anxious_glo

Hi,

I work for an American company and have received 1099 Misc(as though i am compensated for my services as a nonemployee that is not on payroll -- consultant).

What form do i use to pay my taxes in Canada. I dont intend to pay tax in the U.S. since i live in Canada and telecommute

hope someone has previous experience to to give me some advice
tks

anxious_glo

Hi,

I work for an American company and have received 1099 Misc(as though i am compensated for my services as a nonemployee that is not on payroll -- consultant).

What form do i use to pay my taxes in Canada. I dont intend to pay tax in the U.S. since i live in Canada and telecommute

hope someone has previous experience to to give me some advice
tks

Souvenir

I'm in pretty much the same position as you, except that I telecommute to the UK and work from home. The company views me as an employee. The UK tax people regard me as not existing. I get paid gross and there are no UK deductions paid by either the company or me. My accountant in Canada considers me to be self-employed, which is good because lots of things can be deducted from my Canadian tax liability.

The paperwork is daunting. There are various additional forms to complete for overseas income, business expenses etc. In my case those forms are different for the Feds and the Quebec tax grabber. I tried, once, to do it myself. When I came out of therapy, I found myself a chartered accountant. He does my taxes, and Souvette's, in about an hour. He does this on the side, so it only costs me $75. If he did it in a formal capacity it would cost several times that but would still be worth it (and his fee is tax deductible).

It is worth remembering that anything you tell a chartered accountant becomes a matter of record and they won't pretend they never heard it if the taxman comes sniffing later. That is not to say that they won't do their best to protect you. Just don't bring up anything unnecessary. Let them ask the questions they want answers to.

Let us assume that you do go to an accountant. I would introduce myself as a Canadian resident who works from home in a consultancy capacity. The work I do is for a company in the US that sends me money, gross. I would not volunteer any more information than that unless asked. I wouldn't, for example, volunteer information on any contracts that might suggest a fairly close association with the US company. Nor would I bring up the 1099. The Canada Revenue Agency has never asked to see proof of my earnings, even when they did a partial audit on me.

The other issue is how the tax is paid. The first year, I just sat on the money and sent off a whopping cheque when my return was calculated. I was told to do this by the tax people. I now pay by quarterly installments. These are based on the income reported in your last tax return. I received my installment notice early in the New Year and paid the first chunk in March, before I did my current tax return. I will soon probably receive a revised schedule of payments for the rest of the year.

If you pay the installments suggested by the taxman, you will not be penalised or charged interest if your tax hit later turns out to be higher. You just pay the difference.

It is also my understanding that you don't have to pay according to the instalment schedule at all, if you don't wish to. Provided that by the end of the year you have paid the tax you owe, you're OK. If you've underpaid, then you'll get slapped.

The main problem with being paid gross is spouses. I constantly have to remind Souvette that a good third of the cash hitting my bank account each months is not available for shoes.

anxious_glo

Thank you so much. We are in the same situation. And thanks a lot for lettime me know i shouldnt bring up 1099. I was planning to visit an accountant with my 1099s!
i greatly appreciate your detailed reply to my anxious and agony filled, daunting tax question (i had been postponing my visit to an accountant because of the complicated situation i am in!


(i have a spouse too. so i may have to file separately? anyway, i will leave it to consultants!)

Thanks a zillion!

Souvenir

You both file separate returns but they are linked. Mine shows what Souvette made and vice-versa. There can be advantages to that. I'm not qualified to say what they are, so I won't try.

anxious_glo

oic, so i dont have to give both our taxes to the accountant?... i can do mine, being complicated, with an accountatn and then have his done based on mine. i guess i will do that and save a few bucks. last year i did both ours and it wasnt hard.