US citizen in Canada (PR) working for US company as an FTE paid into US Bank

[chs]

Hi, Folks,
I've had a job proposition by a company in the US to work for them as a full time employee. I am a US citizen currently living in Canada as a PR (With citizenship test pending the COVID shenanigans) working for a company here in Montreal. If I take this job in the US and get paid into a US bank account, how does that work from a tax perspective? My last state of residence was New York, but could I choose any state to get paid into, so long as I have a valid mailing address there? Obviously, I want to do the right thing with regards to taxes, and understand that there's a tax treaty between the two countries, but I had some questions:

1. I *believe* I would pay US taxes first, *then* Canadian taxes (with the US taxes offsetting the Canadian tax obligations); is this correct?
2. How do state taxes work, given I would not actually be resident in the US?
3. I have a US bank account in the US (have had it for ages); would it just be easiest to get paid into that and transferwise/Norbert's to my Canadian bank account?
4. Any other gotchas?

I did do some research here, but a lot of it seemed to be centred around people that have PR in the US; not citizens that are permanently living here.

Any help would be greatly appreciated.

Cheers
chs

 

[MidoRafa]

Hi, Folks,
I've had a job proposition by a company in the US to work for them as a full time employee. I am a US citizen currently living in Canada as a PR (With citizenship test pending the COVID shenanigans) working for a company here in Montreal. If I take this job in the US and get paid into a US bank account, how does that work from a tax perspective? My last state of residence was New York, but could I choose any state to get paid into, so long as I have a valid mailing address there? Obviously, I want to do the right thing with regards to taxes, and understand that there's a tax treaty between the two countries, but I had some questions:

1. I *believe* I would pay US taxes first, *then* Canadian taxes (with the US taxes offsetting the Canadian tax obligations); is this correct?
2. How do state taxes work, given I would not actually be resident in the US?
3. I have a US bank account in the US (have had it for ages); would it just be easiest to get paid into that and transferwise/Norbert's to my Canadian bank account?
4. Any other gotchas?

I did do some research here, but a lot of it seemed to be centred around people that have PR in the US; not citizens that are permanently living here.

Any help would be greatly appreciated.

Cheers
chs

In general, you self-report to the CRA your US income and US income tax paid and the rest happens automatically (the software computes total taxes owed on said, + other, income, minus any credits for the "foreign" tax paid to the US, and ask for the difference, if any). Just make sure you hang on to any tax forms (W2, etc.) in case they get requested (usually not),
Re state taxes, as far as I understand your situation, you're not actually residing in any state and therefore are not liable for any state tax (or benefit). No need to pretend you're living anywhere in the US if you're not.
Which bank account (or currency) you get paid into is not relevant to anything (but obviously a lot easier for a US employer to pay you into a US bank, and a Canadian employer to pay you into a Canadian bank).
Short form:
1. Yes
2. N/A (AFAIK)
3. Yes
4. One thing I can think of and you probably know this already, but as a US citizen you're always on the hook for filing a tax return (if making more than a certain amount, etc.). So I'd just make sure you're caught up on your past returns so that when you start getting paid from the US again and you start showing up on the IRS's radar, you're not on any bad list

 

[chs]

In general, you self-report to the CRA your US income and US income tax paid and the rest happens automatically (the software computes total taxes owed on said, + other, income, minus any credits for the "foreign" tax paid to the US, and ask for the difference, if any). Just make sure you hang on to any tax forms (W2, etc.) in case they get requested (usually not),
Re state taxes, as far as I understand your situation, you're not actually residing in any state and therefore are not liable for any state tax (or benefit). No need to pretend you're living anywhere in the US if you're not.
Which bank account (or currency) you get paid into is not relevant to anything (but obviously a lot easier for a US employer to pay you into a US bank, and a Canadian employer to pay you into a Canadian bank).
Short form:
1. Yes
2. N/A (AFAIK)
3. Yes
4. One thing I can think of and you probably know this already, but as a US citizen you're always on the hook for filing a tax return (if making more than a certain amount, etc.). So I'd just make sure you're caught up on your past returns so that when you start getting paid from the US again and you start showing up on the IRS's radar, you're not on any bad list

Holy moley, that's awesome; thanks for all the info! Yes, I've been filing US taxes since forever, even living abroad, so that's pretty much a non-issue (And working for US employer may make FATCA/FBAR easier if I just transfer minimal funds to Canada for living or use a US credit card tied to the US bank account with a low/no FX fee for local purchases.) I guess I'll only see Federal deductions on a W2 and no state ones, since I'm not resident anywhere? (Apologies, first time doing this, so I'm kind of wandering around the tub a bit.)

Cheers
chs

 

[MidoRafa]

Holy moley, that's awesome; thanks for all the info! Yes, I've been filing US taxes since forever, even living abroad, so that's pretty much a non-issue (And working for US employer may make FATCA/FBAR easier if I just transfer minimal funds to Canada for living or use a US credit card tied to the US bank account with a low/no FX fee for local purchases.) I guess I'll only see Federal deductions on a W2 and no state ones, since I'm not resident anywhere? (Apologies, first time doing this, so I'm kind of wandering around the tub a bit.)

Cheers
chs

So I did some quick checking and it seems that that in certain (most?) states, state income tax will still get withheld (based on which state the employer is in) and you may actually owe taxes as a non-resident. I'd suggest looking at the specific rules for the state where the company is in.. Sorry for the confusion.

 

[jclarke99]

Are you sure that it's this straightforward, and that you'd pay U.S. taxes first? Does the U.S. company that you would be working for have a Canadian office or affiliation? If not, I thought that you would probably have to make use of a PEO (Professional Employer Organization)?? I'm very interested in this topic as this could be my situation in a year's time. Check out the following https://hcbtax.com/2019/08/29/canadian-resident-working-for-a-u-s-company/

 

[jclarke99]

So I did some quick checking and it seems that that in certain (most?) states, state income tax will still get withheld (based on which state the employer is in) and you may actually owe taxes as a non-resident. I'd suggest looking at the specific rules for the state where the company is in.. Sorry for the confusion.

Below I'm re-posting some answers to this overall question, which seem to be at odds with some of the conclusions above. I'm not saying that the following is correct. It's just concerning.

"You can but that is a conversation between your company and your accountant. My understanding is that if you reside in Canada, you must be paid through a Canadian entity in Canadian dollars and are subject to Canadian payroll laws. If your company has a branch in Canada, you could be placed “on assignment” to that branch and potentially continue to receive US pay provided you maintain a US residence.

As a general rule, where you live determines how you get paid and what taxes you are responsible for paying. The US and Canada have a tax reciprocity treaty ensuring you pay taxes only in one place but that appears to depend on where you are living.

You need to seriously sit down with your company and a tax advisor familiar with both US and Canadian tax and labor laws. If your goal is to “have the best of both worlds” with US dollar buying power in Canada, lower US taxes but Canadian lifestyle, you’re probably out of luck."

"Yes you can, We do not care if you have a remote US job. However, as a Canadian resident you have to file a Canadian tax return for the income.

Then you will also have to file a US tax return on the same income though you will get a tax credit for the Canadian taxes paid. You will not be double taxed.

If this is confusing for the first year at least get a professional to do your taxes."

Source: https://www.quora.com/Can-I-move-to-Canada-from-the-US-with-my-remote-US-job

 

[MidoRafa]

Are you sure that it's this straightforward, and that you'd pay U.S. taxes first? Does the U.S. company that you would be working for have a Canadian office or affiliation? If not, I thought that you would probably have to make use of a PEO (Professional Employer Organization)?? I'm very interested in this topic as this could be my situation in a year's time. Check out the following https://hcbtax.com/2019/08/29/canadian-resident-working-for-a-u-s-company/

Prefacing this by stating the obvious about my being just another guy on the Internet and that the following wall of text is only the result of personal experience + some research done at discrete points in time with a specific situation and set of parameters in mind. Take it with a grain of salt and do your own research, which often includes the advice of (good) paid professionals.

OP's question was about a US Citizen working for a US Company as a Full Time Employee while living in Canada as a PR. My opinion and answer to that question have been that there is nothing stopping him from doing exactly that, for the following reasons:
1. OP is a US citizen, so where the US government is concerned, he/she has the right to work for any employer, regardless of which state/country he/she lives in. OP also has the obligation to report his income to the IRS and pay any applicable taxes.
2a. Where the US company is concerned (and I am following here the letter of the question in that it is a company "in the US", i.e. no Canadian presence), there is nothing stopping it from hiring him/her as an individual/employee (since he/she has the right to work under US law, as will be ascertained through form W9). Taxes will -generally- be withheld from the pay on the IRS's behalf.
2b. Does the US company have an obligation to the CRA, namely to withhold and remit taxes from OP's pay and issue a T4? I don't know - maybe. Is it enforceable? I don't know - probably not. But I would hazard a guess that the company would either know this already and know how to handle it, or be completely oblivious to it and just process OP's pay as US payroll and leave it up to OP to deal with CRA.
3. As a PR residing in Canada, OP has the right to work for and derive income from any legal source, including employment by a company outside Canada. They have the obligation to report their worldwide income to the CRA (+provincial tax authority) and pay applicable taxes and contributions.
4. I do not know of any law or rule that says Canadians/Canadian residents must get paid in CAD or into a Canadian bank account. On your Canadian tax forms you are asked to convert everything into CAD anyway.
5. As to why I said they'd typically file the US tax return(s) first, it's because of the withholding part and because one has to start somewhere, so It makes sense to start with the US to figure out the exact tax owed, and use that information to file the Canadian return(s).

I still believe this to be true, but like I said, this is just my personal opinion based on my own research and analysis, and my interpretation of OP's question.
-----------
I can't speak to the links and excerpts you posted other than to say that most of the stuff you'll find online will be about "just" Canadian residents doing work for a US company, i.e., not considering the case of a Canadian resident who also happens to be a US citizen, and therefore doesn't have to jump through (many) hoops to frame the relationship in a way that is acceptable from the points of view of the US employment and tax laws. That, and of course something about them being just the opinions of random people on the internet that may or may not have been true at a certain point in time. Ha!

Now was that the only way to "do work" for a company in the US (or anywhere else in the world for that matter) while being a resident of Canada? Of course not. There are many, many combinations that may exist, depending on:
- the employer (e.g., like you said, whether they have an office/branch in Canada or not, whether they have an established administrative framework for remote workers, etc.),
- the employee (whether they have the right to work in the jurisdiction(s) where they live and where the employer is located),
- the type of employment relationship the parties would like to establish (contractual, employer-employee, partnership, etc.),
- tax implications for both parties,
- legal implications (e.g., liability for work done, Intellectual property rights, governing employment laws, etc.),
- cost, time and effort that the person and the company are willing to spend to set things up a certain way,
- ...

Based on the answers to these questions, one could for example be an employee of the US company (OP's case), or an employee of a Canadian affiliate/office of the US company, or (maybe) a contractor to the Canadian office, or an employee of a Canadian entity that is a contractor to the US (or Canadian) entity, or you could start your own company in the BVI with offices in Delaware and Toronto, which can then be contracted by the other company, etc. etc. etc.

So as you can see, there is no one-size-fits-all answer. You are absolutely right in that when faced with a similar situation, one should consult a professional (for tax and possibly legal), combined with own research, to figure out what the possible and the optimal formats for the relationship are based on the specific circumstances and goals, or conversely, analyze what is being offered and its various implications.

 

[jclarke99]

Prefacing this by stating the obvious about my being just another guy on the Internet and that the following wall of text is only the result of personal experience + some research done at discrete points in time with a specific situation and set of parameters in mind. Take it with a grain of salt and do your own research, which often includes the advice of (good) paid professionals.

OP's question was about a US Citizen working for a US Company as a Full Time Employee while living in Canada as a PR. My opinion and answer to that question have been that there is nothing stopping him from doing exactly that, for the following reasons:
1. OP is a US citizen, so where the US government is concerned, he/she has the right to work for any employer, regardless of which state/country he/she lives in. OP also has the obligation to report his income to the IRS and pay any applicable taxes.
2a. Where the US company is concerned (and I am following here the letter of the question in that it is a company "in the US", i.e. no Canadian presence), there is nothing stopping it from hiring him/her as an individual/employee (since he/she has the right to work under US law, as will be ascertained through form W9). Taxes will -generally- be withheld from the pay on the IRS's behalf.
2b. Does the US company have an obligation to the CRA, namely to withhold and remit taxes from OP's pay and issue a T4? I don't know - maybe. Is it enforceable? I don't know - probably not. But I would hazard a guess that the company would either know this already and know how to handle it, or be completely oblivious to it and just process OP's pay as US payroll and leave it up to OP to deal with CRA.
3. As a PR residing in Canada, OP has the right to work for and derive income from any legal source, including employment by a company outside Canada. They have the obligation to report their worldwide income to the CRA (+provincial tax authority) and pay applicable taxes and contributions.
4. I do not know of any law or rule that says Canadians/Canadian residents must get paid in CAD or into a Canadian bank account. On your Canadian tax forms you are asked to convert everything into CAD anyway.
5. As to why I said they'd typically file the US tax return(s) first, it's because of the withholding part and because one has to start somewhere, so It makes sense to start with the US to figure out the exact tax owed, and use that information to file the Canadian return(s).

I still believe this to be true, but like I said, this is just my personal opinion based on my own research and analysis, and my interpretation of OP's question.
-----------
I can't speak to the links and excerpts you posted other than to say that most of the stuff you'll find online will be about "just" Canadian residents doing work for a US company, i.e., not considering the case of a Canadian resident who also happens to be a US citizen, and therefore doesn't have to jump through (many) hoops to frame the relationship in a way that is acceptable from the points of view of the US employment and tax laws. That, and of course something about them being just the opinions of random people on the internet that may or may not have been true at a certain point in time. Ha!

Now was that the only way to "do work" for a company in the US (or anywhere else in the world for that matter) while being a resident of Canada? Of course not. There are many, many combinations that may exist, depending on:
- the employer (e.g., like you said, whether they have an office/branch in Canada or not, whether they have an established administrative framework for remote workers, etc.),
- the employee (whether they have the right to work in the jurisdiction(s) where they live and where the employer is located),
- the type of employment relationship the parties would like to establish (contractual, employer-employee, partnership, etc.),
- tax implications for both parties,
- legal implications (e.g., liability for work done, Intellectual property rights, governing employment laws, etc.),
- cost, time and effort that the person and the company are willing to spend to set things up a certain way,
- ...

Based on the answers to these questions, one could for example be an employee of the US company (OP's case), or an employee of a Canadian affiliate/office of the US company, or (maybe) a contractor to the Canadian office, or an employee of a Canadian entity that is a contractor to the US (or Canadian) entity, or you could start your own company in the BVI with offices in Delaware and Toronto, which can then be contracted by the other company, etc. etc. etc.

So as you can see, there is no one-size-fits-all answer. You are absolutely right in that when faced with a similar situation, one should consult a professional (for tax and possibly legal), combined with own research, to figure out what the possible and the optimal formats for the relationship are based on the specific circumstances and goals, or conversely, analyze what is being offered and its various implications.

Thank you for your detailed and helpful response.

I guess it's still not black-and-white to me. I know that tax-wise, one won't be double taxed due to the tax treaty. It's more of a legal question - whether one can be an U.S. Citizen W2 employee working remotely in Canada. Here the "W2" is key. I'd be surprised if Canada is fine with paying for one's health care, infrastructural support, etc. and let a resident pay all of their employment income tax, while living in Canada, first to the U.S.

Until I get professional legal/accounting advice otherwise, my own personal plan is to be a W9 employee (i.e., freelancer) for my U.S. employer. I will invoice for work done, and payment will be to a Canadian bank (probably a U.S.$ account). I plan to be classified just as self-employed, not incorporated as a business per se. My employer will not be responsible for any deductions, SS, or Medicare payments. I'll have to manage (with an accountant) all the tax ramifications, but my understanding is that in this situation I would pay Canadian taxes first and take tax treaty foreign tax credit when I file U.S. taxes. Apparently, I would be subject to Canadian Pension Plan (CPP) payments, but not U.S. self-employment taxes.

 

[jclarke99]

Thank you for your detailed and helpful response.

I guess it's still not black-and-white to me. I know that tax-wise, one won't be double taxed due to the tax treaty. It's more of a legal question - whether one can be an U.S. Citizen W2 employee working remotely in Canada. Here the "W2" is key. I'd be surprised if Canada is fine with paying for one's health care, infrastructural support, etc. and let a resident pay all of their employment income tax, while living in Canada, first to the U.S.

Until I get professional legal/accounting advice otherwise, my own personal plan is to be a W9 employee (i.e., freelancer) for my U.S. employer. I will invoice for work done, and payment will be to a Canadian bank (probably a U.S.$ account). I plan to be classified just as self-employed, not incorporated as a business per se. My employer will not be responsible for any deductions, SS, or Medicare payments. I'll have to manage (with an accountant) all the tax ramifications, but my understanding is that in this situation I would pay Canadian taxes first and take tax treaty foreign tax credit when I file U.S. taxes. Apparently, I would be subject to Canadian Pension Plan (CPP) payments, but not U.S. self-employment taxes.

Just did some more digging. My idea of being a W9 freelancer for a single U.S. Company may not fly.
Canada Revenue (CRA) may well classify me as a "Personal Services Business", which has some serious tax disadvantages (it appears).

Quoting from this site: https://www.thebalancesmb.com/costs-of-declaring-a-personal-service-corp-2948621

"First and foremost, you want to avoid being in the situation of working only for a single client, especially in a long-term continuous relationship.

You want to avoid the perception that you are an employee of a particular client. If a third party could mistake you for an employee of the company, you're in danger of the CRA viewing you that way, too."

Unless you're a risk taker, I'm thinking that the Professional Employer Organization (PEO) option is the way to go.

 

[chs]

Hi, everyone, OP weighing back in here. I bit the bullet and actually paid a tax lawyer who specializes in cross-border taxation issues.

The bottom line is this: It's at best complicated and at worst illegal, depending on a variety of factors. It will almost certainly be painful for the US company to employ a resource outside the US as it confuses the IRS and the CRA will want to know why the company is not routing their pay through the CRA/Revenu Quebec. (I don't know if I mentioned this originally, but the US company has no Canadian presence, so that creates the crux of the problem.) I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same. HOWEVER, at the end of the year, I could claim the US taxes back as I wasn't physically present. It still wouldn't fix the heartburn that CRA or RQ would give me and they would likely pressure the US company (however they could) to do things "the right way" and pay through Canada first.

Now, it gets a little more complex, but he said, as a self-employed consultant, options open up considerably and the IRS doesn't nearly care as much as I wouldn't be being treated as an FTE and wouldn't be resident in the States, so the IRS tax situation gets a bit better. The most obvious problem being that what I consider self-employed and what RQ considers self-employed may be at odds, so it would be best to form a corporation, hire myself and use the corporation in Canada to bill the Corporation in the US.

In the end, I decided the juice wasn't worth the squeeze, so I turned the offer down. Shame in that it paid a good chunk of change, but, with citizenship pending, I just can't afford to make my tax situation any more complicated than it absolutely needed to be.

Thanks for everyone's input - it was very much appreciated to have the input.

As always, I am not a lawyer, your mileage may vary, batteries not included, yadda yadda yadda..

 

[jclarke99]

Hi, everyone, OP weighing back in here. I bit the bullet and actually paid a tax lawyer who specializes in cross-border taxation issues.

The bottom line is this: It's at best complicated and at worst illegal, depending on a variety of factors. It will almost certainly be painful for the US company to employ a resource outside the US as it confuses the IRS and the CRA will want to know why the company is not routing their pay through the CRA/Revenu Quebec. (I don't know if I mentioned this originally, but the US company has no Canadian presence, so that creates the crux of the problem.) I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same. HOWEVER, at the end of the year, I could claim the US taxes back as I wasn't physically present. It still wouldn't fix the heartburn that CRA or RQ would give me and they would likely pressure the US company (however they could) to do things "the right way" and pay through Canada first.

Now, it gets a little more complex, but he said, as a self-employed consultant, options open up considerably and the IRS doesn't nearly care as much as I wouldn't be being treated as an FTE and wouldn't be resident in the States, so the IRS tax situation gets a bit better. The most obvious problem being that what I consider self-employed and what RQ considers self-employed may be at odds, so it would be best to form a corporation, hire myself and use the corporation in Canada to bill the Corporation in the US.

In the end, I decided the juice wasn't worth the squeeze, so I turned the offer down. Shame in that it paid a good chunk of change, but, with citizenship pending, I just can't afford to make my tax situation any more complicated than it absolutely needed to be.

Thanks for everyone's input - it was very much appreciated to have the input.

As always, I am not a lawyer, your mileage may vary, batteries not included, yadda yadda yadda..

Very kind of you to share CHS, especially after shelling out $ for expert advice.

Curious if you discussed the PEO option with the tax lawyer. Seems like that would address the main concerns in your first paragraph. Of course, there's the matter of the U.S. company being open to this.

As for the incorporated self-employed option, did the Personal Service Business classification get brought up with the tax lawyer? Seems like that could be an issue if you chose this route and only had one (U.S.) client.

Anyway, congratulations on making a decision. I'm sure that it wasn't an easy decision.

 

[chs]

Very kind of you to share CHS, especially after shelling out $ for expert advice.

Curious if you discussed the PEO option with the tax lawyer. Seems like that would address the main concerns in your first paragraph. Of course, there's the matter of the U.S. company being open to this.

As for the incorporated self-employed option, did the Personal Service Business classification get brought up with the tax lawyer? Seems like that could be an issue if you chose this route and only had one (U.S.) client.

Anyway, congratulations on making a decision. I'm sure that it wasn't an easy decision.

Hi, there. I did discuss this with him and he said that, whilst it was technically possible, I'd still be on the hook for FICA and a couple of other things as an FTE (I threw away my notes, apologies, so I'm trying to recall from memory.) It wasn't a deal-breaker, per se, but it did raise the pain threshold. That didn't do away with the heartburn that a lot of US companies are now dealing with with regards to out-of-country employees where they're technically not allowed to hire and appeasing the various tax entities. His bottom line question was "How badly do you want to work for them and how badly do they want to hire you?" I didn't ask about the Personal Service Business classification bit as I was really angling for the FTE route. He did say to steer away from S-Corps and LLCs, but I didn't go to deep into the reasons why (I think, if memory serves, there's no real analog of the S-Corp in Canada.)

Bottom line is that it was simply too complex for relatively too little gain; I can incorporate in Canada, hire myself and maybe lose some dollars in the process, but I would be completely above board with taxes and legality, which was my main overriding concern. I'm sure some more "enterprising" individuals could have made the FTE route work, but I just didn't want to chance it this close to the finish line, especially if it turned out to be illegal and end up with me getting turfed in a few months down the road and having to deal with the CRA/RQ/IRS "lovefest" that would result on the exhaust side.

(Purely) anecdotal story: I have a lot of friends in the US in senior management/hiring positions (MDs at banks and credit card firms) and their HR departments are cracking down hard on remote workers (I was honestly surprised by how endemic this situation was); one guy got canned after he was busted working for the bank earning Palo Alto $$$ and living in Argentina - I did not want to risk a similar fate. My own company has said that no employee will be allowed to work outside the country - they have not elaborated why, but I'm guessing something to do with taxes and repatriation challenges in the age of COVID.

As always, this is free advice on the Internet, so take with appropriate grain of sodium chloride

 

[deadbird]

Hi, everyone, OP weighing back in here. I bit the bullet and actually paid a tax lawyer who specializes in cross-border taxation issues.

The bottom line is this: It's at best complicated and at worst illegal, depending on a variety of factors. It will almost certainly be painful for the US company to employ a resource outside the US as it confuses the IRS and the CRA will want to know why the company is not routing their pay through the CRA/Revenu Quebec. (I don't know if I mentioned this originally, but the US company has no Canadian presence, so that creates the crux of the problem.) I would be double-taxed throughout the year as I would be paying the IRS and, at the same time, having to pay CRA quarterly on my estimated earnings of the same. HOWEVER, at the end of the year, I could claim the US taxes back as I wasn't physically present. It still wouldn't fix the heartburn that CRA or RQ would give me and they would likely pressure the US company (however they could) to do things "the right way" and pay through Canada first.

Now, it gets a little more complex, but he said, as a self-employed consultant, options open up considerably and the IRS doesn't nearly care as much as I wouldn't be being treated as an FTE and wouldn't be resident in the States, so the IRS tax situation gets a bit better. The most obvious problem being that what I consider self-employed and what RQ considers self-employed may be at odds, so it would be best to form a corporation, hire myself and use the corporation in Canada to bill the Corporation in the US.

In the end, I decided the juice wasn't worth the squeeze, so I turned the offer down. Shame in that it paid a good chunk of change, but, with citizenship pending, I just can't afford to make my tax situation any more complicated than it absolutely needed to be.

Thanks for everyone's input - it was very much appreciated to have the input.

As always, I am not a lawyer, your mileage may vary, batteries not included, yadda yadda yadda..

Trying to understand what factors make the self-employed consultant via an incorporation a challenging option?

Isn't incorporating a good idea in any case to limit liability similar to US LLCs?

I presume a tax/finance accountant could ease a lot of the burden in setting up a corporation. Moreover it would largely be a one time setup cost. Recurring costs should mostly get streamlined over time. Further, you are free to work with a different employer or two at the same!

 

[chs]

Trying to understand what factors make the self-employed consultant via an incorporation a challenging option?

Isn't incorporating a good idea in any case to limit liability similar to US LLCs?

I presume a tax/finance accountant could ease a lot of the burden in setting up a corporation. Moreover it would largely be a one time setup cost. Recurring costs should mostly get streamlined over time. Further, you are free to work with a different employer or two at the same!

Undoubtedly, hiring an accountant would be not only prudent, but I would deem a necessity if one were to incorporate and self-employ in Canada/Quebec. Self-employment, according to (I think) RQ is a moving target and is surprisingly hard to prove from my very superficial research in the area. I have a few friends here in Quebec that do contracting in IT. Without fail, each one formed their own company/corporation (with them, of course, as the sole owner/employee) and they billed corp-to-corp to the client company. They all have accountants that they use to keep the books legit.

One-off observation - Tax dude told me that, if you claim foreign income exemptions on Canadian taxes, CRA takes it very seriously and audit 100% of all claims. He could have been exaggerating, but I'm inclined to believe a guy that does this for a living (And I just paid money to for his advice), so I opted for the route less painful (i.e. - declining the offer)

 

[canuck78]

Hi, there. I did discuss this with him and he said that, whilst it was technically possible, I'd still be on the hook for FICA and a couple of other things as an FTE (I threw away my notes, apologies, so I'm trying to recall from memory.) It wasn't a deal-breaker, per se, but it did raise the pain threshold. That didn't do away with the heartburn that a lot of US companies are now dealing with with regards to out-of-country employees where they're technically not allowed to hire and appeasing the various tax entities. His bottom line question was "How badly do you want to work for them and how badly do they want to hire you?" I didn't ask about the Personal Service Business classification bit as I was really angling for the FTE route. He did say to steer away from S-Corps and LLCs, but I didn't go to deep into the reasons why (I think, if memory serves, there's no real analog of the S-Corp in Canada.)

Bottom line is that it was simply too complex for relatively too little gain; I can incorporate in Canada, hire myself and maybe lose some dollars in the process, but I would be completely above board with taxes and legality, which was my main overriding concern. I'm sure some more "enterprising" individuals could have made the FTE route work, but I just didn't want to chance it this close to the finish line, especially if it turned out to be illegal and end up with me getting turfed in a few months down the road and having to deal with the CRA/RQ/IRS "lovefest" that would result on the exhaust side.

(Purely) anecdotal story: I have a lot of friends in the US in senior management/hiring positions (MDs at banks and credit card firms) and their HR departments are cracking down hard on remote workers (I was honestly surprised by how endemic this situation was); one guy got canned after he was busted working for the bank earning Palo Alto $$$ and living in Argentina - I did not want to risk a similar fate. My own company has said that no employee will be allowed to work outside the country - they have not elaborated why, but I'm guessing something to do with taxes and repatriation challenges in the age of COVID.

As always, this is free advice on the Internet, so take with appropriate grain of sodium chloride

Would assume higher unemployment and increased remote work has a lot to do with the crackdown. There is a lot of pressure to employ US citizens/residents first and with all the remote work being approved/encouraged by employers assume that the US is wanting to crack down on employers hiring remote workers outside the US and keeping an eye on any American working remotely to make sure they are also paying their taxes. Most countries, provinces/states and cities are in for a lot of economic pain without their normal tax revenue. Who knows what will happen with Biden but likely nothing without control of the Senate.