TaxMess

Hi,

Thank you for your help in advance. I am about to enter into a potentially complicated tax situation and wanted to make sure my understanding is broadly correct.

The situation:
UK Citizen resident in USA
Working 2 days a week in Canada (staying overnight in Canada)
Working 3 days a week from home in the USA

As I understand it I will pay Canadian income tax on the portion of income earned in Canada (being 2/5) and have to file a Canadian income tax return. I will not be tax resident in Canada due to 183 day rule and ties to USA and hence won't have to declare worldwide income.

I will also have to file a US tax return on which I will declare world wide income (including Canadian income) I will be able to apply a tax credit for Canadian tax paid against federal tax but which for my state NJ will not be credited against state tax.

Anything I am missing?

tom169

Any foreign holdings that meet the requirements for FBAR / FATCA?

TaxMess

A couple of UK bank accounts and a SIPP which presumably gets reported?

neill

Just my opinion:
Canada uses 'significant ties' to determine residency. You are significantly tied to Canada, but as you are "tax resident in USA" you should be deemed non-resident in Canada due to the tax treaty. I think you have it broadly correct. There's a NR form you can send to CRA to formalize this -- but know that they are currently taking 1 year to process it.

Shirtback

Not tax-related, however: make sure any visa requirements are in order for regular ongoing weekly work in Canada.

ian-mstm

Do you have permission to work in Canada?

Ian

TaxMess

Will be obtaining a work permit. More focused on the tax implications to be honest.

christmasoompa

I would also look at the visa side of things - what kind of work permit? LMIA's aren't possible for part-time working, and you'll need a sponsoring Canadian employer, not sure you'll have that though?

TaxMess

I have a number of options due to how the opportunity came about and a supportive employer... so should be ok

Steve_

Mmmm, you haven't given enough information to answer this one, have a read of IRS publication 597.

Depends on which payroll you're on. Basically if you're on a US payroll and in Canada for less than 183 days a year, there's no difference to working in the US. Your employer pays you, you fill in your 1040.

If you're on a Canadian payroll while in Canada, you file a T1 (make sure you use the non-resident payroll code on your TD1 when you start work, equivalent of W-4) every year, put your US address on it, pay any tax on the Canadian-source income only, which will probably all be on your T4 slip (and thus already withheld).

Then on your 1040 you claim a foreign tax credit on 1116 (which under the tax treaty includes payroll taxes) and fill in your 1040 as you regularly would. Or you can use 2555-EZ if all your Canadian-source income is employment-based, bit easier to do than a 1116 usually, the choice is yours.

Effectively you pay taxes on the Canadian income in both places and claim a credit in the US for the Canadian tax. Main thing is, make sure your health insurance covers Canada!

Steve_

If he's an intracompany transferee which sounds likely, no LMIA required and the US employer can sponsor him for it. In fact they can have a blanket agreement for the company. Lots of Canadian and US companies do this. The reverse is an L-1 blanket petition and you just show up at the POE with a completed I-129S. And if you're in the other country for less than 183 days per year, it can be renewed indefinitely. L-1 intermittent.

I remember during the depths of the recession, I think it was in 2009 I got chatting with a CBSA inspector at Coutts POE and he said to me "we've denied entry to 21 Americans who were trying to work here illegally in the past month! It's a new record!"

21 whole Americans at the largest POE into Alberta. Gasp.