Work remotely from Canada for US Employer

[jclarke99]

Does CRA have a way of knowing if you are a commuter? Anyway most of these "commuters" are now fully remote anyway. I guess if the worst case is to pay double taxes that is OK with me. I just wanna make sure there are no other complications as per labor laws etc.

It's all clear as mud. Taxes, immigration, labor laws - it's a tangled web. Well, at least the cross-border experts should know what to advise. Then again, maybe not. Check out this post on how 3 different cross-border tax accountants provided 3 diverging opinions of how a couple living in Canada should handle, for tax purposes, a situation of having both U.S.-source and Canada-source income.

https://forums.serbinski.com/viewtopic.php?f=2&t=13471

 

[mastersboy]

It's all clear as mud. Taxes, immigration, labor laws - it's a tangled web. Well, at least the cross-border experts should know what to advise. Then again, maybe not. Check out this post on how 3 different cross-border tax accountants provided 3 diverging opinions of how a couple living in Canada should handle, for tax purposes, a situation of having both U.S.-source and Canada-source income.

https://forums.serbinski.com/viewtopic.php?f=2&t=13471

Yeah what a mess. To me seems like as long as you file and disclose all income you will be fine. If they audit and ask for ccorections etc. it would be extra work but at the end of the day IRS and CRA will have to agree due to the treaty and not double tax you. Seems like it is easier to navigate this for U.S. citizens as compared to U.S. work visa holders as you at least don't have worry about your ability to legally work for an U.S. employer from outside U.S.

I apln to go forward with the trusty formula of let U.S. employer deduct U.S. taxes and then claim FTC to CRA. Only caveat is to apply on paper to CRA so we can send the 1040 to them from the get go, or they'll make you pay double tax and then you'll have to challenge the audit by sending the 1040 anyway. We were part residents in U.S. and Canada one year and that is what happened to U.S. Once we sent 1040, CRA kept some money (after FTC) but gave us rest of our money back.

I have not found one case of any "illegality" thus far as long as you declare all your income to both IRS and CRA.

 

[jclarke99]

Agreed. If, like yourself, you are transparent, honest, and declare all of your income to both IRS and CRA, you should be on firm ground. I do want to make sure that others reading this thread don't think that the matter is so convoluted that it's a free-for-all. Use a relative or friend's U.S. home address as your home address for U.S. tax purposes, and not declare U.S. income to Canada? Now we're in the realm of illegality.

 

[Scalphunter]

I'm currently on an H-1B with an approved I-140 working as a consultant at a third part client site. Once I have my PR, I plan to relocate to Canada and continue working for the same client from Canada with no commuting to the US (my colleague recently moved to Canada and is still working for the same client, so it seems my client is okay with fully remote work). My questions are:

1. If my client and US employer are agreeable to me working remotely full time, is it legal? In this scenario, would my US employer just continue my payroll as it is right now and I'd have to transfer it into Canada when needed? I know I'd be paying taxes to the US and using that as credit on the Canada tax owed.

2. If I continue working remotely from Canada, what happens to my current H-1B and can it be renewed?

3. My US employer has a Canadian branch. Can I become an employee of this Canadian branch and have the payroll run through them to be directly deposited into my Canada bank account? I guess in this case, the H-1B becomes irrelevant as it'd be a contract between my employer's US and Canadian branches.

 

[canuck78]

I'm currently on an H-1B with an approved I-140 working as a consultant at a third part client site. Once I have my PR, I plan to relocate to Canada and continue working for the same client from Canada with no commuting to the US (my colleague recently moved to Canada and is still working for the same client, so it seems my client is okay with fully remote work). My questions are:

1. If my client and US employer are agreeable to me working remotely full time, is it legal? In this scenario, would my US employer just continue my payroll as it is right now and I'd have to transfer it into Canada when needed? I know I'd be paying taxes to the US and using that as credit on the Canada tax owed.

2. If I continue working remotely from Canada, what happens to my current H-1B and can it be renewed?

3. My US employer has a Canadian branch. Can I become an employee of this Canadian branch and have the payroll run through them to be directly deposited into my Canada bank account? I guess in this case, the H-1B becomes irrelevant as it'd be a contract between my employer's US and Canadian branches.

How can your company continue your payroll as it is. You'll need to update your address once you move or payroll will be linked to your previous address.

 

[Scalphunter]

How can your company continue your payroll as it is. You'll need to update your address once you move or payroll will be linked to your previous address.

I'll have to ask my colleague what address he's providing for his payroll because he's definitely getting paid in USD in his US bank account.

 

[jclarke99]

I'm currently on an H-1B with an approved I-140 working as a consultant at a third part client site. Once I have my PR, I plan to relocate to Canada and continue working for the same client from Canada with no commuting to the US (my colleague recently moved to Canada and is still working for the same client, so it seems my client is okay with fully remote work). My questions are:

1. If my client and US employer are agreeable to me working remotely full time, is it legal? In this scenario, would my US employer just continue my payroll as it is right now and I'd have to transfer it into Canada when needed? I know I'd be paying taxes to the US and using that as credit on the Canada tax owed.

2. If I continue working remotely from Canada, what happens to my current H-1B and can it be renewed?

3. My US employer has a Canadian branch. Can I become an employee of this Canadian branch and have the payroll run through them to be directly deposited into my Canada bank account? I guess in this case, the H-1B becomes irrelevant as it'd be a contract between my employer's US and Canadian branches.

Some of this is already covered in this thread, nevertheless..
#1 This is a thorny path of immigration laws, tax laws, and cross-border labor laws that all need to be satisfied. Check out the post on Dec. 22 in this thread. Although it applies to the situation of a U.S. citizen moving to Canada, I assume some of the issues would pertain to your situation.

#2 No idea.

#3 This is your solution once you obtain PR status.

 

[matteosc]

I'll have to ask my colleague what address he's providing for his payroll because he's definitely getting paid in USD in his US bank account.

Hi, I do not think that providing an US address you are not really living at is legal (which does not mean that your colleague is not doing it). If your employer has a Canadian branch that would be by far the best option in my opinion. It could also be the only legal option, if you are working full time from Canada (but I would let people more expert than me comment on this).

 

[canuck78]

I'll have to ask my colleague what address he's providing for his payroll because he's definitely getting paid in USD in his US bank account.

Would be careful because many are not doing things legally and so would get independent advice.

 

[matteosc]

Hi everyone, I have a couple of questions about what happens when we "activate" the PR status in Canada. Considering that I have an H1B in US:

1) If I would do a "soft landing" and coming back to US to work from here, would I need to declare my US income in Canada?
2) Since I have lots of vacation days left (thanks, pandemic...), what would happen if I spend the last couple of months of my US contract in Canada? I would do no work from there, but I would still be paid. Would I need to declare that income?

Thanks in advance for your replies.

 

[moonlight86]

Hi all,

Glad I found this forum, this is a hot topic as more and more people working remotely. For a case of a US citizen &Candian PR, working for US employer while living in Canada, I did some extensive research and I appreciate if you can provide your feedback on if my interpretation of the rules is correct, (as a reminder this only applies based on the tax treaty between US and Canada):

Basically, you are obligated to report your worldwide income to CRA (which includes US income) only when you are considered a resident in Canada for tax purposes. Of course, you can have a PR status in Canada but be considered as non- resident for tax purposes under certain circumstances. For example, if you have been in Canada less than 183 days in a calendar year, you can file as non-resident in Canada that means that you have to only report your Canadian income (if you have any) to CRA and pay US taxes only to US. There is actually a link at the bottom of the post on how you determine your tie to each country and which one is stronger. You can refer to the link below for the entire article but here is the important part under Article IV to determine your residence:

For the purposes of this Convention, the term "resident" of a Contracting State means any person that, under the laws of that State is liable to tax , an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State.

So it really depends on where you have a stronger financial tie to and this can even override the 183 day rule. So even if you spend more time in Canada than US but you are a US citizen or GC holder who has a very strong financial tie in the US, chances are you can consider yourself as a non-resident in Canada for tax purposes. Although when it comes to the time you want to renew your PR, IRCC wants the tax assessment but as they know PR's can file taxes as a non-resident, they can demand another document to prove you meet the RO.

Can you please provide your opinion on this?

Here is the source:

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997-2007.html

 

[jclarke99]

Hi all,

Glad I found this forum, this is a hot topic as more and more people working remotely. For a case of a US citizen &Candian PR, working for US employer while living in Canada, I did some extensive research and I appreciate if you can provide your feedback on if my interpretation of the rules is correct, (as a reminder this only applies based on the tax treaty between US and Canada):

Basically, you are obligated to report your worldwide income to CRA (which includes US income) only when you are considered a resident in Canada for tax purposes. Of course, you can have a PR status in Canada but be considered as non- resident for tax purposes under certain circumstances. For example, if you have been in Canada less than 183 days in a calendar year, you can file as non-resident in Canada that means that you have to only report your Canadian income (if you have any) to CRA and pay US taxes only to US. There is actually a link at the bottom of the post on how you determine your tie to each country and which one is stronger. You can refer to the link below for the entire article but here is the important part under Article IV to determine your residence:

For the purposes of this Convention, the term "resident" of a Contracting State means any person that, under the laws of that State is liable to tax , an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State.

So it really depends on where you have a stronger financial tie to and this can even override the 183 day rule. So even if you spend more time in Canada than US but you are a US citizen or GC holder who has a very strong financial tie in the US, chances are you can consider yourself as a non-resident in Canada for tax purposes. Although when it comes to the time you want to renew your PR, IRCC wants the tax assessment but as they know PR's can file taxes as a non-resident, they can demand another document to prove you meet the RO.

Can you please provide your opinion on this?

Here is the source:

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997-2007.html

I agree with your interpretation of the 183 day rule, but I'm not convinced that having a "very strong financial tie with the US" can make you a non-resident for tax purposes and over-ride the 183 day rule. Here's an excerpt from the link below..

"One of the most important factors which impact your residential status in Canada is your residential ties with the country. Home, spouse or common-law partner or dependants in Canada are considered to be significant residential ties to the country.

Following secondary residential ties are applicable to determining your residency. Such as,

• personal property (i.e. car, furniture),
• social ties and economic ties (i.e. membership in Canadian recreational organisations, bank accounts in Canada),
• Canadian passport, driver’s license and health insurance with a Canadian province or territory.
• Residential status in another country may also impact your Canadian status.

You are a factual resident for tax purposes if you:

• Keep significant residential ties in Canada while you live and travel outside the country
• Working temporarily outside Canada
• Teaching or attending school in a foreign country
• Commuting from Canada to US workplace
• Vacationing outside Canada"

Importantly, note above that "Commuting from Canada to US workplace" does NOT make you a non-resident of Canada for tax purposes. I highlight this as it keeps getting brought up in this forum.

https://1040abroad.com/blog/moving-to-canada-learn-about-canadian-tax-residency/

 

[moonlight86]

I agree with your interpretation of the 183 day rule, but I'm not convinced that having a "very strong financial tie with the US" can make you a non-resident for tax purposes and over-ride the 183 day rule. Here's an excerpt from the link below..

"One of the most important factors which impact your residential status in Canada is your residential ties with the country. Home, spouse or common-law partner or dependants in Canada are considered to be significant residential ties to the country.

Following secondary residential ties are applicable to determining your residency. Such as,

• personal property (i.e. car, furniture),
• social ties and economic ties (i.e. membership in Canadian recreational organisations, bank accounts in Canada),
• Canadian passport, driver’s license and health insurance with a Canadian province or territory.
• Residential status in another country may also impact your Canadian status.

You are a factual resident for tax purposes if you:

• Keep significant residential ties in Canada while you live and travel outside the country
• Working temporarily outside Canada
• Teaching or attending school in a foreign country
• Commuting from Canada to US workplace
• Vacationing outside Canada"

Importantly, note above that "Commuting from Canada to US workplace" does NOT make you a non-resident of Canada for tax purposes. I highlight this as it keeps getting brought up in this forum.

https://1040abroad.com/blog/moving-to-canada-learn-about-canadian-tax-residency/

Thanks for your feedback. So if someone has a job, multiple bank accounts, 401 K, credit cards, DL and a place available to reside (not own that property though) in the US and physically live in Canada in a rental place and only one bank account plus provincial health insurance, how can you tell where is the stronger financial ties (even if this person spends more than 183 days in Canada)? I'm not clear because it is somehow subjective. I know CRA has forms you can fill out and ask their opinion on this but is that the right thing to do or can I make the call for myself that my financial ties are stronger in the US? Anyone has any experience to share please?

 

[jclarke99]

Thanks for your feedback. So if someone has a job, multiple bank accounts, 401 K, credit cards, DL and a place available to reside (not own that property though) in the US and physically live in Canada in a rental place and only one bank account plus provincial health insurance, how can you tell where is the stronger financial ties (even if this person spends more than 183 days in Canada)? I'm not clear because it is somehow subjective. I know CRA has forms you can fill out and ask their opinion on this but is that the right thing to do or can I make the call for myself that my financial ties are stronger in the US? Anyone has any experience to share please?

I think a lawyer is needed to clearly decipher the paragraph you sent, also here...

"For the purposes of this paragraph, an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State. "

I'm just not sure whether "not a resident of Canada under this paragraph" means, per your interpretation, that personal & economic ties are closer to the U.S., or that the individual is deemed a non-resident of Canada to begin with (which then wouldn't apply). Nevertheless, you'd have to address the "personal", not just the "financial" connections to Canada. I guess if you are single with no family connections to Canada, then it may be all about financial.

 

[jclarke99]

I think a lawyer is needed to clearly decipher the paragraph you sent, also here...

"For the purposes of this paragraph, an individual who is not a resident of Canada under this paragraph and who is a United States citizen or an alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United States, and that individual’s personal and economic relations are closer to the United States than to any third State. "

I'm just not sure whether "not a resident of Canada under this paragraph" means, per your interpretation, that personal & economic ties are closer to the U.S., or that the individual is deemed a non-resident of Canada to begin with (which then wouldn't apply). Nevertheless, you'd have to address the "personal", not just the "financial" connections to Canada. I guess if you are single with no family connections to Canada, then it may be all about financial.

Also, my interpretation of the 183 day rule is different than yours. If you don't meet "significant" or "secondary" ties to Canada (per the link I sent), then you might not be a resident of Canada for tax purposes, unless you spend 183+ days in Canada, then you become a resident for tax purposes. In other words, the 183 day test becomes the trump card. You see it the opposite way - that "significant" and "secondary" ties to the U.S. becomes the trump card.