Canadian PR working remotely for US company as W2 employee - Basic questions

[frankyfix]

Dear forum,

I hope I can get some thoughts from you regarding my questions. I am a Canadian PR (originally from South America).

I am working for a US based company as a W2 employee. I have no visa for the US or work permit- all happens remotely.

My questions are:

a) My employer withholds income taxes on the US side, I offset them through the foreign income credit on through the Canadian tax return. Do I have to file an income tax return for the US too?

b) Is there a chance that my foreign income from the US counts against EI benefits? I have not found any informations if foreign employment income counts towards EI benefits

Thank you friends!

Have a great day

 

[canuck78]

Dear forum,

I hope I can get some thoughts from you regarding my questions. I am a Canadian PR (originally from South America).

I am working for a US based company as a W2 employee. I have no visa for the US or work permit- all happens remotely.

My questions are:

a) My employer withholds income taxes on the US side, I offset them through the foreign income credit on through the Canadian tax return. Do I have to file an income tax return for the US too?

b) Is there a chance that my foreign income from the US counts against EI benefits? I have not found any informations if foreign employment income counts towards EI benefits

Thank you friends!

Have a great day

You can't be employed directly by a US company if you can't work in the US.

 

[frankyfix]

Can you please provide a proof for what you said?

In my understanding, there is nothing in the law that prohibits a US corporation from putting a foreigner working outside USA onto the payroll.

If there is no physical presence, there is no need for a visa:
https://shieldgeo.com/hiring-remote-workers-in-canada-a-guide-for-us-employers/

 

[jclarke99]

Dear forum,

I hope I can get some thoughts from you regarding my questions. I am a Canadian PR (originally from South America).

I am working for a US based company as a W2 employee. I have no visa for the US or work permit- all happens remotely.

My questions are:

a) My employer withholds income taxes on the US side, I offset them through the foreign income credit on through the Canadian tax return. Do I have to file an income tax return for the US too?

b) Is there a chance that my foreign income from the US counts against EI benefits? I have not found any informations if foreign employment income counts towards EI benefits

Thank you friends!

Have a great day

I too question whether you can be a W2 employee in your situation. You could be a consultant and invoice the U.S. company. But W2 employee??
In any event, seems like you would need to file U.S. taxes. You should also withhold quarterly payments to Canada (not assume you can just offset taxes with foreign tax credit - check other posts about this - search for the author chs). At tax time you should try and get your U.S. taxes back and use the tax credit on the U.S. side so that you are ultimately giving the tax $ to Canada.

 

[canuck78]

Can you please provide a proof for what you said?

In my understanding, there is nothing in the law that prohibits a US corporation from putting a foreigner working outside USA onto the payroll.

If there is no physical presence, there is no need for a visa:
https://shieldgeo.com/hiring-remote-workers-in-canada-a-guide-for-us-employers/

There is no visa required to work in Canada for a US employer but you can't be a direct employee of a US company. You essentially have to be a contract worker. How have you set up how you work for the US employer? Have you worked with an accountant to get advice how to structure your business in order to be the most advantageous for you tax wise?

 

[frankyfix]

Thanks for your feedback.

Ok, I see what you mean. I have a document on my table saying „W2 Contractor -seasonal worker“.Length up to 6 month.

Is that what you mean?

I know that they are withholding tax on their end. I am currently trying to find a cross border account to get help. The main question for me is, if I have to file US tax return too..

cheers

 

[jclarke99]

I don't see how you could take a foreign tax credit on the Canadian side if you're not going to file taxes on the U.S. side (yes, I realize you're employer is making U.S. deductions). You should be making quarterly tax payments to Canada. Seems to me that either you're willing to be double taxed (i.e., no tax credit) or you file Canadian and U.S. taxes and make use of the tax deduction.

 

[frankyfix]

You know, after you mentioned that this will not work, I started digging and I talked to a cross border accountant and he confirmed that this is just not working. I can not work and live in Canada while full time employed as W2 in the US.
I need to talk to them to switch to an contractor position or maybe put me on a Canadian payroll.

 

[jclarke99]

If your U.S. employer has Canadian office(s) and can put you on Canadian payroll, then that would be the solution.

Alternatively, you could be on Canadian payroll via a Personal Employer Organization (PEO) with cross-border experience. You'd work for the PEO and they'd "lease" you out to your U.S. employers. Of course, your U.S. employer would need to be open to that and pay the premium for the PEO.

Or, as you stated, there's the option to be an independent contractor and invoice your U.S. employer. If you go this route, you should be aware of the possibility of being declared a Personal Service Business (PSB) by CRA and be subject to very high tax rates. I recommend doing some research on this, perhaps starting here https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk

 

[canuck78]

You know, after you mentioned that this will not work, I started digging and I talked to a cross border accountant and he confirmed that this is just not working. I can not work and live in Canada while full time employed as W2 in the US.
I need to talk to them to switch to an contractor position or maybe put me on a Canadian payroll.

You will also need to correct any past tax filings.

 

[Rachael_Mynah]

I got my Canadian PR. Currently residing in Canada. Planning to switch my job to US employer paying in USD.
A contractor will be there as a layer between the employer and I.
Any idea on how the contractor will pay ? USD or CAD
How the taxation will go ? Should I need to pay tax for both the countries ?
In Canada, how can I show my source of income ?

Any one started working for an US employer through a contractor before ? Please show some light on this.

 

[jclarke99]

What do you mean be "contractor"? Are they U.S. or Canadian based? It's confusing because it sounds like you'd be acting as a contractor to the U.S. Company. If the "contractor" is actually a Canadian-based Personal Employer Organization (PEO) with reputable cross-border experience, then I suspect you should be fine. But then again, they should then be able to answer you questions.

 

[canuck78]

I got my Canadian PR. Currently residing in Canada. Planning to switch my job to US employer paying in USD.
A contractor will be there as a layer between the employer and I.
Any idea on how the contractor will pay ? USD or CAD
How the taxation will go ? Should I need to pay tax for both the countries ?
In Canada, how can I show my source of income ?

Any one started working for an US employer through a contractor before ? Please show some light on this.

Would be speaking to an accountant about how to best structure your contracting business. Technically you can be paid in US dollars or Canadian but paid in Canada and your income declared in Canada.

 

[Rachael_Mynah]

What do you mean be "contractor"? Are they U.S. or Canadian based? It's confusing because it sounds like you'd be acting as a contractor to the U.S. Company. If the "contractor" is actually a Canadian-based Personal Employer Organization (PEO) with reputable cross-border experience, then I suspect you should be fine. But then again, they should then be able to answer you questions.

Contractor is a layer between me and the actual company. They will be basically hiring me and running my payroll.

 

[Rachael_Mynah]

Would be speaking to an accountant about how to best structure your contracting business. Technically you can be paid in US dollars or Canadian but paid in Canada and your income declared in Canada.

There are few suggestions to open a company in Canada in our own name and then the contractor will pay to that company.