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Subject: TN Status
Hi David,
I went through your website, but still I have some questions. I am incorporated in Canada. A US company sent me a 'professional services
agreement' and will pay to my corporation for my services in USA. (Most of my work will be done in USA, the US company agreed to provide paperwork
necessary to file my TN status). The US company will issue me a 1099 next year
.
1. Is this ok to do from a legal point of view as well as tax saving perspective?
2. I understand I have to file a 1040NR, since I will be performing the services in US. How about my corporation? Do they also have to file any
return in US and does my corporation also have to pay tax to US?
3. If it is 1099, is it true, there won't be any withholding every pay period? I need to settle the taxes only next year.
4. How much of accounting fees will I be paying if I request your company to do all returns involved both for my corporation and personal ones (me and my
wife)
thanks
BXXXXXXXXX
_________________________________________________________________
david ingram replies:
If your Canadian Mortgage is not deductible, you should not be incorporated anyway. Goto www.centa.com and read the November 2001 newsletter which co-incidentally, lists Canadians who have to file US tax returns on the first page and then explains how to make the interest on a Canadian mortgage deductible.
1. If your visa is being issued by XYZ company to you as an individual, you are the employee, not your corporation. You can NOT work for your corporation in the USA. There may be an opportunity for them to hire your corporation for some of the services performed in Canada, but not in the USA.
2. Your corporation does not have any business operations in the US as you describe it. You can call a toad a frog all day long but it does not make it a frog. You are an employee of the US corporation but do not have any benefits. A 1040NR is possible but if so, you will be paying both halves of your US social security. Assuming that you rent an apartment and set up a base of operations as it were, you must pay the tax and 15.3 % social security because you will have to pay both halves.
The good news is that the social security AND the tax will be a tax credit on your personal Canadian Tax return.
If you are living in Canada and commuting to the states as a consultant and have no fixed base in the US, you can exempt all the earnings from both US Social security and income tax under Article XIV of the US / Canada Income Tax convention.
3. No deductions means you have to account for the tax AND pay both halves of Social Security. If yiou were an employee, the company would be paying half of the social security.
4. There is no need for us to file your corporate return although we would be glad to to so.
As described, your US / Canada personalk returns would be in the $700 to $1,000 range with a little counselling thrown in.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
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