Cross border income tax (Independent contractor) on TN - david ingram expert US CANADA cross border non-resident income tax help

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david ingram replies:

This was rejected but picked out of the rejected emails because my 'picks' did not appeal to me.

If you are in the US on a TN visa, you can NOT be self employed.  You are not an independent contractor.  What you are is an employee without benefits which means you have to pay both halves of the US Social Security of 16%  plus your regular income tax to the US and if working in Louisiana or Oklahoma as opposed to Texas or Alaska, you will have to file a state return as well.

Your first liability as you have described yourself is to the USA.

You may file a US 1040 return and report your world income for the year including anything earned in Canada before you moved to the US .

OR

If you had a lot of Canadian income before you left, you may want to file a Dual Status US return where you do not claim the standard deduction but have to use itemized deductions.

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THEN

You will either file a departing Canada tax return or a factual resident tax return but either of them require you to file Canadian form T1161.

You imply that you gave up your Canadian rental residence.  If that is the case, you are absolutely a Taxable (on your world income ) resident of the US under Article IV of the US Canada Income Tax Convention.

BUT

On the other hand, if you have a wife and children in Canada in a rented or owned place and you come 'home' every two weeks and do not intend to move your family to the US, you are likely only taxable on your US income in the US and taxable on your world income in Canada.
 
AND,

If you are a resident of Canada and working for a Canadian Employer, then you owe tax to the US as described above but would qualify for the overseas employment tax credit (form T626) if you are away for more than six months.
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This older q & a might help

QUESTION:

I started working in the states last April for about 8 months with a TN visa. I was wondering if I have to pay taxes on income earned in the states to Canada as well?


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david ingram replies:

You should file a departing Canada Income tax return with form T1161 and maybe a 1243 and 1244 if you have left any assets behind.

These older questions will help a bit


xxxxx wrote: -------------------------------------------------
david ingram replies:

As described, you have no tax to pay to Canada and should not have bought an RRSP for 2007.

Basically, you should be filing a departing Canada return and look at T1161 to see if it is necessary to file it -  Usually, you would file it is you own a summer cottage, home, non-RRSP mutual fund or brokerage account or are leaving a share of a family business or farm behind.

For the US, you would file a US1040.  there is no tax return in Texas, Nevada, Alaska, Florida for you to file.

If your intention is to come back to Canada, you should likely NOT buy a ROTH.  If you want a tax deduction buy a conventional IRA or participate larger in a company 401(K)

We charge $900 to $3000 for US Canada tax returns

There is a more detailed list further down below.



I am Canadian citizen and have been working in USA on TN-Visa since 2004. I have a valid Canadian driver license, no medical card, working bank account and has no property. All my family is staying with me in USA.

1) Am I suppose to file a Canadian taxes every year.

2) If I do, what would be the roughly tax break up like 20% paying in Canada and 80% in USA.

3) What would be your fee to file Canadian and USA taxes.

Thanks & regards.

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david ingram replies:

You should have filed a departing Canada return in 2004.  there is no need to file a 2005, 2006, or 2007 return as you have described your situation.

If, on the other hand, the Canadian government asks you for a return for any of those years, you, as a Canadian citizen, are required to file.  Report all of your US income on the T1 and then deduct it all on line 256 of the return under Article IV of the US - Canada Income Tax Convention (treaty).

This older question and answer may help

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I moved to Nevada for a job July 2006, and still work there now.  Do I do my
taxes in canada and us seperately? My earnings for 2006 in Canada were very
low.
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david ingram replies:

You have more than one choice.

1.   a) You file a departing Canada tax return including form T1161 and 1243 and 1244 if you left more than $25,000 worth of assets behind.
   
        b)
You file a 1040NR Dual Status Statement for the US and then a 1040 Dual Status Return to report the US income only.  The statement is there to separate out any US income you may have received BEFORE you actually went to the US. You can NOT claim the standard deduction on a Dual Status Return You can only use itemized deductions on a Dual Status Return. 

2.   a)   You file Canada as in 1a) above.

       b)   You file a 1040 tax return reporting your world income for the year including the Canadian income.  Then you file US form 1116 to claim a foreign tax credit for the tax, CPP and EI you paid to Canada.  This allows you to claim the standard deduction on the US return.

Good luck.  Remember that you can always send the returns here by fax, courier snail mail or pdf email.
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david ingram replies

If you are applying for an H1B visa and intend to get a green card and your family is not moving unitl the resident alien cards come through, you should be filing as a US resident and not paying tax in Canada.  If you have a house, it should be put in your wife's name only.  You would file a US joint return with your wife and claim your children as dependents.

If you are not intending to stay in the US and are still spending a lot of time in Canada, you would file as a Canadian resident and claim a foreign tax credit for the taxes, FICA and Medicare taxes you pay to the US after filing your US 1040.

There is an in between position where you might be a factual resident of Canada where you report your US income to Canada but deduct it then on line 256 under Article IV of the US Canada Income Tax Convention. In this case you would be a tax resident of the US and file a joint US return with your wife.

You need to sit down in person or by phone with someone who really understands it.

my charges are explained below


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