Taxes/Payroll - Working in US/ Living in Windsor

[rthtor]

I still cannot interpret if your withholding(tax at source) is being paid to IRS or CRA. I havent seen w2 tax being paid to cra hence i cannot compare or ask questions based on that.
Irrelevant of above, simply follow this logic - file tax return to the country where your w2 tax is paid. Then include that tax paid in the second country and file the return.

Per my understanding, CRA cannot have multiple forms for same 401k contribution exemption as i assume that they just named the form with "commuters" representing the majority of users. Lets wait for others comments on it or consult some tax consultant to confirm or you can pay additional tax for that contribution.
may be you can search if you have any additional form to get 401k contribution exemption.

>I still cannot interpret if your withholding(tax at source) is being paid to IRS or CRA.
My US company has been withholding USD tax at source for the entire TY2023, and has paid it to the IRS.
CRA has had no withholding or tax payments at all so far for TY2023.

 

[harirajmohan]

>I still cannot interpret if your withholding(tax at source) is being paid to IRS or CRA.
My US company has been withholding USD tax at source for the entire TY2023, and has paid it to the IRS.
CRA has had no withholding or tax payments at all so far for TY2023.

Then its same case like i initially said.

1. File IRS.
2. Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.
If you feel you are not eligible for RC268 then you need to pay additional rrsp contribution or tax to compensate. Per my understanding the form is badly named as commuters but its for US pension contribution amount exemption, nothing more to worry/interpret too much about it.
Use RC268 and see if they accept as you are not doing anything illegal. if they say you are not eligible then you pay the tax.

I and many commuters get audited and get bugged for 3+ years in some tax return. For 2018 audits, i resolved it in 4 iterations and later i paid some final tax to avoid bugging me as they have bad habit of trouble only legal tax payers. So you dont need worry about getting audit and paying taxes later. You are not doing anything illegal. If denial of tax claim is illegal then thousands of people will be in jail for getting tax exemption denied every year.

if you still being doubtful then please check with some tax guys and per my understanding they will too ask you to use RC268.

 

[rthtor]

Then its same case like i initially said.

1. File IRS.
2. Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.
If you feel you are not eligible for RC268 then you need to pay additional rrsp contribution or tax to compensate. Per my understanding the form is badly named as commuters but its for US pension contribution amount exemption, nothing more to worry/interpret too much about it.
Use RC268 and see if they accept as you are not doing anything illegal. if they say you are not eligible then you pay the tax.

I and many commuters get audited and get bugged for 3+ years in some tax return. For 2018 audits, i resolved it in 4 iterations and later i paid some final tax to avoid bugging me as they have bad habit of trouble only legal tax payers. So you dont need worry about getting audit and paying taxes later. You are not doing anything illegal. If denial of tax claim is illegal then thousands of people will be in jail for getting tax exemption denied every year.

if you still being doubtful then please check with some tax guys and per my understanding they will too ask you to use RC268.

Thank you for the continued support and your kindness. I'll be sure to pay it forward.

>I and many commuters get audited and get bugged for 3+ years in some tax return.
Got it! This is the key point I've tried to highlight. I don't commute at all, I'm fully remote. And if they're this scrutinous with
people who commute more often than not in a week, I wonder how hard they'll come after those that don't commute at all.

>Mention/include the taxes paid in US.
Here, you are referring to filing an FTC claim with T2209, correct?

>they will too ask you to use RC268
This is my very first year paying/filing Canadian taxes. My capacity for RRSP allotment is 0%,

 

[harirajmohan]

>Mention/include the taxes paid in US.
Here, you are referring to filing an FTC claim with T2209, correct?

You wont fill the exact line number in the form as your tax software would do it when it generates the final file.
So look for "Foreign Income & Foreign Tax Credits" section and just fill the foreign income and foreign tax paid.

 

[missedTheGCBus]

@harirajmohan Do you have any idea?

Additional Question: I read that it would be an issue from CRA as my US employer would be required to withold Canadian Payroll taxes, if I work remote from Canada. Better to travel at least few days in a year to avoid this.

If Social security tax is withheld by US, what do you do when you file as a Canadian resident? Do you get a refund?

@ejackson6691 how has this been going for you, for me the question is what is the right number of days for "at least few days" 50% of days, once a week?

 

[missedTheGCBus]

Got it! This is the key point I've tried to highlight. I don't commute at all, I'm fully remote. And if they're this scrutinous with
people who commute more often than not in a week, I wonder how hard they'll come after those that don't commute at all.

I too am very concerned about this? I traveled ~50% of days last year, but other 50% from home.
My concern is that if they ask for I94 or some such proof then I might be trouble

 

[samverm1993]

Hi,

I have following questions, any help would be great. Background - My US status is approved I-140 and I am right now working for my US company for their Canadian Entity as a Canadian Permanent Resident, I want to get you feedback if this is feasible?

1) I reside in Canada and want to maintain my PR, can I work on H1b in US with a residence in US border town, by filing a new LCA?
2) Do I need to commute every day to US to maintain 6 months residency?
3) How would taxes work? If I would show my primary residence in Canada while filing taxes, wouldn't that cause problem in H1b status?

Thank you!

 

[swan0206]

Hi,

I have following questions, any help would be great. Background - My US status is approved I-140 and I am right now working for my US company for their Canadian Entity as a Canadian Permanent Resident, I want to get you feedback if this is feasible?

1) I reside in Canada and want to maintain my PR, can I work on H1b in US with a residence in US border town, by filing a new LCA?
2) Do I need to commute every day to US to maintain 6 months residency?
3) How would taxes work? If I would show my primary residence in Canada while filing taxes, wouldn't that cause problem in H1b status?

Thank you!

1. Yes.
2. Not needed. Once in a month should be fine.
3. Nope.

 

[vensharm]

Is there any time limit for which one must stay in US on h1b or minimum limit for which one can stay out of country. I am in Canada currently and have h1b approved but i don’t plan to move for next 7-8 months.

 

[junkie999]

Does your company have an office in a border city or do you plan to fly once a month to your work city? Do you plan to amend your H1B to change job location or keep it as-is in the current location?

Hi,

I have following questions, any help would be great. Background - My US status is approved I-140 and I am right now working for my US company for their Canadian Entity as a Canadian Permanent Resident, I want to get you feedback if this is feasible?

1) I reside in Canada and want to maintain my PR, can I work on H1b in US with a residence in US border town, by filing a new LCA?
2) Do I need to commute every day to US to maintain 6 months residency?
3) How would taxes work? If I would show my primary residence in Canada while filing taxes, wouldn't that cause problem in H1b status?

Thank you!

 

[vinay2222]

Hi, I moved to Windsor in mid Jan 2024 and I commute every day to Michigan for work on H1B with a Canada PR. can someone help me with these questions?
1. Any reliable and knowledgeable tax consultant in Windsor. I consulted one and got wrong advice.
2. I am contributing to HSA and FSA(dependent care). I see that hsa is not tax deductible here. Has anyone had a problem contributing and while filing taxes as hsa is not included in box 1 and box 3 wages.
3. I believe i am not eligible for 401k deductions (rrsp) for the first year only. Please confirm.
4. Worse case - i have heard and read that cra deducts money from bank account automatically even while the audit/review is pending. I am not planning to have a lot of cad. But will they go to the extreme of selling my stocks from my brokerage/tfsa accounts? I know they have the power.

Can someone who has gone through tax process in the past years message me please?

 

[alabatross09]

Then its same case like i initially said.

1. File IRS.
2. Filing CRA: Include income from US with the total of 1040 AGI line11 and 401k contribution from w2. Mention/include the taxes paid in US. Include RC268 form to get the 401k income exempted from tax. If any additional tax to be paid then contribute to rrsp or pay tax. File it.
If you feel you are not eligible for RC268 then you need to pay additional rrsp contribution or tax to compensate. Per my understanding the form is badly named as commuters but its for US pension contribution amount exemption, nothing more to worry/interpret too much about it.
Use RC268 and see if they accept as you are not doing anything illegal. if they say you are not eligible then you pay the tax.

I and many commuters get audited and get bugged for 3+ years in some tax return. For 2018 audits, i resolved it in 4 iterations and later i paid some final tax to avoid bugging me as they have bad habit of trouble only legal tax payers. So you dont need worry about getting audit and paying taxes later. You are not doing anything illegal. If denial of tax claim is illegal then thousands of people will be in jail for getting tax exemption denied every year.

if you still being doubtful then please check with some tax guys and per my understanding they will too ask you to use RC268.

Hi, I have been reading your contributions on various threads. Thank you so much for all your insights.

I did talk to a few tax consultants as I am also planning to be mostly remote from Canada and commute every month to US work location.
The CPA mentioned that since the economic activity is happening within Canada, CRA will want to be paid first.
What this would mean is, employer will continue to deduct from payroll (as they are supposed to), and we will have to pay CRA first and then claim FTC with IRS to get a refund for whatever the IRS withheld over the course of a year. If IRS gets paid first, CRA will audit and ask for more money. (Leading to a temporary cash-flow issue as we await refund from one entity)

Many CPAs seem to interpret the tax laws differently.
Another CPA mentioned:
"Primary right" refers to Canada’s priority in taxing income for work done within its borders. However, it doesn’t determine the order of payment. Practically, you pay U.S. taxes first (because of withholding rules), and then Canada asserts its right to tax the income related to Canadian workdays, allowing you to apply foreign tax credits to avoid double taxation."

To be absolutely sure, I have set up a paid consult with a cross-border tax lawyer to find out what is the right approach. This confusion seems to be a common theme in many threads and forums.
I will update on this thread as I get more information.

 

[harirajmohan]

Hi, I have been reading your contributions on various threads. Thank you so much for all your insights.

I did talk to a few tax consultants as I am also planning to be mostly remote from Canada and commute every month to US work location.
The CPA mentioned that since the economic activity is happening within Canada, CRA will want to be paid first.
What this would mean is, employer will continue to deduct from payroll (as they are supposed to), and we will have to pay CRA first and then claim FTC with IRS to get a refund for whatever the IRS withheld over the course of a year. If IRS gets paid first, CRA will audit and ask for more money. (Leading to a temporary cash-flow issue as we await refund from one entity)

Many CPAs seem to interpret the tax laws differently.
Another CPA mentioned:
"Primary right" refers to Canada’s priority in taxing income for work done within its borders. However, it doesn’t determine the order of payment. Practically, you pay U.S. taxes first (because of withholding rules), and then Canada asserts its right to tax the income related to Canadian workdays, allowing you to apply foreign tax credits to avoid double taxation."

To be absolutely sure, I have set up a paid consult with a cross-border tax lawyer to find out what is the right approach. This confusion seems to be a common theme in many threads and forums.
I will update on this thread as I get more information.

I doubt that cra(or any tax office in any country) will ever agree to give the money back as they cant just get the money from irs(same with irs too).
My take: If the company doesnt pay the CRA then we shouldnt and file as usual(by first filing of irs and then with cra).

My colleague still submits like usual, even though we have 2 days work from home per week.

 

[alabatross09]

I doubt that cra(or any tax office in any country) will ever agree to give the money back as they cant just get the money from irs(same with irs too).
My take: If the company doesnt pay the CRA then we shouldnt and file as usual(by first filing of irs and then with cra).

My colleague still submits like usual, even though we have 2 days work from home per week.

Makes sense. Thank you for your input!

The CPA said that recently CRA's stance is this: since the economic activity is being performed from within Canada, even if it is for a US employer (For H1B remote from Canada), then the income is considered "Canadian Sourced", even if the employer has no presence in Canada.

So when we file with the US using 1040-NR we can exclude the income earned from working in Canadian soil (essentially get the tax refund because it is payroll deducted) and get the refund from IRS (which will be filed first)

Then we file with CRA claiming any FTC for taxes paid while working on US soil that is taxable in Canada due to tax resident status.

Now, if we work for X days from the US in a given Tax Year, we can claim those taxes paid for X days as FTC with because it is then not Canadian Sourced (but Canadian residents have to pay on Global Income: This is where FTC prevents double taxation)

You may ask, how is a US salary not considered "US Sourced". See this IRS link. For salaries and wages, our USD salary is considered "US Sourced" based on where the services are performed. So if you work from Canada remotely, then the income is not US sourced.

For commuters, what you are saying is 100% right. In that case, the "where" is on US soil as they commute to US and come back.

 

[justinline]

Makes sense. Thank you for your input!

The CPA said that recently CRA's stance is this: since the economic activity is being performed from within Canada, even if it is for a US employer (For H1B remote from Canada), then the income is considered "Canadian Sourced", even if the employer has no presence in Canada.

So when we file with the US using 1040-NR we can exclude the income earned from working in Canadian soil (essentially get the tax refund because it is payroll deducted) and get the refund from IRS (which will be filed first)

Then we file with CRA claiming any FTC for taxes paid while working on US soil that is taxable in Canada due to tax resident status.

Now, if we work for X days from the US in a given Tax Year, we can claim those taxes paid for X days as FTC with because it is then not Canadian Sourced (but Canadian residents have to pay on Global Income: This is where FTC prevents double taxation)

You may ask, how is a US salary not considered "US Sourced". See this IRS link. For salaries and wages, our USD salary is considered "US Sourced" based on where the services are performed. So if you work from Canada remotely, then the income is not US sourced.

For commuters, what you are saying is 100% right. In that case, the "where" is on US soil as they commute to US and come back.

Actually this position CRA is taking is not recent one, even before Covid, I heard cases where CRA was not giving full credit of the taxes remitted to IRS, if they determine you are more of a remote worker. The question here is not who taxes you first rather who gets to collect all or the majority of taxes.

If you are daily traveller, you are are fine, you still file with IRS and then claim that as foreign tax credit in your CRA filling. But if you are more of a remote worker, this will be increasingly challenging. I say increasingly because, I personally know few cases who have done this in past without any issues.

Have you explored W8BEN
What Is a W-8BEN Form? (velocityglobal.com)

Basically that reduces withholding or create exemptions, then you remit that to CRA instead of IRS. Now if you already paid taxes as remote worker to IRS, you have to claim that back then remit to CRA. little more complicated.
US employer may be reluctant as well, because then they enter into employer-employee relationship with someone who is residing in a foreign country, besides taxes there are other consequences.

Best is to convert to contractor and not remain full time employee, saves every one headache, if you are planning to be fully remote.