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

[deadbird]

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)

Yeah, can second the 100% audit rate by CRA. I've claimed foreign tax credits over the last several years due to RSUs vesting from my time in the US (intra-company transfer). The audits are not pleasant and the letters sound threatening. However, by now my accountant and I have templatized the CRA responses. Typically they want a copy of your US tax transcript. It's easy to order one from the IRS. Overall. it's like doing a second tax return at the end of the year, and they've accepted my responses each time.

Assuming you get a competent and not too pricey tax accountant, then I figure it's just a small cost of doing business. Very often, the US corp will pay you far more than most Canadian corps, that paying the accountant is a perfectly reasonable expense.

 

[chs]

Yeah, can second the 100% audit rate by CRA. I've claimed foreign tax credits over the last several years due to RSUs vesting from my time in the US (intra-company transfer). The audits are not pleasant and the letters sound threatening. However, by now my accountant and I have templatized the CRA responses. Typically they want a copy of your US tax transcript. It's easy to order one from the IRS. Overall. it's like doing a second tax return at the end of the year, and they've accepted my responses each time.

Assuming you get a competent and not too pricey tax accountant, then I figure it's just a small cost of doing business. Very often, the US corp will pay you far more than most Canadian corps, that paying the accountant is a perfectly reasonable expense.

Thanks for the "boots on the ground" view of it; honestly, given that this was straight-up salary, I didn't want to go too far down that road. Undoubtedly, there would be a way to formally make it work, I just didn't think it was worth the effort at the end of the year (And didn't want to cough up the multiple tens of thousands of extra dollars the first year to make it work on the off chance their HR department had kittens and decided I was out of Compliance and gave me the boot.)

Re: Canuck78 - I'm a US Citizen (Born/raised) living abroad. Bossperson said they didn't care where I lived/worked, but I strongly suspect their HR/Payroll department did. No proof, of course, but the jockeying back and forth on conversation with my Canadian citizenship pending just left me with too many question marks to make it a worthwhile pursuit.

 

[deadbird]

Thanks for the "boots on the ground" view of it; honestly, given that this was straight-up salary, I didn't want to go too far down that road. Undoubtedly, there would be a way to formally make it work, I just didn't think it was worth the effort at the end of the year (And didn't want to cough up the multiple tens of thousands of extra dollars the first year to make it work on the off chance their HR department had kittens and decided I was out of Compliance and gave me the boot.)

Re: Canuck78 - I'm a US Citizen (Born/raised) living abroad. Bossperson said they didn't care where I lived/worked, but I strongly suspect their HR/Payroll department did. No proof, of course, but the jockeying back and forth on conversation with my Canadian citizenship pending just left me with too many question marks to make it a worthwhile pursuit.

This is one more reason to get Canadian citizenship Only PRs understand the anxiety of constantly being on trial until you really become a "permanent" permanent resident.

 

[canuck78]

This is one more reason to get Canadian citizenship Only PRs understand the anxiety of constantly being on trial until you really become a "permanent" permanent resident.

Think the issue was with the US HR department. Being a Canadian citizen won't change CRAs demands if you are working for a US company or have investments in the US. Many dual citizens get so fed up paying the US taxes and CRA hassles they renounce their US citizenship. They tend to be older in general and have no plans of moving to the US.

 

[chs]

Think the issue was with the US HR department. Being a Canadian citizen won't change CRAs demands if you are working for a US company or have investments in the US. Many dual citizens get so fed up paying the US taxes and CRA hassles they renounce their US citizenship. They tend to be older in general and have no plans of moving to the US.

You would be 100% correct, good human. CRA really doesn't like people getting paid outside of the country for obvious reasons, so they strongly discourage it and, tax guy said, they can (try to) hassle and make life generally unpleasant for that company. US HR departments similarly have heartburn when it comes to dealing with authorized workers working out of a country that they have no presence or jurisdiction in (Heck, some don't even like you to work in different states!) My main takeaway from this is, if one really, really wants to do it, do corp-to-corp billing for the least amount of headache.

 

[deadbird]

Think the issue was with the US HR department. Being a Canadian citizen won't change CRAs demands if you are working for a US company or have investments in the US. Many dual citizens get so fed up paying the US taxes and CRA hassles they renounce their US citizenship. They tend to be older in general and have no plans of moving to the US.

My response was in response to OP's statement "but the jockeying back and forth on conversation with my Canadian citizenship pending just left me with too many question marks to make it a worthwhile pursuit.".

I'm in agreement that the CRA treats citizens and PRs equally. However, the consequences of having to deal with audits or a complicated tax situation might derail or delay OP's citizenship application with secondary reviews. Consequently, while a citizen would be unfazed in trying out innovative corporate/tax structures, a PR OTOH, would be unwilling to take that risk.

I'm sure most PRs feel a similar sentiment and hence many of them opt for citizenship as soon as it is available so that they can live their full ambitious lives.

 

[piotrqc]

Canadian citizenship is a sine qua non (necessary condition), to obtain a perfect integration and a better feeling of belonging to Canada.

IRCC needs to be aware of the importance of this, and we need to work on valuing citizenship in the media and official political discourse. Citizenship is very important!

... And we should not hesitate to remind them when it is necessary (As for example during the last blocking of citizenship tests).
, Piotr.

 

[jclarke99]

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

Sharing this helpful link for those considering the freelancer option...

https://diaryofatorontogirl.com/2019/03/18/canadian-income-taxes-freelancer/

And this link for tax-related implications...
https://onlinetaxman.com/moving-to-canada-from-the-usa-heres-what-you-should-know-about-taxes/

 

[Islander216]

My response was in response to OP's statement "but the jockeying back and forth on conversation with my Canadian citizenship pending just left me with too many question marks to make it a worthwhile pursuit.".

I'm in agreement that the CRA treats citizens and PRs equally. However, the consequences of having to deal with audits or a complicated tax situation might derail or delay OP's citizenship application with secondary reviews. Consequently, while a citizen would be unfazed in trying out innovative corporate/tax structures, a PR OTOH, would be unwilling to take that risk.

I'm sure most PRs feel a similar sentiment and hence many of them opt for citizenship as soon as it is available so that they can live their full ambitious lives.

I agree, as a PR you're still not over the line. But when you consider you can apply for citizenship after 3 years, we still have it pretty good compared to a lot of other countries.

Really interesting topic, learnt a lot so thanks for everyone's replies.

 

[deadbird]

I agree, as a PR you're still not over the line. But when you consider you can apply for citizenship after 3 years, we still have it pretty good compared to a lot of other countries.

Yeah, fully agree. Canada's pretty awesome.

 

[chs]

Sharing this helpful link for those considering the freelancer option...

https://diaryofatorontogirl.com/2019/03/18/canadian-income-taxes-freelancer/

And this link for tax-related implications...
https://onlinetaxman.com/moving-to-canada-from-the-usa-heres-what-you-should-know-about-taxes/

Those links are very good - thanks for sharing! However, I would be cautious on the "Self-Employed" one; it only appears to be addressing the issue via CRA and not provincially; Quebec has a much firmer stance and definition of what a "Self-Employed" person is; here's a link for your edification: https://www.revenuquebec.ca/en/citizens/self-employed-persons/your-status/criteria-used-to-determine-a-workers-status/

Specifically, the following criteria would exclude almost anyone that consults on projects for any large corporation (I've underlined the parts that would be applicable to my situation as an IT/Cybersecurity consultant, for example):
If you are an employee, your employer usually

• establishes the conditions of your hiring and firing;
• sets your schedule and decides where you will work;
• defines your tasks and work methods;
• manages your activities and those of any substitute;
• controls the execution of your work and that of any substitute;
• may take disciplinary action against you

Bottom line is that, at first blush, it's harder in Quebec, to do self-employed project work, which is why many people ultimately ended up forming corporations and being the sole employee.

 

[canuck78]

My response was in response to OP's statement "but the jockeying back and forth on conversation with my Canadian citizenship pending just left me with too many question marks to make it a worthwhile pursuit.".

I'm in agreement that the CRA treats citizens and PRs equally. However, the consequences of having to deal with audits or a complicated tax situation might derail or delay OP's citizenship application with secondary reviews. Consequently, while a citizen would be unfazed in trying out innovative corporate/tax structures, a PR OTOH, would be unwilling to take that risk.

I'm sure most PRs feel a similar sentiment and hence many of them opt for citizenship as soon as it is available so that they can live their full ambitious lives.

Agree that citizenship brings some security but think many would not risk creative tax structures any time especially if they have US citizenship or investments in the US and know they will likely face more scrutiny.

 

[canuck78]

Canadian citizenship is a sine qua non (necessary condition), to obtain a perfect integration and a better feeling of belonging to Canada.

IRCC needs to be aware of the importance of this, and we need to work on valuing citizenship in the media and official political discourse. Citizenship is very important!

... And we should not hesitate to remind them when it is necessary (As for example during the last blocking of citizenship tests).
, Piotr.

Canada isn't denying anyone citizenship. Like every other immigration program and life in general there have delays. Although frustrating PRs still have access to financial support programs and healthcare which is the most important in a global pandemic. Time to citizenship will still end up being faster than many countries. If you want to invest time or express outrage I would focus on things like delays in lifesaving or time sensitive surgery.

 

[piotrqc]

Although frustrating PRs still have access to financial support programs and healthcare which is the most important in a global pandemic.

Waw! ... Thank you for your kindness, what a privilege! ... Oh boy!

... Let's be serious, this is just the norm for people legally resident permanently, and contributing to this society, through taxes and their work. Not a privilege at all, it's just normal. Even more for a developed country like Canada, we are not in a third world country.
The opposite will have been shocking.

Canada isn't denying anyone citizenship. Like every other immigration program and life in general there have delays. Although frustrating PRs still have access to financial support programs and healthcare which is the most important in a global pandemic. Time to citizenship will still end up being faster than many countries. If you want to invest time or express outrage I would focus on things like delays in lifesaving or time sensitive surgery.

* We have the right to wish the best for our adopted country (and our country quite simply). Bringing constructive criticism or even demonstrations when necessary is not a bad thing ... It is even desired, and it is the sign of a healthy democratic society, don't you agree?
Don't we have the right to be demanding and very ambitious for our country? ... I want my adopted country (and my country soon) to be the BEST. Where is the harm in this?

* One does not prevent the other, one can be indignant at the exaggerated delays in the citizenship process (or any other administrative act of the federal or provincial public service), and at the same time be indignant at the things you mention. Neither is interchangeable. All outrage is legitimate ... Are you trying to establish a hierarchy in outrage?

I have a question for you, @canuck78 , if you allow.

If tomorrow an O'toole majority conservative government changes the rules for citizenship retroactively, and cancels all existing files (It's a suposition), do you necessarily consider this to be a source of some indignation? Or just an unimportant question and not a priority? ...

I'm curious to know. (Although I have a small idea of your thought, but it remains assumptions resulting from perceptions due to your different and numerous interventions).

 

[Islander216]

There's a pandemic, i think we can forgive the government for delays in citizenship applications.

If you look at how immigrants have been treated in the U.S under the Trump administration, you would see we've been very lucky to be PRs in Canada.