Fema Employment

What are the tax implications of living in Canada and working in the US?

If I live in Canada and work for a US company and commute to the US 2-3 days per week, what will be the tax implications? Will I have to pay federal taxes in both countries? Will I have to pay provincial/state taxes in both countries as well? Is there any tax sharing agreement? I am looking at a job offer and want to understand the implications. Would it be a significant reduction in taxes if I became a US resident? Thanks Brad

Public Comments

1. There may be some pressure by U.S. company to become a permanent U.S. resident - an expensive, fairly complex process and one that may well one day soon but not today affect your Canadian citizenship. That's one consideration. A second is that permanent residency has requirements of its own, ie. maintaining a U.S. address and documenting the precise number of days you are within the U.S. each year as a matter of law to ensure you meet the required minimum. Permanent residency will also most certainly affect your ability to transfer things like pension and other accumulated benefits. These things do not travel well despite our USELESS! cross-border tax treaty. (Take a boo http://www.fin.gc.ca/treaties/USA_e.html). The boys are still negotiating these things, so I'm told by the Minister. I could go on and on. We had a similar arrangement for a few years. The best advice is to speak with an atty familiar with cross-border tax / financial planning issues here in Canada to help you draw up an offer that will properly address all of the issues raised by such an arrangement. Spend the money early before like us you are fighting the Busher and Busher Wannabes for access to 401K benefits. And yes, you will probably have to pay two pipers - both Revenue Canada and the IRS. All of that hassle makes the offer crucially important. Good luck. A final note: For all their horrible politics, it is A DREAM to work with Americans. Unlike Cdns, they are cheerful, open for business 24/7 and diligent about even the most insignificant task. They will work till they drop, usually for no more than two weeks of holidays each year, and are ever anxious to provide service.
2. Part of it really depends on which state you're working in the US. I spent a good chunk of 2006 living in Ontario and working in Ohio. Ohio's taxation level is comparable to Ontario. As a matter of fact people in the top tier in Ohio pay more tax than someone in Ontario. There are tax treaties between Canada and the US. So basically you can claim credit for the taxes you already paid the US goverments. The taxes in the US to be aware of are the Social Security and Medicare taxes. They can consume up to 15% of your US paycheque - assuming you're working on a W2. 30% if you're on a 1099. There is a form CPT56 you can obtain from the CRA which under treaty your american employer will use it to not charge you old age and medicare (since you're covered for the Canadian version). However its very difficult to get one. Nobody at the CRA I spoke to on the phone was able to help me get one. I had to escalate my request through my MP to get the CRA to sign and stamp the letter. Also since you're travelling, ask your employer if you can take part of your pay as an hourly per diem. The money is paid to you tax free and does not show up on your W2 and therefore does not have to be reported at tax time. You'll only have to pay taxes to Canada when you file your annual taxes - if you owe anything.