Work remotely from Canada for US Employer

[crowbocop]

I was hoping if someone can help me, since I'm interpreting conflicting answers in this thread, on what it means for each of the following situations:

1. to live in Canada (PR) and work for a US-based employer
2. Commute to the US from Canada most of the time and work for the US-based employer

In both cases, assume the work is through an H-1B (so you're paid as a full-time, non-resident employee in USD). For the first option, assume you're going to live in Canada for more than 183 days for the fiscal year.

Can someone clarify how it's really different in terms of your tax situation? Wouldn't it be the same? My situation is I would be looking to travel from Toronto to San Francisco, infrequently (my employers are based in the Bay area). The reason is that my company has been entirely remote since late 2018.

I'm also planning to use a friend's address in the same area (within 50 miles of the office address) and I'm not sure if this is going to be problematic or worse, illegal.

 

[canuck78]

I was hoping if someone can help me, since I'm interpreting conflicting answers in this thread, on what it means for each of the following situations:

1. to live in Canada (PR) and work for a US-based employer
2. Commute to the US from Canada most of the time and work for the US-based employer

In both cases, assume the work is through an H-1B (so you're paid as a full-time, non-resident employee in USD). For the first option, assume you're going to live in Canada for more than 183 days for the fiscal year.

Can someone clarify how it's really different in terms of your tax situation? Wouldn't it be the same? My situation is I would be looking to travel from Toronto to San Francisco, infrequently (my employers are based in the Bay area). The reason is that my company has been entirely remote since late 2018.

I'm also planning to use a friend's address in the same area (within 50 miles of the office address) and I'm not sure if this is going to be problematic or worse, illegal.

If you are not actually living at the address in SF I think you know that it would be misrepresenting your situation if you declare your friend's address in California as your residence. Although your office is remote I would suggest informing your employer that you will be working from Canada. Some companies are comfortable with the idea where s others are not.

 

[crowbocop]

> Although your office is remote I would suggest informing your employer that you will be working from Canada. Some companies are comfortable with the idea where s others are not.

They are aware . They just need me to tell them if I'm okay moving forward with the H-1B for this year.

 

[jclarke99]

I was hoping if someone can help me, since I'm interpreting conflicting answers in this thread, on what it means for each of the following situations:

1. to live in Canada (PR) and work for a US-based employer
2. Commute to the US from Canada most of the time and work for the US-based employer

In both cases, assume the work is through an H-1B (so you're paid as a full-time, non-resident employee in USD). For the first option, assume you're going to live in Canada for more than 183 days for the fiscal year.

Can someone clarify how it's really different in terms of your tax situation? Wouldn't it be the same? My situation is I would be looking to travel from Toronto to San Francisco, infrequently (my employers are based in the Bay area). The reason is that my company has been entirely remote since late 2018.

I'm also planning to use a friend's address in the same area (within 50 miles of the office address) and I'm not sure if this is going to be problematic or worse, illegal.

I don't think that your H-1B status changes the following (but others correct me if I'm wrong)....

You are a Canadian resident for tax purposes. Partly because you'll live in Canada >183 days a fiscal year. But mainly because you consider Canada your home (and CRA will see it that way too).

"If you are working temporarily outside Canada, vacationing outside Canada, commuting (going back and forth daily or weekly) from Canada to your place of work in the United States, or attending school in another country, and you maintain residential ties with Canada, you may be considered a factual resident of Canada"

source: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

What are you going to use your friend's address for? For U.S. tax purposes? For Canadian tax purposes? Why not simply use your address in Toronto? Who are you trying to "fool", if anyone? Legally, you're going to be considered a Canadian resident for tax purposes.

I see this getting complicated at tax time. Presumably, your U.S. employer is making U.S. tax withholdings on your pay check. While the U.S.-Canada tax treaty will prevent you from being double-taxed, you may find that Canada expects you to pay taxes to them, and you'd need to "claw-back" the taxers you paid to the U.S. Another member, in a somewhat similar situation, paid for legal tax advice and was advised that he should be making regular tax payments to Canada during the fiscal year (so you'd initially be paying double taxes, but then claw-back the U.S. taxes at tax time).

A final thought that is more of a consideration for your U.S employer than it is to you. Your U.S. employer is bound by Canadian labor laws given that you are a Canadian resident. Perhaps that will never be an issue, but it is something they need to be aware of.

 

[matteosc]

I don't think that your H-1B status changes the following (but others correct me if I'm wrong)....

You are a Canadian resident for tax purposes. Partly because you'll live in Canada >183 days a fiscal year. But mainly because you consider Canada your home (and CRA will see it that way too).

"If you are working temporarily outside Canada, vacationing outside Canada, commuting (going back and forth daily or weekly) from Canada to your place of work in the United States, or attending school in another country, and you maintain residential ties with Canada, you may be considered a factual resident of Canada"

source: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

What are you going to use your friend's address for? For U.S. tax purposes? For Canadian tax purposes? Why not simply use your address in Toronto? Who are you trying to "fool", if anyone? Legally, you're going to be considered a Canadian resident for tax purposes.

I see this getting complicated at tax time. Presumably, your U.S. employer is making U.S. tax withholdings on your pay check. While the U.S.-Canada tax treaty will prevent you from being double-taxed, you may find that Canada expects you to pay taxes to them, and you'd need to "claw-back" the taxers you paid to the U.S. Another member, in a somewhat similar situation, paid for legal tax advice and was advised that he should be making regular tax payments to Canada during the fiscal year (so you'd initially be paying double taxes, but then claw-back the U.S. taxes at tax time).

A final thought that is more of a consideration for your U.S employer than it is to you. Your U.S. employer is bound by Canadian labor laws given that you are a Canadian resident. Perhaps that will never be an issue, but it is something they need to be aware of.

I agree with what you said.
If I can summarize, I think the situation is pretty simple and common in reality.

• Using a friend's address is definitely illegal
• You should file taxes in both Canada and US

I am not 100% sure of where you should file them first, but there is a treaty preventing from double taxation, so you will subtract the taxes payed to the first country to the ones due to the second country.

 

[crowbocop]

Thanks @jclarke99 and @matteosc. I should clarify a couple of things, however.

I actually don't mind being taxed as a Canadian resident and paying taxes in both countries. This part I'm at peace with.

My only worry was if there would be a problem more on the H-1B side of things since I was looking to work remotely from Canada for a US-based employer. If the physical presence requirements of an H-1B either make it difficult for this arrangement or require frequent trips to be made with the additional stipulation of a US residence, then I would simply not proceed with filing for an H-1B.

Was just curious how people with work through an H-1B from Canada with the physical presence requirements of the H-1B in mind.

 

[jclarke99]

Ahhh, now I understand your main concern. Perhaps this link helps??

https://www.reddit.com/r/h1b/comments/fn4jhm

 

[crowbocop]

I think it does for 90% of my concerns; thank you so much for sharing this. So it appears that people are able to work outside the US and be on an H-1B. The problem appears to be with re-entry (which doesn't seem so bad). I've asked my company's lawyers this question too, so I'll wait to see what they have to say.

The other 10% is on the requirement to maintain a physical address in the US - I don't know if this still applies.

There's also something I read somewhere which says that the H-1B's physical presence requirements are only applicable as long as I'm on US soil → so here it may make sense to not use a friend's address and simply use an address I'll be at during this time (maybe an Airbnb reservation). What happens to my visa status if I leave the US is also something I've asked my company lawyers.

Overall, I'm only considering the H-1B as an alternative should my Canadian application not work out. I really don't want to use any kind of loophole in either system or appear as though I'm abusing the system. Life has enough headaches as it is .

 

[matteosc]

I think it does for 90% of my concerns; thank you so much for sharing this. So it appears that people are able to work outside the US and be on an H-1B. The problem appears to be with re-entry (which doesn't seem so bad). I've asked my company's lawyers this question too, so I'll wait to see what they have to say.

The other 10% is on the requirement to maintain a physical address in the US - I don't know if this still applies.

There's also something I read somewhere which says that the H-1B's physical presence requirements are only applicable as long as I'm on US soil → so here it may make sense to not use a friend's address and simply use an address I'll be at during this time (maybe an Airbnb reservation). What happens to my visa status if I leave the US is also something I've asked my company lawyers.

Overall, I'm only considering the H-1B as an alternative should my Canadian application not work out. I really don't want to use any kind of loophole in either system or appear as though I'm abusing the system. Life has enough headaches as it is .

I am not aware of any requirements in terms of residence in order to retain the H1B status. From what I understand, the days you spend on US soil count for defining if you are a resident alien or a nonresident alien. If you work remotely from Canada, I think that you are a nonresident alien for tax purposes and the following should apply to you:

Tax implications for an H1B non resident alien

Whereas a resident alien must report income from all sources, both inside and outside the US, a non resident alien is only required to report and therefore pay tax to the IRS on income earned within the US.
The IRS can’t demand that a non resident alien pays tax on any income earned in a foreign country.

Of course in your case it makes no difference as all you income is coming from an US company and you need to declare all of it anyways.

If you work from Canada on a US payroll, you need to be eligible to work in both US and Canada, which means that you need the H1B. Without it, your company would need to pay you on a Canadian payroll or you would need to work as a contractor.

I think waiting for the lawyer's advice is the best choice, just keep in mind these consideration.

 

[crowbocop]

I understand - the option to continue working for them as a contractor remains an option.

In your last response, you've pretty much covered all of it and given me the right words to speak to someone else about it as well. Thank you!

 

[#tran]

My US employer treats me as independent contractor. He e-transfers me my compensation to my Canada bank account, withhold no tax. I file income tax with Canada.

I know this thread is old, so would very appreciate if receive an answer from you. I'm in the same situation: moving to Canada this June from the US (was in the US on F1 visa) and will be working for a US company as independent contractor. May I ask how you handled the taxes? Thank you in advance!

 

[canuck78]

I know this thread is old, so would very appreciate if receive an answer from you. I'm in the same situation: moving to Canada this June from the US (was in the US on F1 visa) and will be working for a US company as independent contractor. May I ask how you handled the taxes? Thank you in advance!

Would really suggest meeting with an accountant because the answer requires much more information.

 

[jclarke99]

I know this thread is old, so would very appreciate if receive an answer from you. I'm in the same situation: moving to Canada this June from the US (was in the US on F1 visa) and will be working for a US company as independent contractor. May I ask how you handled the taxes? Thank you in advance!

I agree with canuck78. Just because some individuals have arrangements that seem to do the trick, this doesn't necessarily mean that they are legitimate/legal.

 

[canuck78]

I agree with canuck78. Just because some individuals have arrangements that seem to do the trick, this doesn't necessarily mean that they are legitimate/legal.

There are many things to consider which may influence how you structure your contracting business so what one person does may not be the best option for the next person.

 

[chikoo1985]

I know this thread is old, so would very appreciate if receive an answer from you. I'm in the same situation: moving to Canada this June from the US (was in the US on F1 visa) and will be working for a US company as independent contractor. May I ask how you handled the taxes? Thank you in advance!

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

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

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