TAX 2020 - US & Canada

[chikoo1985]

Hello all,
I got in touch with an accountant to file dual tax and I wasn't satisfied with his answers. I am doing my own research now before approaching another accountant. It would be great if someone can throw some light on the below situation.

- Worked as a FULL TIME in the US from Jan - March 2020.
- Move to Canada in March 2020
- Continued working for the same company but on CONTRACT as a consultant. Basically a sole proprietor. I don't have any documentation except the contract with the client (US). Nor do I have GST/HST number or registered corporation.

Questions:
- Can I file Tax separately in the US and Canada? I believe that because I stayed there more than 30 days in the financial year and had income, I have to file the US taxes there. Please correct me if I am wrong.
- If I file separately, do I need to show the US income while filing taxes in Canada or I can ignore it because I have already filed the US tases?
- In the US I will be filing taxes jointly with my spouse. Is it the same for Canada?
- Feel free to share any other relevant details.

Hope this thread helps me and many others like me for now and in the future. If there is an existing thread for the same, request you to please direct me over there.

Thank you,
Chikoo.

 

[jclarke99]

What's your U.S. status? U.S. citizen or something else?

In any event, I assume you were a W2 U.S. employee, so you'll need to file U.S. taxes on your U.S. income.

If you are a U.S. citizen, you need to report your world-wide income, so you'd need to report your Canadian income on your U.S. taxes (but then make use of the bilateral tax credit so that you're not being double taxed).

In Canada, you must file taxes separately, even if you are married. However, you will need to provide some info about your Spouse on your Canadian tax return.

Canada expects you to report your world-wide income, so you'd need to report your U.S. income in addition to income while living in Canada (again, the tax treaty will prevent you from being double taxed).

Tread carefully with your consulting work for your U.S. company. Sounds like your role is switching from a W2 full-time employee to an independent consultant. In which case, I encourage you to read the following...

https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk#:~:text=The Personal Service Business,-#career #contracting #&text=In Canada, for the past,the dreaded Personal Service Business .

 

[chikoo1985]

What's your U.S. status? U.S. citizen or something else?

In any event, I assume you were a W2 U.S. employee, so you'll need to file U.S. taxes on your U.S. income.

If you are a U.S. citizen, you need to report your world-wide income, so you'd need to report your Canadian income on your U.S. taxes (but then make use of the bilateral tax credit so that you're not being double taxed).

In Canada, you must file taxes separately, even if you are married. However, you will need to provide some info about your Spouse on your Canadian tax return.

Canada expects you to report your world-wide income, so you'd need to report your U.S. income in addition to income while living in Canada (again, the tax treaty will prevent you from being double taxed).

Tread carefully with your consulting work for your U.S. company. Sounds like your role is switching from a W2 full-time employee to an independent consultant. In which case, I encourage you to read the following...

https://dev.to/canosielabs/canadians-beware-the-personal-service-business-4kbk#:~:text=The Personal Service Business,-#career #contracting #&text=In Canada, for the past,the dreaded Personal Service Business .

I was on H1b there and then immigrated to Canada as a PR. Yes, I have W2.
Your answers gave me some clarity. Thanks.

 

[leo_CA]

Hi
I found your post with exactly same situation as mine. Was working in US, came to Canada as PR and continued working remotely from Canada for US company for some months. After that started working Canada payroll. So I have both W2 and T4. Can you kindly let me know how you did your taxes as I’m getting very confused as I don’t have any exact answers? your help will be much appreciated.

 

[chikoo1985]

Hi
I found your post with exactly same situation as mine. Was working in US, came to Canada as PR and continued working remotely from Canada for US company for some months. After that started working Canada payroll. So I have both W2 and T4. Can you kindly let me know how you did your taxes as I’m getting very confused as I don’t have any exact answers? your help will be much appreciated.

Hey, I tried to do it by myself earlier and then it got a bit complicated. I would highly recommend you to not do this by yourself. Hire a CPA. That would be better. Good thing is that the USA and Canada have treaty (in case you have US income too). DM me if you need my CPA’s contact.

 

[jclarke99]

I agree with the above - your best bet is to hire a CPA. That said, for your Canadian taxes you should report your world-wide income (U.S. and Canadian) since the time you moved to Canada as a PR. Ideally, you should not have been a W2 employee at that time, and should be paying into CPP rather than U.S. Social Security (i.e., another reason you need the CPA). I suspect you're going to have to try and claw-back the taxes you paid to the U.S. since you moved to Canada, such that you'll actually be paying taxes to Canada instead and taking a tax credit on your U.S. taxes.

 

[leo_CA]

I agree with the above - your best bet is to hire a CPA. That said, for your Canadian taxes you should report your world-wide income (U.S. and Canadian) since the time you moved to Canada as a PR. Ideally, you should not have been a W2 employee at that time, and should be paying into CPP rather than U.S. Social Security (i.e., another reason you need the CPA). I suspect you're going to have to try and claw-back the taxes you paid to the U.S. since you moved to Canada, such that you'll actually be paying taxes to Canada instead and taking a tax credit on your U.

I was a non resident in US, so just filed to IRS as a non resident. There were no social security deductions as well. As far as I understand, I will need to file to CRA including Canadian income and US income. But since I already paid taxes to IRS, I will use them as credits to reduce overall taxable Canadian income right? Yes I will have to pay more because of higher rates here. What do you think?

 

[jclarke99]

I'm not convinced that it works that way - i.e., your assumption that you already paid taxes to the IRS, so the IRS gets to keep it and you'll claim it as a credit on you Canadian taxes. Because you were a PR of Canada during that time, I believe that CRA will expect you to to pay all taxes to them, and take the credit on the U.S. side (and that's what I mean by trying to "claw-back" the taxes you've already paid to the IRS). FYI, an individual who posted on this site got professional advice and was told that they should be making quarterly tax payments to CRA at the same time that deductions are being taken for the IRS. So, double taxed during the year, but at tax time - take the Canadian taxes paid as a credit on your U.S. taxes (that's what I mean by clawing it back).