Tax Obligations: Employed in the US (US payroll) working remotely from Canada

[mayple]

Hi,

I've made a post under a different forum here, but summarizing the questions on this forum for better responses.

1. Do I need to let the US employer know that my remote location is not the state where I'm living and working in the US, and instead will be my home in Canada?

2. Does the US company need to withhold Canadian taxes ? I read somewhere online that CRA expects tax remittances from US/Foreign employers/companies. But I'm not sure how that is possible.

3. Do I become a Canadian tax resident if I exceed 183 days of physical presence?

4. Is T4 (I believe the equivalent of W2) required (must have) in order to file a Canadian tax return, especially in case of those employed by a US employer (on US payroll) but living and/or working remotely in Canada (i.e. physically in Canada whilst performing the work for a foreign employer)

5. In case the answer to the first 2 questions is NO, then do I simply file Canadian taxes at the end of the year as well as US taxes and thats it ? Is there a sequence to filing taxes? (i.e. US taxes before Canadian or vice-versa).

6. How are those who commute daily (pre-pandemic) to the US dealing with this tax situation (assuming they are all working from home in Canada) ?

In another thread I had read posts from those who are/were daily commuters to the US, and it seemed pretty straightforward from how they described it (file taxes in the US, and then file in Canada and claim treaty based exemptions/deductions/credits), but I'm not sure how things change right now with no daily (or frequent) travel to the US, and performing work while physically present in Canada.

Also, any recommendations for a good cross-border tax agent with reasonable charges?

Thanks

 

[harirajmohan]

Hi,

I've made a post under a different forum here, but summarizing the questions on this forum for better responses.

1. Do I need to let the US employer know that my remote location is not the state where I'm living and working in the US, and instead will be my home in Canada?

2. Does the US company need to withhold Canadian taxes ? I read somewhere online that CRA expects tax remittances from US/Foreign employers/companies. But I'm not sure how that is possible.

3. Do I become a Canadian tax resident if I exceed 183 days of physical presence?

4. Is T4 (I believe the equivalent of W2) required (must have) in order to file a Canadian tax return, especially in case of those employed by a US employer (on US payroll) but living and/or working remotely in Canada (i.e. physically in Canada whilst performing the work for a foreign employer)

5. In case the answer to the first 2 questions is NO, then do I simply file Canadian taxes at the end of the year as well as US taxes and thats it ? Is there a sequence to filing taxes? (i.e. US taxes before Canadian or vice-versa).

6. How are those who commute daily (pre-pandemic) to the US dealing with this tax situation (assuming they are all working from home in Canada) ?

In another thread I had read posts from those who are/were daily commuters to the US, and it seemed pretty straightforward from how they described it (file taxes in the US, and then file in Canada and claim treaty based exemptions/deductions/credits), but I'm not sure how things change right now with no daily (or frequent) travel to the US, and performing work while physically present in Canada.

Also, any recommendations for a good cross-border tax agent with reasonable charges?

Thanks

https://www.canadavisa.com/canada-immigration-discussion-board/threads/tax-challenges.715793/#post-9097544
https://www.canadavisa.com/canada-immigration-discussion-board/threads/taxes-payroll-working-in-us-living-in-windsor.551077/

 

[mayple]

https://www.canadavisa.com/canada-immigration-discussion-board/threads/tax-challenges.715793/#post-9097544
https://www.canadavisa.com/canada-immigration-discussion-board/threads/taxes-payroll-working-in-us-living-in-windsor.551077/

I mentioned in my post I've already read through others posts on this forum. They do not necessarily address (or clearly address) the specific questions I've posted. This situation is different with pandemic, where many will be working remote from Canada:
1. either temporarily - such as those who were daily commuters, but aren't commuting anymore, and hence must work from their Canadian homes
2. permanently - those that plan to be in Canada all the time as a matter of routine, and only occasionally may travel to the US.

These two are different situations, and the talks about CRA requiring Canadian taxes be withheld by US employers, or using a PEO only makes sense in certain cases e.g. where there is where an employee is 100% remote from Canada on US payroll. That is my interpretation based on all what I've read so far.

Therefore, the questions I post remain unanswered and are likely useful for everyone with a US employer but based in Canada. Lets try to address them if we can.

 

[mayple]

As an update, I read through the CRA website link here. Its still not entirely clear on certain aspects, but one thing is fairly certain that US employers ARE required to withhold Canadian taxes and remit them to CRA unless they get a waiver (I don't know more about the process and what it entails). I'm sharing some highlights below. Note - the highlighted text in italics is directly from the CRA website, while colored font (in red) is my interpretation.

Canadian income tax rules require that amounts must be deducted or withheld and remitted in respect for:

• payments to non-residents for services rendered in Canada , other than those paid in respect of an office or employment (regulation 105)
• remuneration paid to a non-resident officer or employee in respect of an office, or employment services, provided in Canada (regulation 102)

The below text appears to be related to Canadian residents (for tax purposes) who work in the US a.ka. the commuters:

Potential Issue
A non-resident entity may employ Canadian residents to work outside of Canada. As a result of the travel restrictions, the only way for some of these Canadian resident employees to fulfil their duties might be by performing them in Canada on an exceptional and temporary basis. Will the performance of employment duties from Canada affect the withholding obligations of the non-resident entity?

Agency Position
If a Canadian resident employee of a non-resident entity is forced to perform their employment duties in Canada on an exceptional and temporary basis as a result of the travel restrictions, and that employee has been issued a letter of authority applicable to the tax year including that period, the letter of authority will continue to apply and the withholding obligations of the non-resident entity will not change in Canada, as long as there are no changes to the withholding obligations of the non-resident entity in the other jurisdiction.

The below text appears to be related to Canadian non-residents (for tax purposes) who typically/mostly work in the US a.ka. the non-commuters. Take note of the text in green for the applicable dates for this CRA position:

1. Non-resident employer withholdings with non-resident employee in Canada
   The situation may arise where, due to the COVID-19 crisis, a non-resident employee of a non-resident employer travelled to Canada for personal reasons and, as a result of the travel restrictions, was unable to return to their country of residence when intended. Although it may not have been their intention, if the non-resident employee performs their duties of employment remotely while in Canada, and continues to receive remuneration for those duties, the non-resident employer would be subject to Canadian withholding, remitting, and reporting obligations, notwithstanding that the non-resident employee may ultimately be exempt from tax in Canada due to a tax treaty.
   For the non-resident employer to be relieved of their obligation to withhold and remit the applicable taxes, the non-resident employee would have to apply for and receive a waiver of the tax required to be deducted. Alternatively, the non-resident employer could apply for certification as a qualifying non-resident employer, and if the non-resident employee also qualifies, the non-resident employer would not have to withhold and remit tax on the payments they make to the non-resident employee. Both these remedies apply only where the non-resident employee is working in Canada for a limited time and is exempt from tax in Canada under a tax treaty. However, these remedies are only available in respect of a payment if granted prior to the date that the payment was made.
   In light of the extraordinary circumstances caused by the COVID-19 crisis, it is plausible that a non-resident employee who customarily performed their duties of employment for the non-resident employer in their jurisdiction of residence travelled to Canada unexpectedly, in haste, or under personal distress, and commenced performing their duties of employment remotely while remaining in Canada due to the travel restrictions. The non-resident employer and the non-resident employee may not have had the time or knowledge necessary to obtain the available relief from Canadian withholdings, at that time.
   Potential Issue
   The non-resident employee would be subject to both Canadian payroll withholdings, and those of their jurisdiction of residence, and the resulting reduction in net pay could cause undue hardship.
   Additionally, the non-resident employer, failing to withhold and remit the required Canadian amounts without authorization from the Agency, could be held liable for the whole amount with interest and penalties.
   Agency Position
   Note: The ending date referenced above for the application period of the guidance on this page, September 30, 2020, is not applicable to subsection III. D. Non-resident employer withholdings with non-resident employee in Canada. The ending date for this subsection is detailed below.
   As an administrative matter and in light of these extraordinary circumstances, the Agency will not assess or penalize a non-resident employer for failing to withhold the required Canadian payroll deductions, in respect of remuneration paid to a non-resident employee performing duties of employment remotely in Canada, where the non-resident employer and the non-resident employee, as may be required, can reasonably demonstrate that:
   • the non-resident employee is resident in a country with which Canada has a comprehensive tax treaty (treaty);
   • the non-resident employee is not resident in Canada for tax purposes in accordance with the relevant treaty;
   • the remuneration received by the non-resident employee for performing their duties of employment in Canada would otherwise be exempt from taxation in Canada in accordance with the relevant treaty;
   • the non-resident employee regularly and customarily performs their duties of employment outside of Canada and has not previously performed duties of employment in Canada, as a non-resident of Canada, for any employer;
   • there is no employer-employee relationship between the non-resident employee and any employer in Canada;
   • there has been no significant change to: the non-resident employee’s duties of employment (other than working remotely) while working in Canada; or the employer-employee relationship that existed between the non-resident employer and the non-resident employee at the time the non-resident employee travelled to Canada; and
   • the non-resident employee travelled to Canada due to the COVID-19 crisis or for reasons not relating in any manner whatever to their employment, and could not return to their jurisdiction of residence solely due to COVID-19 travel restrictions.

The Agency will respect this position for the period beginning on the day the non-resident employee commenced exercising their duties of employment in Canada because they were unable to return to their jurisdiction of residence due to the COVID 19 travel restrictions, and ending on the date that is the earliest of:

• the day the non-resident employee returned or was able to return to their jurisdiction of residence;
• the day specified on a Regulation 102 waiver relieving the non-resident employee from the relevant Canadian withholdings;
• the day the non-resident employer was certified by the Minister as a qualifying non-resident employer and the non-resident employee was also a qualifying non-resident employee, or
• December 31, 2020.

Non-resident employees providing employment services in Canada are subject to the same withholding, remitting, and reporting obligations as Canadian resident employees. Therefore, any employer, including a non-resident employer, has to withhold amounts on account of the income tax liability of an employee in Canada, even if the employee is likely to be exempt from tax in Canada because of a tax treaty. For the employer to be relieved of their obligation to withhold, the employee would have to apply for, and get, an income tax waiver from the CRA [as discussed in IV. Waiver requests – Payments to non-residents for services provided in Canada above].


From the above, it appears to be the case that both in case of the commuters who have to work from Canada due to cross-border restrictions AND those who aren't commuters but are choosing to work from Canadian home, the US employer is required to withhold Canadian taxes and remit them to CRA (in addition to employees filing Canadian tax returns as applicable), unless the US employer (and perhaps the employee as well) can get a waiver.

Thoughts?

 

[DEEPCUR]

All of the above is for non resident employees. Did you find anything for resident employees? You become Canadian resident from the day you enter Canada with an intent of settling there. It is not based on the number of days you stay. Also remember, even if your family stays in Canada, you'll still be considered as Canadian resident regardless of days you spend in Canada or live in Canada. So no matter where you work, if you have ties to Canada, you are a resident of it.

Anyways bottom line on employer taxes is this: taxes always go by the place of employment. So if someone commutes to US for work, their employer is not obligated to withhold any Canadian taxes because duties are performed within US. CRA recognizes people with such work arrangement as factual residents and expects them to file taxes as residents. If someone travels daily or once a week, CRA sees them as commuters traveling to work in US. It ends there. Pandemic situation might have impact on this , I'm not sure how CRA might question this.. but I presume they might be reasonable here and understand that it's a passe.

But if there is no plan to commute, the right way to work fully remote for US employer is through PEO or bill as contractor. But people do get away working remotely on W2 by taking care of taxes appropriately (non resident filing in US and resident filing in Canada, pay the difference). Nobody can say if it's the right thing to do or not. So far nobody has reported any problems with that work arrangement.

If you prefer to be 100% clean, either go through PEO or contractor route. That's the correct way to go about this. Or just start commuting to your workplace. If you cannot work out or if you don't want to work out such an arrangement, take a chance working remotely on W2 and face things as it comes. These are pretty much your options on this topic.

And the way you are posting, it feels like you somehow want to hear from someone that it's absolutely fine to work remotely on W2 for your own peace of mind.

 

[mayple]

All of the above is for non resident employees. Did you find anything for resident employees? You become Canadian resident from the day you enter Canada with an intent of settling there. It is not based on the number of days you stay. Also remember, even if your family stays in Canada, you'll still be considered as Canadian resident regardless of days you spend in Canada or live in Canada. So no matter where you work, if you have ties to Canada, you are a resident of it.
Are you confusing Canadian residency (immigration) with Canadian tax resident?. This information is specifically as it relates to a person being a tax resident or not. Not everything above is for non-resident - I have called out the text that I believe applies to commuters who are Canadian tax residents. Simply having a family in Canada WILL NOT make you a resident. It needs to be combined with the fact that you're overseas "temporarily". E.g. if you have a wife/kids/husband in Canada, whilst you're posted temporarily outside of Canada, you'd be deemed a tax resident. However, if you're single and living overseas, and have no income/ownership of property etc. (substantial ties), you could have a family (parents, cousins etc.) but you will not necessarily be deemed a Canadian tax resident. Also non-resident employee is one that does not have substantial ties in Canada, nor does work in Canada for more than 183 days.

Anyways bottom line on employer taxes is this: taxes always go by the place of employment. So if someone commutes to US for work, their employer is not obligated to withhold any Canadian taxes because duties are performed within US. CRA recognizes people with such work arrangement as factual residents and expects them to file taxes as residents. If someone travels daily or once a week, CRA sees them as commuters traveling to work in US. It ends there. Pandemic situation might have impact on this , I'm not sure how CRA might question this.. but I presume they might be reasonable here and understand that it's a passe.
Read over again in the link provided for the CRA website. Commuters are a special case because they are not providing services in Canada. They are tax residents in Canada, however, they perform their services IN THE USA. Therefore, employers are not required to withhold Canadian taxes. At the end of the year, they file their tax returns and go through the treaty based tax treatment. However, due to the pandemic, things are different. If a commuter is working from Canada now, that changes the dynamics, based on what I've read and quoted above. CRA had given a pass to such instances, but it appears to have expired in December 2020.

But if there is no plan to commute, the right way to work fully remote for US employer is through PEO or bill as contractor. But people do get away working remotely on W2 by taking care of taxes appropriately (non resident filing in US and resident filing in Canada, pay the difference). Nobody can say if it's the right thing to do or not. So far nobody has reported any problems with that work arrangement.
I believe from a employee perspective this would still work because you're filing taxes as appropriate. However, from what I read and understand, CRA expects remittances of some sort from US employers, and that is where it gets tricky. I don't fully understand where this is a problem.

If you prefer to be 100% clean, either go through PEO or contractor route. That's the correct way to go about this. Or just start commuting to your workplace. If you cannot work out or if you don't want to work out such an arrangement, take a chance working remotely on W2 and face things as it comes. These are pretty much your options on this topic.
I'm trying to figure out the current pandemic situation. I work and live in the US. However, since we're expected to work remotely for a good chunk of this year (I presume), I'd prefer to work from Canada. If that happens, I'm trying to figure out whether I become a tax resident once I complete 183 days or more? If yes, then does that also mean that my employer must withhold Canadian taxes since I'm performing services IN CANADA (unlike the usual where I'm working in the US). Once the pandemic is over, I may start commuting, but that is a different arrangement akin to a normal commuting arrangement that many Canadians follow (daily/weekly travel). That commuting arrangement is more clear from taxation perspective. But this temporary arrangement (which may be anywhere from 3-12 months i.e. 183 days or more) is where its sticky.

And the way you are posting, it feels like you somehow want to hear from someone that it's absolutely fine to work remotely on W2 for your own peace of mind.

See response in highlighted text

 

[Islander216]

It's bananas that your employer would have to withhold both American and Canadian tax obligations and then you would basically apply for a tax credit under the double taxation treaty when you file your taxes in Canada. So unless your U.S employer gets the waiver for you, you would be in the same situation. I'm trying to figure out the exemptions, but the exemptions relate to tax residency not income sourced in Canada.

It's not really an issue of tax residency, because your income is being derived in Canada, which makes it taxable in Canada regardless of whether you're a tax resident or non-resident. Where your tax non-residency applies is that the exemption prevents you being a tax resident in both countries, meaning you can still offset your U.S taxes paid against your tax liabilities in Canada as a non-resident. The bottomline is unless your employer gets the waiver, they would need to withhold both U.S and Canadian taxes and then you would get a refund when you file your tax return with the CRA.

This is what is most relevant to you:

Many individuals residing on either side of the Canada-U.S. border may be employed and perform their employment duties in the other country.

US Resident Employees
Under the Canada-United States income tax treaty, Canada can tax salary, wages and other similar remuneration derived by a resident of the United States for employment services provided in Canada, if the employment is exercised in Canada. Notwithstanding the above rule, such remuneration is not taxable in Canada if either of the following apply:

• The remuneration is not greater than CAN$10,000
• The person is present in Canada for no more than 183 days in any 12-month period, starting or ending in the fiscal year concerned and the remuneration is not borne by either:
  • an employer who is a resident of Canada
  • a permanent establishment which the employer has in Canada

A reciprocal rule applies for residents of Canada working in the United States.

Potential Issue
Some U.S. residents who regularly exercise their employment in Canada and who are normally not present in Canada in excess of 183 days (and, for that reason alone, are not taxable in Canada on their employment income) may now be exercising their duties in Canada for an extended period of time, as a result of the travel restrictions. In these situations, will the employees' taxation in Canada be changed?

Agency Position
If such individuals are present in Canada, and are exercising their employment duties in Canada solely as a result of the travel restrictions, those days will not be counted toward the 183-day test in the Canada-United States income tax treaty. As such, these individuals will continue to benefit from the treaty relief provided under the Canada-United States income tax treaty.

 

[mayple]

It's bananas that your employer would have to withhold both American and Canadian tax obligations and then you would basically apply for a tax credit under the double taxation treaty when you file your taxes in Canada. So unless your U.S employer gets the waiver for you, you would be in the same situation. I'm trying to figure out the exemptions, but the exemptions relate to tax residency not income sourced in Canada.
In the same situation ? what same situation? What exemptions?

It's not really an issue of tax residency, because your income is being derived in Canada, which makes it taxable in Canada regardless of whether you're a tax resident or non-resident. Where your tax non-residency applies is that the exemption prevents you being a tax resident in both countries, meaning you can still offset your U.S taxes paid against your tax liabilities in Canada as a non-resident. The bottomline is unless your employer gets the waiver, they would need to withhold both U.S and Canadian taxes and then you would get a refund when you file your tax return with the CRA.
Residency for taxation defines the process, the type of forms and the withholdings. Taxation is different for non-residents and residents sourcing income in Canada. So its absolutely relevant. I don't quite understand what you're saying about exemptions etc.

My understanding of the current Covid related scenarios is that:
1. If you're a US resident for tax purposes (and not a Canadian resident for tax purposes), AND you work remotely from Canada for under 183 days (that makes you a non-resident for tax purposes given no other substantial ties criteria applies), then you DO NOT have to have the US employer withhold Canadian taxes.

2. If you're typically a US resident for tax purposes, AND are now, given the pandemic, transitioning to work remote from Canada AND you're going to exceed 183 days presence requirement, you're going to become a Canadian tax resident, whilst being on US payroll. And since the daily/weekly commute is not happening due to the pandemic, that puts you in that tricky situation where your US employer must now withhold Canadian taxes. Because based on my understanding, the waiver does not apply. The waiver only applies to "non-resident employer" (e.g.US employer) paying a "non-resident employee" (e.g. someone who typically works in the US, but is now temporarily stuck in Canada to perform services/duties/carry out their work due to covid restrictions. However, won't exceed more than 183 days)

3. So in a case where a typically US based employee who is opting to work from Canada right now during the pandemic, ends up working more than 183 days in Canada, that individual WILL NOT be a non-resident anymore. i.e. will become a Canadian tax resident. If that happens, then the waiver DOES NOT apply. Therefore, my understanding is that, unless CRA extends this pandemic related relief in 2021 since it expired in December, the US employer would be expected to withhold Canadian taxes. And this is where I'm trying to get a confirmation/understanding. I don't know why it'd be required if the employee ends up filing Canadian taxes as a resident at the end of the year. It should sort itself out.

4. Another aspect of this applies to commuters - several on this forum used to go back and forth daily/weekly across the border. Many aren't doing so anymore. They are ALSO impacted i.e. there usual arrangement where only US payroll taxes were held by their employers is no longer applicable, and it appears that unless they get some sort of an "Authority letter" from CRA, their US employer must withhold Canadian taxes. I don't know whether my interpretation here is correct, but it seems to connect the dots based on what CRA website says


This is what is most relevant to you:

Many individuals residing on either side of the Canada-U.S. border may be employed and perform their employment duties in the other country.

As I noted above, this CRA position ended in December 2020. As of right now, this guidance does not appear to be applicable. Therefore it leaves everything in a limbo. And perhaps defaulting to the usual - the usual being, taxes must be withheld.
US Resident Employees
Under the Canada-United States income tax treaty, Canada can tax salary, wages and other similar remuneration derived by a resident of the United States for employment services provided in Canada, if the employment is exercised in Canada. Notwithstanding the above rule, such remuneration is not taxable in Canada if either of the following apply:

• The remuneration is not greater than CAN$10,000
• The person is present in Canada for no more than 183 days in any 12-month period, starting or ending in the fiscal year concerned and the remuneration is not borne by either:
  • an employer who is a resident of Canada
  • a permanent establishment which the employer has in Canada

A reciprocal rule applies for residents of Canada working in the United States.

Potential Issue
Some U.S. residents who regularly exercise their employment in Canada and who are normally not present in Canada in excess of 183 days (and, for that reason alone, are not taxable in Canada on their employment income) may now be exercising their duties in Canada for an extended period of time, as a result of the travel restrictions. In these situations, will the employees' taxation in Canada be changed?

Agency Position
If such individuals are present in Canada, and are exercising their employment duties in Canada solely as a result of the travel restrictions, those days will not be counted toward the 183-day test in the Canada-United States income tax treaty. As such, these individuals will continue to benefit from the treaty relief provided under the Canada-United States income tax treaty.

See above respones

 

[Islander216]

Your situation of being a U.S resident who is a tax non-resident in Canada. The exemptions relate to covid which suspend you becoming a tax resident if you've already done 183 days in Canada, if you've been stuck there because of restrictions but you are normally resident in another country.

Yes, residency is important in terms of your filings and paperwork, that much should be obvious. But if your concern was whether your employer would have to withhold Canadian taxes on your income, that will occur regardless of whether you're a tax resident or non-resident in Canada, because it's derived in Canada. That was the gist of that paragraph.

1. No, this is incorrect from what i've read but it would be good to verify this with a tax consultant. Your employer withholds your Canadian taxes regardless of whether you're a tax resident in Canada or not. It's only when you file your taxes in Canada that you get tax relief and get refunded for the Canadian taxes withheld based on the double taxation treaty with the U.S, based on your tax residency. Unless your employer gets a waiver.

2. This is correct except for the part which mentions that your U.S employer does not withhold your Canadian taxes.

3. Same.

4. Depends on where you're commuting from and where you're working.

The most recent guidance is the one in force until it's superseded by a more recent one.

 

[DEEPCUR]

No matter how to put, even with pandemic situation your options to work remotely are same. PEO or contracting if you want to do the right way. If not, get paid in W2, file and face whatever that comes.

You seem to be hell bent on somehow finding something that will say it's okay to be on W2 while working remotely from Canada.. I can confidently say you will not get any conclusions even if you consult 100s of forums or consult countless tax attorneys. You'll hear similar things or worse things which will keep make you lose sleep over and over on this topic. If you are so worried and since you are not in a position to move even a needle from your employer, you should not move at this time and move only when you feel you can commute.

 

[mayple]

Your situation of being a U.S resident who is a tax non-resident in Canada. The exemptions relate to covid which suspend you becoming a tax resident if you've already done 183 days in Canada, if you've been stuck there because of restrictions but you are normally resident in another country.
Yes, so if I anticipate that I'd be working in/from Canada for more than 183 days in 2021, even though I'm typically either commuting (daily/weekly) or I reside in the US (live and work) as a routine, I will become a Canadian tax resident in 2021. And so, the US employer is then expected to withhold Canadian taxes. It would not be the case, had I transitioned to a daily/weekly commuter in a pre-pandemic scenario, in which case my employment services would have been outside of Canada (hence no Canadian withholding required, however due to physical presence in Canada for more than 183 days I would still file Canadian tax returns).

Yes, residency is important in terms of your filings and paperwork, that much should be obvious. But if your concern was whether your employer would have to withhold Canadian taxes on your income, that will occur regardless of whether you're a tax resident or non-resident in Canada, because it's derived in Canada. That was the gist of that paragraph.

1. No, this is incorrect from what i've read but it would be good to verify this with a tax consultant. Your employer withholds your Canadian taxes regardless of whether you're a tax resident in Canada or not. It's only when you file your taxes in Canada that you get tax relief and get refunded for the Canadian taxes withheld based on the double taxation treaty with the U.S, based on your tax residency. Unless your employer gets a waiver.
I dont believe that US employers withhold taxes regardless of whether one is tax resident or not. Commuters are tax residents, but on this forum there are several who have been working in the US living in Canada and do not have any Canadian taxes withheld by US employer. The notion of withholding Canadian taxes is linked to tax residency.

2. This is correct except for the part which mentions that your U.S employer does not withhold your Canadian taxes.

3. Same.

4. Depends on where you're commuting from and where you're working.

The most recent guidance is the one in force until it's superseded by a more recent one.
I believe that is only true if there is no expiry date for the guidance. They've clearly articulated that it ends in December 2020.

 

[Islander216]

They key difference between a commuter is that they are commuting to work in the U.S and living in Canada.

Your work is being done in Canada hence it's derived in Canada not the U.S, that's why your U.S employer is liable to withhold Canadian taxes.

This is what i said at the beginning, your income being sourced in Canada makes your tax residency redundant in terms of the collection of Canadian taxes by your U.S employer. Where your tax residency becomes important is being able to get tax relief and refunded those taxes once you file your taxes in Canada with the CRA.

Remember that you pay taxes on Canadian sourced income even if you're a tax non-resident in Canada, but you can claim tax relief under the tax treaty with the U.S.

 

[Islander216]

Well we are all here to provide advice to the best our knowledge and using our reasoning, if OP has any doubts then it would be better to have a tax professional clear it up for them.

Non-resident employer withholdings with non-resident employee in Canada
The situation may arise where, due to the COVID-19 crisis, a non-resident employee of a non-resident employer travelled to Canada for personal reasons and, as a result of the travel restrictions, was unable to return to their country of residence when intended. Although it may not have been their intention, if the non-resident employee performs their duties of employment remotely while in Canada, and continues to receive remuneration for those duties, the non-resident employer would be subject to Canadian withholding, remitting, and reporting obligations, notwithstanding that the non-resident employee may ultimately be exempt from tax in Canada due to a tax treaty.
For the non-resident employer to be relieved of their obligation to withhold and remit the applicable taxes, the non-resident employee would have to apply for and receive a waiver of the tax required to be deducted. Alternatively, the non-resident employer could apply for certification as a qualifying non-resident employer, and if the non-resident employee also qualifies, the non-resident employer would not have to withhold and remit tax on the payments they make to the non-resident employee. Both these remedies apply only where the non-resident employee is working in Canada for a limited time and is exempt from tax in Canada under a tax treaty. However, these remedies are only available in respect of a payment if granted prior to the date that the payment was made.
In light of the extraordinary circumstances caused by the COVID-19 crisis, it is plausible that a non-resident employee who customarily performed their duties of employment for the non-resident employer in their jurisdiction of residence travelled to Canada unexpectedly, in haste, or under personal distress, and commenced performing their duties of employment remotely while remaining in Canada due to the travel restrictions. The non-resident employer and the non-resident employee may not have had the time or knowledge necessary to obtain the available relief from Canadian withholdings, at that time.

Potential Issue
The non-resident employee would be subject to both Canadian payroll withholdings, and those of their jurisdiction of residence, and the resulting reduction in net pay could cause undue hardship.
Additionally, the non-resident employer, failing to withhold and remit the required Canadian amounts without authorization from the Agency, could be held liable for the whole amount with interest and penalties.

Agency Position
Note: The ending date referenced above for the application period of the guidance on this page, September 30, 2020, is not applicable to subsection III. D. Non-resident employer withholdings with non-resident employee in Canada. The ending date for this subsection is detailed below.
As an administrative matter and in light of these extraordinary circumstances, the Agency will not assess or penalize a non-resident employer for failing to withhold the required Canadian payroll deductions, in respect of remuneration paid to a non-resident employee performing duties of employment remotely in Canada, where the non-resident employer and the non-resident employee, as may be required, can reasonably demonstrate that:

• the non-resident employee is resident in a country with which Canada has a comprehensive tax treaty (treaty);
• the non-resident employee is not resident in Canada for tax purposes in accordance with the relevant treaty;
• the remuneration received by the non-resident employee for performing their duties of employment in Canada would otherwise be exempt from taxation in Canada in accordance with the relevant treaty;
• the non-resident employee regularly and customarily performs their duties of employment outside of Canada and has not previously performed duties of employment in Canada, as a non-resident of Canada, for any employer;
• there is no employer-employee relationship between the non-resident employee and any employer in Canada;
• there has been no significant change to: the non-resident employee’s duties of employment (other than working remotely) while working in Canada; or the employer-employee relationship that existed between the non-resident employer and the non-resident employee at the time the non-resident employee travelled to Canada; and
• the non-resident employee travelled to Canada due to the COVID-19 crisis or for reasons not relating in any manner whatever to their employment, and could not return to their jurisdiction of residence solely due to COVID-19 travel restrictions.

The Agency will respect this position for the period beginning on the day the non-resident employee commenced exercising their duties of employment in Canada because they were unable to return to their jurisdiction of residence due to the COVID 19 travel restrictions, and ending on the date that is the earliest of:

• the day the non-resident employee returned or was able to return to their jurisdiction of residence;
• the day specified on a Regulation 102 waiver relieving the non-resident employee from the relevant Canadian withholdings;
• the day the non-resident employer was certified by the Minister as a qualifying non-resident employer and the non-resident employee was also a qualifying non-resident employee, or
• December 31, 2020.

So here is the thing, everything i've said is true. However, the exemption (agency position, whatever you want to call it) does give your employer a pass until the end of December 31 2020 as part of the extraordinary situation presented by covid.

We don't know what the current position is, whether that exemption continues or doesn't into 2021.

 

[mayple]

Well we are all here to provide advice to the best our knowledge and using our reasoning, if OP has any doubts then it would be better to have a tax professional clear it up for them.

Yes, before I go to a tax expert, I'm trying to have this discussion going to see what the outcome is so far for those who've thought about or dealt with it. This isn't just for me. There are several others who may be browsing these forums silently, or others who are in this position but are unaware or have no answers for this just yet. This discussion benefits many people (non-resident for tax purposes, residents for tax purposes including commuters who aren't commuting anymore) - even those who may call others "newcomers" and think of themselves as know it all. This is not the "usual" scenario of living in Canada and working in the US, and that is the core to this discusison.

So here is the thing, everything i've said is true. However, the exemption (agency position, whatever you want to call it) does give your employer a pass until the end of December 31 2020 as part of the extraordinary situation presented by covid.

We don't know what the current position is, whether that exemption continues or doesn't into 2021.

Yes - that is what I'm saying. At this point, there is zero clarity from CRA.

 

[cansha]

No matter how to put, even with pandemic situation your options to work remotely are same. PEO or contracting if you want to do the right way. If not, get paid in W2, file and face whatever that comes.

You seem to be hell bent on somehow finding something that will say it's okay to be on W2 while working remotely from Canada.. I can confidently say you will not get any conclusions even if you consult 100s of forums or consult countless tax attorneys. You'll hear similar things or worse things which will keep make you lose sleep over and over on this topic. If you are so worried and since you are not in a position to move even a needle from your employer, you should not move at this time and move only when you feel you can commute.

+1 on this response. Tax attorneys will charge money to say the exact same thing posted here.