Canadian consultant working in US with TN under contract - international non-resident cross border expert income tax &

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david ingram replies:

If you have an actual long term conttract and are working under a TN visa, you are illegal and can have your TN revoked by any single Homeland security officer at the border.

Therefore, if you realy have a long term contract, the border person can revoke your TN and ban you from the US for 5 or 10 years under ER (Expedited Removal)  for filing false documentation to get your TN visa.

The terms of a TN visa are very clear that the contract is a short term contract lasting a year or less although it can be renewed for an indefinite time. This is the risk that all TN holders take.  Your contract is for a year or less and you have to be prepared for an employer's not offering you anopther letter at the end of the year.  If they do not, you can't sue because you would be proving in court that the two of you violated USCIS rules and could both be severely punished. Although you do not need to be paid on a strict W2 basis with tax, medicare and FICA deducted, you can opmnly to work for the employer who sponsored your visa.  Anything earned in the USA is absolutely taxable as an employee in the USA unless you earn less than $10,000 under Article XV of the US / Canada tax treaty.  However, that article does NOT exempt you from Illinois state tax.  AND, you must file your Federal 1040NR witjh foprm 8833 in that case to claim the exemption.

You are taxable in both Illinois and the US because you ware working there at a fixed base.  If you were working all over all of the time, it would not be a fixed base but 4 days a week at the same site most of the time is clearly a fixe base of operations and your TN visa is for you NOT your Incorporated Canadian Company which is likely a waste of time and accounting and legal  fees under the circumstances. 

You should have filed a US 1040NR and an Illinois IL-1040 with schedule NR for 2006.  Any tax you owed on these two tax returns would be a foreign tax credit on your Canadian tax return by filling inform T2209  lines 431 and 433 on schedule 1 of the Federal return and form T2036 and line 47 47 of the Provincial form 428.

If you were working all over the place and not at the same place in your employer's premises on a three or four day a week basis, you could be exempt from US federal tax under Article XIV of the US / Canada Income Tax treaty. However, you stated you were at the client's sitre for 4 days a week and that qualifies as a fixed base of operations.

Your Visa is for 'YOU' to work for whatever the name of the employer comapny in the US is.  It is NOT for you to work for a Canadian Company that you happen to own.  In fact, you can NOT officially get a TN visa for a company that you own.  (I say this a little tongue in cheek becasue I have seen them issued many times but the paperwork never indicates that the visa holder owned the company).

Remember that the US has a Subchapter S corporation where the fees just flow through to the owners of the company and that is how you should be treating your earnings in the US.  If you are working in multiple states, then properly, a separate return should be filed for each state.  Now, you might talk to another dozen tax consultants who tell you that you do not have to file in the US (I think you already have)  but I assure you that they are incorrect as you have described your situation. Even if you were exempt from tax because of Article XIV or Article XV, you STILL HAVE TO FILE THE RETURN WITH FORM 8833 to calim the exemption and that exemption does NOT apply to the state.

And, yes, I know of people who are doing what you are doing and have not yet been caught by the US IRS. or Homeland Security.  I also know of dozens who have been caught and paid BIG penalties and interest bills to the IRS when the situation catches up to them and been banned from the US for five or ten years for filing false working visa papers.

The following are the first rules for a TN visa

CHECK LIST for the TN Visa

    * An applicant for admission must establish Canadian citizenship

    * The applicant must be entering the United States to engage in a profession or occupation at a professional level under NAFTA

    * The applicant must be in possession of an offer or contract of employment from a United States employer stating:

        1)     The professional activity to be engaged in

        2)     Purpose of entry 

        3)     Remuneration

        4)     That the position is temporary in nature and will not exceed one  year  (although it can be renewed)

* The applicant must provide documentation of his or her educational degree or professional qualifications

* The applicant must meet all licensing requirements

* Employment need not be full-time 

* Permanent residence abroad is not a prerequisite

* Maximum period of admission of a TN is one year

* TN dependants accompanying the principal TN will be admitted under the  "TD" classification for the same amount of time as the principal 

* A $56 U.S. fee is required ($85.00 for renewal by mail)

* TN applicants are not permitted to enter as a professional to participate in any way to circumvent a strike

* SELF EMPLOYMENT IS NOT PERMISSIBLE - This means you can NOT set up an office and take multiple clients.  You 'can' be paid on a 1099 basis which means that you are responsible for both sides of the 16% Social Security taxes.  If there is more than one US employer who wants your services, you can obtain an individual TN visa for each one.  In fact, if you show up at the border with six legitimate job offers for a day a week each (as an example) you can get all six TN visas at the same time for one fee.

The following is a partial list of some who qualify under a TN Visa. Please note that extensive experience can equal a degree in many cases. All need a Bachelor or Baccalaureate degree unless otherwise noted. In some cases, 3 or 4  years of practical work in a discipline can count for one year of a University degree.  Therefore if the University BA requires 3 years, you need 9 or 12 years of work experience to qualify.

* Accountants - RIA or SIA or CPA or CGA or CMA or CA

** Actuaries (this is one of two classifications added since 1989)

* Agriculturalists

* Agronomists

* Animal Breeders

* Animal Scientists

* Apiculturist

* Architects - BA or state / provincial license

* Astronomers

* Biochemists

* Biologists

* Botanists

* Chemists

* Computer Systems Analyst - BA or Post-secondary Diploma or Post-secondary certificate and three years of practical experience. This does not get you to the USA, if your job is programming a computer.  An Analyst might spend a day a month working on some modifications (in a testing mode for instance), but they better not be thought of as a "programmer" within the company.

**** Computer Software Engineer *** This is NOT here as an approved occupation.  However, Jackie Bednarz (US head of the NAFTA Section 16 Working group in Washington stated specifically that if a recognized University was to offer the degree, she would consider computer software engineers under the ENGINEER classification when a recognized University granted the degree.  My understanding is that SFU and McGill are now granting such degrees and that the Professional Engineers of British Columbia have recognized graduates as members of their professional society.  Note that TC and TN's were being granted for this category on a sporadic basis until the INS realized that no such "official" degree existed. 

Jackie Bednarz also pointed out (She was part of the original negotiating team when the original FTA (Free Trade Agreement) was being negotiated in 1985, 86, 87 and 88, there was no such thing as the INTERNET, "web masters" and "web sites". When negotiating the job titles, no thought was given to the computer revolution, other than the computer system analyst designation, which at the time meant a main frame analyst for a $1,000,000 computer.

(Thanks to Stuart Lynne and Richard Pitt) (www.fireplug.net), the CEN-TA Group was an official member of the internet as far back as 1986 and thanks to Bill Gates himself (he told me to use Microsoft Xenix as my operating system) and Radio Shack Model 16 computers, CEN-TA was using "email" between offices in Toronto, Ottawa and Vancouver as early as 1983. 

As another aside, Stuart Lynne and Richard Pitt went on to found WIMSEY, the FIRST ISP in CANADA. Bill Gates became quite famous as well. 

* Dairy Scientists 

* Dentists - DDS, DMD, or state / provincial license

* Dental Technicians

* Dietitian

* Disaster Relief Insurance Claim Specialists - (claims adjuster employed by an insurance company located in the territory of a party or an independent claims adjuster) - BA and successful completion of training in the appropriate areas of insurance adjustment pertaining to disaster relief claims; or, three years experience in claims adjustment and successful completion of training in the appropriate areas of insurance adjustment pertaining to disaster relief claims

* Doctors - (see physician further on)

* Economists

* Engineers - BA or state / provincial licensing

* Entomologists 

* Epidemiologists

* Forester - BA or state / provincial licensing

* Geneticists

* Geochemist 

* Geologist 

* Geophysicists  (including Oceanographer in the United States)  

* Graphic Designer - BA or post-secondary diploma and three years    experience.

* Hotel Managers - BA in hotel / restaurant management; or,       post-secondary diploma or post-secondary certificate in hotel / restaurant management and three years experience in hotel / restaurant management

* Horticulturist

* Industrial Designer - BA or post-secondary diploma or post-secondary certificate and three years experience

* Interior Designer - BA or post-secondary diploma or post-secondary certificate and three years experience

* Journalist BA plus three years experience - (This category is no longer valid and has been left in to explain the circumstances. As I understand it, journalists in general took it as an insult that they had to have a BA degree, because, "most, if not all," of the best known journalists do not have a BA degree.)

* Land Surveyor - BA or state / provincial licenses

* Landscape Architect

* Lawyer (including notary in the Province of Quebec) - LLB, JD, LLL, BCL degree (five years); or membership in a state or provincial bar

* Librarians - MLS or BLS (for which another BA was a prerequisite)

* Management Consultants - BA; or equivalent professional experience as established by statement or professional credential attesting to five years experience as a management consultant, or five years experience in a field of specialty relating to the consulting agreement.  I must make it clear here.  A Management Consultant is NOT a manager.  The surest way to lose your management consultant renewal is to show up at the border with a business card with the title General Manager, Western Region, or Human Resources Manager, or, or, or.  A management consultant could consult with the actual sales manager about sales techniques or about selling into Canada.  A management consultant could be advising the actual human resources manager in hiring techniques or even suggesting that one candidate is a better fit than another one.  A management consultant can do market research, gather and assemble data and write a report to give to the manager. This is likely the hardest TN visa to get but is also a very important one when it comes to serving the needs of the US company.

Note that the management consultant does NOT need a degree, just five years experience.  This is the perfect job description for the person with 23 years of job experience who has never gone through the formal process of getting a university degree in the discipline.

* Mathematician (including statistician)

* Medical Laboratory Technologist (Canada) / Medical Technologist (U.S.) - BA; or post-secondary diploma or post-secondary certificate and three years experience

* Meteorologist

* Nutritionist

* Occupational Therapist - BA; or state / provincial license

* Organic Chemist  

* Pharmacologist (Pharmacist) - BA; or state / provincial license

* Physician - (teaching or research only), MD or state /provincial license. To work as MD, a doctor must pass his MLE (medical licensing exam), which has three, parts written over a year.  After passing, he or she would enter the U.S. under an H-1A.

* Physicist (including oceanographer in Canada)

* Physiotherapist/Physical Therapist - BA; or state     /provincial license

* Plant Breeder

** Plant Pathologists (This is one of two professions added since 1989)  

* Poultry Scientist

* Professional (most recognized professions)

* Psychologists - state / provincial license

* Range Conservationist

* Recreational Therapist

* Registered Nurse - state / provincial license

* Research Assistant (working in  post-secondary educational institution)

- * Scientific Technician - Possession of: (a) theoretical knowledge of any of the disciplines: agricultural sciences, astronomy, biology, chemistry, engineering, forestry, geology, geophysics, meteorology, or physics; and (b) the ability to solve practical problems in any of those disciplines, or the ability to apply principles of any of those disciplines to basic or applied research.

* Social Worker

* Soil Scientist

* Sylviculturist

* Teacher (College, Seminary, or University) (Post Secondary level only)

* Technical Publication Writer - BA, or post-secondary diploma or post-secondary certificate, and three years experience

* Urban Planner (including geographer)

* Veterinarian

* Vocational Counselor

* Zoologist

SUBJECT TO CHANGE

This list is subject to change at any time. When talking to Dennis Olsen about updating the rules, I mentioned a nurse who had found out that nurses could go south instantly in the late 1970's.  She got a job offer from a Hawaii hospital, came back to Vancouver, quit her job, sold her house, kicked out her husband, gave away the dogs and showed up at the airport to move to Hawaii, only to find out that they had closed the quota for nurses.

And then, as I was writing this exact section of the book in March, 1995, I received a call from a Doctor who had a job offer from the U.S., sold his house and Canadian practice, only to be told that he did not qualify when he showed up at the border because although a practicing family physician in Canada and fully qualified to go south with a Green Card (a resident alien immigrant visa), he did not qualify as a TN (can only teach or do research) and he did not qualify as an H-1B because he had not written an MLE. This medical licensing exam is written in three stages over a one year timetable.  I guess he has to sue his immigration attorney in Los Angeles.  This attorney knew he did not have his MLE, but charged him significant monies and told him he could get in now!

Remember, NONE of the foregoing confers permanent status. For permanent status, you must still stand in some sort of line.  However, it seems to be true that if you are in the U.S. as a TN or as a L-1, your line moves much faster than if you start from out of the country.

W A R N I N G

March 8, 1995 - When a Canadian leaves Canada to move to the U.S., there is a departure tax.  This means that all of the Canadian's assets are deemed "to have been sold" at fair market value the day before he or she leaves. If there are "paper profits," tax is due on this paper profit although a bond may be posted. The United States did not have this departure tax because the U.S. citizen has to keep on filing U.S. FEDERAL INCOME TAX RETURNS while out of the country for as long as they remain a U.S. citizen. If they gave up their citizenship, they could own a million dollars worth of assets that they had paid a dollar for and their "paper profit" would have just disappeared into the mist. Section 352 of the new Legal Immigrant and Illegal Immigrant Responsibility Act of 1996 states that the U.S. Citizen who gives up their citizenship to avoid U.S. income taxation is also banned from ever returning to the U.S. for any purpose.

I wrote the previous explanation in 1989 for the CFTA ) Canadian Free Trade Agreement) and then updated it a little for the NAFTA when Mexico was added in 1994.  It is downloaded from my website 30 to 300 times a day.

The USCIS (United States Citizenship and Immigration Service) has its own which you can find at the state Department at:  http://travel.state.gov/visa/temp/types/types_1274.html#3

Although this may have seemed to be very negative, I hope it will help you stay out of trouble in the future.

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