US citizen in Canada (PR) working for US company as an FTE paid into US Bank
- Thread starter chs
- Start date
I'm interested in this "illegal" part. There must be a tax law/code that lays out in black and white whether this is illegal or not. To me it doesn't sound illegal from CRA perspective. Anyone got any links for this "illegal" claim? Thanks!
(OP here)
I honestly didn't press the tax guy on what part was illegal; I'm assuming he knows international tax law better than I do, which is why I paid him for his advice. His main point was that it was dodgy at best and maybe illegal at worst, for a company in the US to have a full-time employee in Canada and not routing the pay through the appropriate Canadian payments systems. Whether it was illegal on the US or Canada side, I wasn't sure and didn't ask, but it seemed like both the IRS and the CRA would have had an unusual interest in my position. I felt that was good enough for me, especially given that he said that, were I to consult, such restrictions wouldn't necessarily apply. Given my citizenship application is pending, I'm wanting to make as few waves as possible.
Hope that helps.
Thanks! I understand you not making the move given your citizenship application. However, I cant help but wonder so many cross border commuters MUST be doing this. USC working on W2 in the U.S. and living in Canada. Given most of them successfully get their Canadian PR renwal/citizenship applications approved. I wonder how do they navigate this? I feel like the worst case scenario would be "double taxation", but nothing "illegal" at least on the taxpayer's part. Not sure if CRA considers it "illegal" for U.S. employer to pay folks working from Canada as FTE, but frankly CRA has no ground to take any legal action against a U.S. employer unless there is a treaty that lets them do that?
That's a good question. I did float the idea of that with the lawyer guy and he said it's doable, it's just how far did I want to go for this? I could have had an "office" in Plattsburgh that I would have commuted to in order to work from and continued living in Montreal, but it's not a risk I was really willing to take. I would be curious to hear from people that are doing exactly as you describe; I'm thinking they're probably not super-open about it as it would likely appear dodgy somehow should they have the same company situation (US company with no Canadian affiliate.) I think most of these companies are probably small ones and the people in question may be consultants, but that's purely conjecture. Double taxation is, indeed, the baseline activity (to the point you're severely out-of-pocket the first year until you claim your taxes against the US back (fully 100% audited every time, by the way)) and the dial for pain can move quite far beyond that.
I think CRA can get b*tchy with the company, but I think you're ultimately right; there probably isn't an "official" lever that can be pulled unless the company has an official presence here, but I am by no means a lawyer or even specialist in this field; I am but a lowly layman. I think the problems were more with IRS and full-time employees being outside the US.
I haven't even really talked about this angle very much, but a LOT of the larger companies in the US (At least the financial/Wall Street types) and rapidly slamming shut any talk of having FTEs outside of the US unless the firm has a presence in that country; I've heard it from multiple banks at this point and wouldn't expect that number to decline anytime soon.
I think CRA can get b*tchy with the company, but I think you're ultimately right; there probably isn't an "official" lever that can be pulled unless the company has an official presence here, but I am by no means a lawyer or even specialist in this field; I am but a lowly layman. I think the problems were more with IRS and full-time employees being outside the US.
I haven't even really talked about this angle very much, but a LOT of the larger companies in the US (At least the financial/Wall Street types) and rapidly slamming shut any talk of having FTEs outside of the US unless the firm has a presence in that country; I've heard it from multiple banks at this point and wouldn't expect that number to decline anytime soon.
(US citizen with US based job living PR in Canada)
I just find this all interesting and confusing. from the moment I applied for PR and paid taxes I always had my US employer listed. I've never heard a peep from IRS or CRA about what I'm doing. you'd think Canada wouldn't care- not taking a job from a Canadian if you stay employed in the US....
CRA did ask me to start making quarterly payments. I was able to get my employer in US to stop taking federal tax out. so larger paycheck > convert US 'federal' tax amount to CAD > save > make payments quarterly
great comments here. thanks all for sharing.
I just find this all interesting and confusing. from the moment I applied for PR and paid taxes I always had my US employer listed. I've never heard a peep from IRS or CRA about what I'm doing. you'd think Canada wouldn't care- not taking a job from a Canadian if you stay employed in the US....
CRA did ask me to start making quarterly payments. I was able to get my employer in US to stop taking federal tax out. so larger paycheck > convert US 'federal' tax amount to CAD > save > make payments quarterly
great comments here. thanks all for sharing.
Think Canada should actually care a lot. Living in Canada, using Canadian services but primarily paying US taxes. If they made people consult for US companies the tax revenue would be much higher.
How are you paying $0 in taxes if you are working for a US in employer as a US citizen unless your salary is very low?
The tax treaties make it so you avoid double taxation. You only pay taxes in the country that’s higher. Which for me is in Canada. You get a foreign tax credit in US filing which effectively reduces your amount owing to $0.
https://www.irs.gov/individuals/international-taxpayers/tax-treaties
https://www.irs.gov/individuals/international-taxpayers/tax-treaties
I could have done that with an opportunity that I had in the US but living in Canada, but it seemed like a giant pain in the posterior, especially being out-of-pocket for the estimated quarterly taxes. What province do you live in, if I may ask?
Also, are you getting the money deposited into a US account and moving it over or do you have them deposit it into a Canadian account (Seems more challenging, given the differences in the money routing systems)
Just a clarification - yes, effectively you'd be paying the tax equal to the country with the higher tax. But I don't think that the general rule is that the country with the higher tax gets all the payment, and the other country gets the foreign tax credit. It could have been that you paid full taxes in the U.S., and then paid the difference (making up the Canadian tax rate) to Canada. Others correct me if I'm wrong, but I think it's more a case of where you are a resident determines who actually receives the tax revenues (Canada in your case) and what country gets all or the bulk of the tax credit (the U.S. in your case).
You've achieved the ideal - not having U.S. tax deductions taken out of your pay check (so that you don't have to try and claw it back later, or have to pay, temporarily, double taxes as CHS mentions), and CRA is happy because tax revenues flow through them (given your quarterly payments to CRA).
Did an accountant who specializes in cross border taxes do your taxes? Yes there is a tax treaty but in your situation you should be paying US taxes first and then the get a credit towards your Canadian taxes. Unless your salary is very low or you are prepaying your taxes this makes no sense your tax bill shouldn't be zero.
Just clarifying that you are actually employed by the US company and not consulting.
Yea it’s kind of a pain constantly transferring money from USD to CAD and then with the weakening USD to CAD my savings gets thrown off. I’m in Alberta.
I shouldn’t complain though. I love living here and hope to become a citizen next year.
Yes paid in USD then use TransferWise to convert to CAD.
Yea I may not be speaking the terms 100% correct but at the end of the day the tax credit makes it so I get the US back and then pay Canada. I did things a bit different in tax year 2019 vs 2020 in relation to what actually is taken out of my paycheck. Yes employed by US employer.