working on a TN and 1099 -ask Joe Grasmick

Hello David,

I found your contact information on the Internet
(http://centapede.centa.com/Week-of-Mon-20050207/001605.html), in a posting
that closely reflects my situation.

I am currently working on a TN visa in the US and just in the process on
moving to another project. However, lawyers from the hiring agency insist
that I *have* to work as a W2 employee and I know that this is not true. My
intent is to work as 1099, which means that billing goes through my Canadian
company (incorporated in Ontario). From your post (link above), I know about
tax considerations I have to keep in mind.

Would it be possible to hire you for a consultation so that you can explain
to the lawyer at the hiring agency that 1099 can be done on a TN visa and
how? I do not anticipate any issues with issuing of the TN visa because I
have done it many times before. This issue I am writing you about is tax
related.

Thank you in advance. Below is the email that hiring agency shared with me.
It contains lawyer's contact information. From his email and suggestion #2,
I see that he has not dealt with TN before, otherwise he would not suggest
obtaining a TN visa without a TN letter from the US company. It would be
great if you could provide clarity on the tax situation and what exactly has
to be specified in the contract between NueVista and my company to avoid any
hassles with the IRS. Thank you in advance.

Regards

XXXXXXXXXXXXXXXx
xxx-xxx-xxxxx1

Here is the lawyer's response:

From: Michael xxxxxx
Sent: Monday, August 06, 2007 10:57 AM
To: xxxxxxx
Cc: xxxxxxxxxxxx
Subject: RE: Monday


8 CFR 214.6(b) prohibits him being on a 1099 if sponsored by xxxxxxx.
trying to get cos. to sponsor for TN under a 1099 is an old scheme designed
to avoid taxation in either country and remains quite popular but, the IRS
can some back on xxxxxxxxx for the tax obligations if you participate in the
scheme. 
2 options 
1) sponsor as a TN and employee him not as a contractor
1099 but, as an employee W-2 or 
2) contract with his company directly and
let him deal with obtaining the TN via for his own company but, provide no TN
support letter but, you can sign a contract with his co. (not with him) and
then pay his co. directly and issue a 1099 to his co. as you would any other
vendor. 
If you decide option #2, I recommend that you let me review any
contract or other document he wishes you to sign. xxxxxx 
  

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david ingram replies:

I am answering this twice. There is another answer going directly to you.
The Hammond Law Firm is a very good US immigration firm and your problem is that they do know what they are doing.    Although I disagree in principal with the concept that you can not be paid on 1099 for a short term contract, he is completely correct in stating that xxxxxxxxxx can not issue you a letter, get a TN in your name and then pay your corporation.

He is also 100% correct is strating that xxxxxxxxxxxxx would not issue you a TN letter if you were going to get a corp to corp contract. 

In that case, you would need a contract with your corporation and xxxxxxxxx and 'your' corporation would write the letter.  XXXXXXXXXXXX DOES know what he is doing and the XXXXXXX law Firm runs multiple seminars and immigration meetings in the general XXXXXXX area.

If you have been working for your corporation in the past but the visa was issued to you by a US corporation, you have been working illegally in the US and are lucky you have not had a problem so far.

Remember that I am NOT a lawyer but deal with immigration issues on a regular basis because of my US Canada cross border tax business.

One of the deans dealing with the issuance of a TN Visa to a Canadian is Joe Grasmick at www.grasmick.com
 
He has a 'pay in advance' telephone consultation service and I suggest that if you want a second legal opinion, you contact him.  He wrote the TN handbook which just about everyone in the US/CANADA/MEXICO TN buisinesss uses as a manual at some point.

In the meantime, don't make too much of a fuss or you could end up with retroactive penalties.

So that you understand where I am coming from, In the past, you should be reporting every single cent of money paid to your Candian corporation as gross income on your US tax return.