and kept suggesting ways to shave a few dollars off the US return but I had to keep telling him that it didn't make much of a difference as I have to pay a higher tax rate in Canada so his ideas didn't net me any savings.
From what I understand, it appears that you are positioned to prepare both US and Canadian tax returns for individuals such as me. I realize you probably require additional information before giving firm answers but
1) Can you give me an idea of your fees for preparing three returns (US, NYS,
Canadian),
2) I'm hoping to find a way to pay allot less than $100k in income tax - do you think this is realistic?
I look forward to your response.
Thank you
PS - with respect to my tax calculation above, although I'm self-employed in the US, I have certification of coverage under CPP which saves me from paying thousands in SST in the US
david ingram replies:
I do not understand why you are filing a Canadian Income Tax return. Have you kept your family in Canada?
Usually, a TN would just file a US return as a resident of the US and there would be no Canadian return and no Canadian tax.
Further, your CPP / FICA does not usually apply to a TN. Properly, it should only be used as for L visas where the person is working for the same company.
As well, paying the FICA would be counted as a foreign tax credit in Canada and come off the Canadian tax bill. However, the CPP paid to Canada is NOT a deduction of any sort in the USA.
S0: Are you married?
Where is your wife and family?
Why did you file a Canadian Return?.
----- Original Message -----
From:XXXX XXXXXX
To: 'David Ingram at home - bus at [email protected]'
Sent: Wednesday, November 19, 2003 6:01 AM
Subject: RE: Canada/US Income Tax Filing
Thanks David
Yes I'm married (over XX years, I'm XX years old) and my family (son XX, daughter XX, both at home with my wife who does not work outside the home) and home with mortgage, bank accounts, investments, etc are in XXXXXXXXXX, Ontario. From my limited research, I understand that the only way not to pay income tax in Canada is to sever all connections - not something I can do nor necessarily want to do. Also, I "thought" I had discovered during my research that Social Security Tax in the US does not count in the foreign tax credit calculation and in any case, it would have been a huge percentage of my income (12%?) as a self-employed person and so I was delighted to avoid paying it.
I'm used to working all my life in Canada for an employer (since 82, I was at XXXXXXXXXX in XXXXXXXXXXXXXX, making a modest income.
Since coming to XXXXXXXXXXXXXXX in XXXXX 02 as a self-employed consultant being paid hourly for every hour worked, I have been able to make major dollars (for me) but somehow manage to not have much cash to show for it. I hate like hell to pay $100k in tax - that's significantly more than I used to earn. I don't want to break any laws but there must be ways and means to save a few thousand??
Thanks for your help!
XXXXXXXX
=================================
david ingram replies
It is a moot point, but in my opinion, without seeing the figures or the contracts, from what you have descrtibed, you are not eliigible for the FICA exemption. Paying the 12% should not matter because Canada will give you credit for the 16% paid to the USA and then you do not owe the extra 3,000 to Canada. You should be $3,600 Canadian beter off there plus you will get a bigger pension from the US than from CPP if you stay there long enough.. If you are not there long enough, Canadaian CPP time can be applied to qualify you for your US pension.
Your TN will be in danger though. The US does not like issuing Management consultant TN's for more than a couple of years on the grounds that a consultant should be a supernumerary and only a temporary job.
It is also too easy to change your duties from what "does qualify" for a TN to what does not because you will be obliging and eager to please.
For instance:
A Mangement consultant does "not" give orders to "any" underling.
* A Management consultant is NOT a manager.
* A Management consultant only deals with management, giving management an answer when there is a problem. (Research Management consultants are slightly different because they might be directing a crew to get information)
* It is the hardest TN to obtain and the easiest to lose. If a sharp border guy saw you had a business card saying manager on it, he or she could take your TN immediately with no real appeal process. You should be having them get you an H1B visa for your working safety.
Splitting your income with your wife would likely save you another $2 > 3,000 a year in Canadian tax.
She would be the employee who looks after your books, etc. It would also add to a CPP for her in the future.
A typical charge for the physical preparation of your returns would be $700 to $1,000 Cdn with $1,000 being more likely in our first year.
My consultation rate for US / Canada is $350 Cdn per hour with the hour being a generous hour as opposed to a 50 minute hour.
Your return is a typical return in our office, not one that someone has to do "research" for.
Hope this helps.
=======================
Hello David
I am a Canadian (from Ontario) working for a NY Company under a TN visa as a Management Consultant
I am in my 2nd year here. Last year I used the services of Protax(?) in NYC and they prepared my US income tax return. I prepared my own Canadian tax return. This year, I'm looking at tax of approx $100k Cdn ($50k US, $30k Cdn) on an income of approx $220k Cdn. Besides maximizing my RRSP, I was hoping to find someone who could offer ways and means to greatly reduce this tax burden.
The guy I used last year had no knowledge of the Canadian tax system and kept suggesting ways to shave a few dollars off the US return but I had to keep telling him that it didn't make much of a difference as I have to pay a higher tax rate in Canada so his ideas didn't net me any savings.
From what I understand, it appears that you are positioned to prepare both US and Canadian tax returns for individuals such as me. I realize you probably require additional information before giving firm answers but
1) Can you give me an idea of your fees for preparing three returns (US, NYS,
Canadian),
2) I'm hoping to find a way to pay allot less than $100k in income tax - do you think this is realistic?
I look forward to your response.
Thank you
PS - with respect to my tax calculation above, although I'm self-employed in the US, I have certification of coverage under CPP which saves me from paying thousands in SST in the US
david ingram replies:
I do not understand why you are filing a Canadian Income Tax return. Have you kept your family in Canada?
Usually, a TN would just file a US return as a resident of the US and there would be no Canadian return and no Canadian tax.
Further, your CPP / FICA does not usually apply to a TN. Properly, it should only be used as for L visas where the person is working for the same company.
As well, paying the FICA would be counted as a foreign tax credit in Canada and come off the Canadian tax bill. However, the CPP paid to Canada is NOT a deduction of any sort in the USA.
S0: Are you married?
Where is your wife and family?
Why did you file a Canadian Return?.
----- Original Message -----
From:XXXX XXXXXX
To: 'David Ingram at home - bus at [email protected]'
Sent: Wednesday, November 19, 2003 6:01 AM
Subject: RE: Canada/US Income Tax Filing
Thanks David
Yes I'm married (over XX years, I'm XX years old) and my family (son XX, daughter XX, both at home with my wife who does not work outside the home) and home with mortgage, bank accounts, investments, etc are in XXXXXXXXXX, Ontario. From my limited research, I understand that the only way not to pay income tax in Canada is to sever all connections - not something I can do nor necessarily want to do. Also, I "thought" I had discovered during my research that Social Security Tax in the US does not count in the foreign tax credit calculation and in any case, it would have been a huge percentage of my income (12%?) as a self-employed person and so I was delighted to avoid paying it.
I'm used to working all my life in Canada for an employer (since 82, I was at XXXXXXXXXX in XXXXXXXXXXXXXX, making a modest income.
Since coming to XXXXXXXXXXXXXXX in XXXXX 02 as a self-employed consultant being paid hourly for every hour worked, I have been able to make major dollars (for me) but somehow manage to not have much cash to show for it. I hate like hell to pay $100k in tax - that's significantly more than I used to earn. I don't want to break any laws but there must be ways and means to save a few thousand??
Thanks for your help!
XXXXXXXX
=================================
david ingram replies
It is a moot point, but in my opinion, without seeing the figures or the contracts, from what you have descrtibed, you are not eliigible for the FICA exemption. Paying the 12% should not matter because Canada will give you credit for the 16% paid to the USA and then you do not owe the extra 3,000 to Canada. You should be $3,600 Canadian beter off there plus you will get a bigger pension from the US than from CPP if you stay there long enough.. If you are not there long enough, Canadaian CPP time can be applied to qualify you for your US pension.
Your TN will be in danger though. The US does not like issuing Management consultant TN's for more than a couple of years on the grounds that a consultant should be a supernumerary and only a temporary job.
It is also too easy to change your duties from what "does qualify" for a TN to what does not because you will be obliging and eager to please.
For instance:
A Mangement consultant does "not" give orders to "any" underling.
* A Management consultant is NOT a manager.
* A Management consultant only deals with management, giving management an answer when there is a problem. (Research Management consultants are slightly different because they might be directing a crew to get information)
* It is the hardest TN to obtain and the easiest to lose. If a sharp border guy saw you had a business card saying manager on it, he or she could take your TN immediately with no real appeal process. You should be having them get you an H1B visa for your working safety.
Splitting your income with your wife would likely save you another $2 > 3,000 a year in Canadian tax.
She would be the employee who looks after your books, etc. It would also add to a CPP for her in the future.
A typical charge for the physical preparation of your returns would be $700 to $1,000 Cdn with $1,000 being more likely in our first year.
My consultation rate for US / Canada is $350 Cdn per hour with the hour being a generous hour as opposed to a 50 minute hour.
Your return is a typical return in our office, not one that someone has to do "research" for.
Hope this helps.
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