Work remotely from Canada for US Employer

[jclarke99]

This is what I followed. It worked for me so I would say it will work for you if the situation is same. But most importantly.. have a good CPA as suggested by others.
- I submit the invoice in CAD. Do not charge tax as the client is outside of Canada.
- I get paid in CAD in a Canadian account.
- I save the receipt of all the necessary expenses related to my work ( Gas, Stationary etc..)
- Because it's work from home kind of job, we can claim a certain percent of rent as an expense. Please save the lease agreement for future.
- At the end of the financial year I hired a CPA to file my taxes in Canada. If you have an additional income in the US, you can file it together because US and Canada have a treaty and it works out.
- Because no taxes were deducted before, you will owe a certain amount which you have to pay it at once before the deadline.
- In the following year you need to pay taxes every quarter till your situation remains the same.

Common Question: Should I act as a freelance consultant or open Corporation. Both has its own advantage. This is where CPA comes in.

Hope this helps. It may sound complicated but it's not at all.

Great information chikoo 1985. Just curious - if you happen to be doing all your work (invoicing) for one U.S. company, have you or your CPA considered the matter of possibly being declared a Personal Service Business by CRA? (one such reference https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621)

 

[chikoo1985]

Great information chikoo 1985. Just curious - if you happen to be doing all your work (invoicing) for one U.S. company, have you or your CPA considered the matter of possibly being declared a Personal Service Business by CRA? (one such reference https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621)

Hi.. I don't know to be honest. Never landed on this question during our conversation. Maybe because I filed as a Freelancer and not as a corporation.

 

[jclarke99]

Hi.. I don't know to be honest. Never landed on this question during our conversation. Maybe because I filed as a Freelancer and not as a corporation.

I think that's the key - not declaring yourself as a proprietorship or incorporating. I'm assuming that being a freelancer and using your legal name as your business name avoids CRA declaring you as a PSB??

 

[chikoo1985]

I think that's the key - not declaring yourself as a proprietorship or incorporating. I'm assuming that being a freelancer and using your legal name as your business name avoids CRA declaring you as a PSB??

Yeah Maybe. That's why having a good CPA helps.

 

[JustBal]

Have anyone in the group ever used or heard about a PEO or employer of record in canada.
The US employer will be a client of the PEO based in canada. So adding a layer between you and US employer.
You will be in Canada and on the payrolls of the PEO who will do your Canadian taxes and pay in CAD.

you won’t have to pay US income taxes. For all this the PEO will have a fee.

Anyone has any idea on this?

 

[chikoo1985]

Have anyone in the group ever used or heard about a PEO or employer of record in canada.
The US employer will be a client of the PEO based in canada. So adding a layer between you and US employer.
You will be in Canada and on the payrolls of the PEO who will do your Canadian taxes and pay in CAD.

you won’t have to pay US income taxes. For all this the PEO will have a fee.

Anyone has any idea on this?

I am using one now - remote.com.
- use it, only if you want to show yourself as a Full-Time employee for a client who is not in Canada. Else it's not a suggested move. No idea about fees as it was a requirement from my client. I would have preferred a contract.
- Tax deduction will follow the income tax bracket.
- Because there is a treaty between USA and Canada, you will anyway not pay double taxation regardless of where your income is. If you choose to pursue as an Individual or sole proprietor or incorporation. You will get paid in full amount of your invoices. You will be taking care of taxes at your end.
- More than PEO, you need a good CPA who understands double taxation. I believe it's a common scenario now so it's easy to find.

Trust me it's pretty simple. You will require a bit of research. Then hire a good CPA if you choose to avoid PEO.

 

[Ponga]

I am using one now - remote.com.
- use it, only if you want to show yourself as a Full-Time employee for a client who is not in Canada. Else it's not a suggested move. No idea about fees as it was a requirement from my client. I would have preferred a contract.
- Tax deduction will follow the income tax bracket.
- Because there is a treaty between USA and Canada, you will anyway not pay double taxation regardless of where your income is. If you choose to pursue as an Individual or sole proprietor or incorporation. You will get paid in full amount of your invoices. You will be taking care of taxes at your end.
- More than PEO, you need a good CPA who understands double taxation. I believe it's a common scenario now so it's easy to find.

Trust me it's pretty simple. You will require a bit of research. Then hire a good CPA if you choose to avoid PEO.

So, does using an EOR service, like Remote, mean that you as a freelancer are no longer deemed to be self employed? If so, are you still paying the same amount of what would have been SE tax (CPP premiums), meaning you are still paying both portions (employer and employee)?

 

[chikoo1985]

So, does using an EOR service, like Remote, mean that you as a freelancer are no longer deemed to be self employed? If so, are you still paying the same amount of what would have been SE tax (CPP premiums), meaning you are still paying both portions (employer and employee)?

In my case, I am employed full-time at remote.com for the client (actual employer) who is in the US.
I think that's the who point of having PEO but please double check.

 

[Takita]

In my case, I am employed full-time at remote.com for the client (actual employer) who is in the US.
I think that's the who point of having PEO but please double check.

I just completed reading this entire thread as I'm in similar situation.

@chikoo1985, Would you mind sharing how much is charged (ball park) by PEO thru this arrangement in your case?

Do you know what it takes US employer to complete process to become client to PEO?

Does paycheck from PEO fluctuates every month due to USD-CAD FX?

 

[Ed Doetzel]

You need one year of experience in Canada, preferably under the supervision of a Professional Engineer registered in Canada. But you can use your XP outside Canada towards your XP including in the competency based assessments.

https://techexam.ca/

 

[monglebest]

Great information chikoo 1985. Just curious - if you happen to be doing all your work (invoicing) for one U.S. company, have you or your CPA considered the matter of possibly being declared a Personal Service Business by CRA? (one such reference https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621)

Yeah Maybe. That's why having a good CPA helps.

Thanks for chikoo1985 and jclarke99's reply. I learnt a lot for everyone contributing this thread. I also go through the whole thread from the beginning.

I plan to go the independent contractor routine. I am not interested to keep the H1B or even obtaining US GC anymore. So that I can just pay the Canadian tax only once I am fully committed to Canada. I think the key thing is to have a CPA.

The thing I am curious is about the rule regarding personal service business on CRA website, https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/tax-implications-personal-services-business.html.

The example 1 in the above link clearly state that working for single employer is considered a personal service business and hence cannot enjoy a lot of the small business deduction.

Question 1: I wonder how the CPA can bypass it?
Question 2: what difficult issues people have experienced when talk to their US employer about converting from H1B employee to independent contractor?
Question 3: based on the info from this thread, it seems income more than certain amount, like 30,000 CAD or other number, it become necessary to have an corporation other than freelancer contractor? any reference about this? Or is this very personal decision? Or maybe I should leave these question to the CPA to reply.

Example 1
"
Tam is looking for a job. An Ontario-based trucking company (ABC Trucking) offers him a 12-month contract position with full-time hours. The contract comes with the stipulation that Tam perform his services through a corporation.

Tam incorporates his business (858689 Ontario Inc.), for which he is the only shareholder and the only employee. 858689 Ontario Inc.’s only client is ABC Trucking.

858689 Ontario Inc. bills ABC Trucking for the services it performs, and it receives payment from ABC Trucking for those services. 858689 Ontario Inc. either keeps the funds in the corporation or disburses them to Tam.

In this example, 858689 Ontario Inc. meets the conditions outlined in the Income Tax Act to be considered a personal services business because:

Tam is a specified shareholder of 858689 Ontario Inc.
Tam performs the work of an ABC Trucking employee using their trucks, and were it not for the existence of 858689 Ontario Inc. Tam would be considered an employee of ABC Trucking.
858689 Ontario Inc.’s sole income is from services performed by Tam (incorporated employee) for ABC Trucking.
"

 

[jclarke99]

Thanks for chikoo1985 and jclarke99's reply. I learnt a lot for everyone contributing this thread. I also go through the whole thread from the beginning.

I plan to go the independent contractor routine. I am not interested to keep the H1B or even obtaining US GC anymore. So that I can just pay the Canadian tax only once I am fully committed to Canada. I think the key thing is to have a CPA.

The thing I am curious is about the rule regarding personal service business on CRA website, https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/tax-implications-personal-services-business.html.

The example 1 in the above link clearly state that working for single employer is considered a personal service business and hence cannot enjoy a lot of the small business deduction.

Question 1: I wonder how the CPA can bypass it?
Question 2: what difficult issues people have experienced when talk to their US employer about converting from H1B employee to independent contractor?
Question 3: based on the info from this thread, it seems income more than certain amount, like 30,000 CAD or other number, it become necessary to have an corporation other than freelancer contractor? any reference about this? Or is this very personal decision? Or maybe I should leave these question to the CPA to reply.

Example 1
"
Tam is looking for a job. An Ontario-based trucking company (ABC Trucking) offers him a 12-month contract position with full-time hours. The contract comes with the stipulation that Tam perform his services through a corporation.

Tam incorporates his business (858689 Ontario Inc.), for which he is the only shareholder and the only employee. 858689 Ontario Inc.’s only client is ABC Trucking.

858689 Ontario Inc. bills ABC Trucking for the services it performs, and it receives payment from ABC Trucking for those services. 858689 Ontario Inc. either keeps the funds in the corporation or disburses them to Tam.

In this example, 858689 Ontario Inc. meets the conditions outlined in the Income Tax Act to be considered a personal services business because:

Tam is a specified shareholder of 858689 Ontario Inc.
Tam performs the work of an ABC Trucking employee using their trucks, and were it not for the existence of 858689 Ontario Inc. Tam would be considered an employee of ABC Trucking.
858689 Ontario Inc.’s sole income is from services performed by Tam (incorporated employee) for ABC Trucking.
"

I believe that the solution for you is to simply not incorporate as a business. Be an independent consultant and file taxes as you normally would (as an individual) rather than as a business. You won't get certain potential tax benefits that you'd get from filing as a business, but you avoid the personal business designation that would negate the tax advantages (and then some). At least that's my understanding. Typical disclaimer - recommend that you speak with a tax professional.