US remote job, physically present in Canada

[rthtor]

I'll lay out certain assumptions based on my understanding so far before I ask the Qs -

1. I was working on a US H1B for a US employer running USD payroll into my USD account while physically in the US until late 2022. I'm not a US Citizen or a US PR.
2. For tax year (TY) 2023, everything in (1) is true, except that I was physically in Canada for all of TY2023 as a Canadian PR. I used the CRA test to figure out that I'm a "CA factual-resident for tax purposes". I used the IRS test to figure out that I'm a "US non-resident for tax purposes".
3. This means that my entire W2 income for TY2023 is actually Canada-sourced.
4. My company has been withholding USD tax at source for the entire TY2023.

Qs -

1. Am I right in assuming that my tax payment will be to the CRA and the potential FTC claim will be to the IRS and not vice-versa?
2. I need to file 1040NR in the US, is this correct?
3. If (2) is true, will simply filing the 1040NR be enough for a refund of the entire IRS withholding for TY2023?
4. Do I also need to file the IRS Form1116 and claim an FTC with the IRS?

 

[missedTheGCBus]

I have similar questions but haven't you already filed for 2023? IRS deadline is already gone

 

[rthtor]

I have similar questions but haven't you already filed for 2023? IRS deadline is already gone

It's very easy to submit a form to request an extension. It gets approved in a couple of days. Of course, you need to submit it before the deadline.

 

[rthtor]

Do I need RRSP room for TY2023 to claim a 401k deduction via Form RC267?
This is my very first tax year (2023) - never filed a CA return before.
I meet all the conditions (as stated in the link) for claiming this deduction - https://support.hrblock.ca/en-ca/Content/Investments_RRSPs/RC267_EEContributionsToAUSRetirementPlan.htm
The only aspect I'm unclear on is whether I need RRSP room, but it feels like I shouldn't because one of the conditions to claim the deductions is that I not be contributing to an RRSP.

@harirajmohan

 

[harirajmohan]

Do I need RRSP room for TY2023 to claim a 401k deduction via Form RC267?
This is my very first tax year (2023) - never filed a CA return before.
I meet all the conditions (as stated in the link) for claiming this deduction - https://support.hrblock.ca/en-ca/Content/Investments_RRSPs/RC267_EEContributionsToAUSRetirementPlan.htm
The only aspect I'm unclear on is whether I need RRSP room, but it feels like I shouldn't because one of the conditions to claim the deductions is that I not be contributing to an RRSP.

@harirajmohan

Per my understanding, you need to have room in rrsp for the first year to contribute(which includes US pension contribution). So you may not avail this deduction for first year.

 

[missedTheGCBus]

@harirajmohan in such a scenario (where employee is present and working half the time from home in Canada and other half in office in the US employer) are you aware of either of the following types of problems happening:

Asking employee to pay more taxes to CRA instead of IRS (as some proportion of days in Canada vs USA)

CRA contacting employer to setup payroll in Canada and pay Canadian payroll taxes?

I spoke to many CPAs and one of them shared such stories everyone else said it doesn't matter how many days you work from home in Canada vs US office.
My employer is not supportive of working from Canada or setting up Canadian payroll etc, so this matter is of importance to me. Thank you

 

[harirajmohan]

@harirajmohan in such a scenario (where employee is present and working half the time from home in Canada and other half in office in the US employer) are you aware of either of the following types of problems happening:

Asking employee to pay more taxes to CRA instead of IRS (as some proportion of days in Canada vs USA)

CRA contacting employer to setup payroll in Canada and pay Canadian payroll taxes?

I spoke to many CPAs and one of them shared such stories everyone else said it doesn't matter how many days you work from home in Canada vs US office.
My employer is not supportive of working from Canada or setting up Canadian payroll etc, so this matter is of importance to me. Thank you

Yes, my colleague is coming from windsor for 5 days a week to avoid this headache but my other two colleagues dont worry and come only 3 days a week. So it looks like its not being imposed by cra fully yet or cant do it fully yet. Not sure if they will do it in future for all.
(My company still follows 3 days in office mandate and can work 2 days from home.)

Yes, even my company wont process payroll to send cra taxes. Just for 1 or 2, they wont change process and i believe its not their headache legally too.

So if you are doubtful and wanting to avoid issue whether the rule is actually being imposed, or will be imposed, then try to work all working days in US, like my one of the colleagues.

 

[missedTheGCBus]

Yes, my colleague is coming from windsor for 5 days a week to avoid this headache but my other two colleagues dont worry and come only 3 days a week. So it looks like its not being imposed by cra fully yet or cant do it fully yet. Not sure if they will do it in future for all.
(My company still follows 3 days in office mandate and can work 2 days from home.)

Yes, even my company wont process payroll to send cra taxes. Just for 1 or 2, they wont change process and i believe its not their headache legally too.

So if you are doubtful and wanting to avoid issue whether the rule is actually being imposed, or will be imposed, then try to work all working days in US, like my one of the colleagues.

Thanks for help. My plan for next year is to commute almost every day, but I am worried about last year.
Have you heard any of your colleagues who don't commute every day run into any issues with CRA, do they get audited for US taxes paid etc?

 

[ViceVersa]

@missedTheGCBus I haven't personally heard of any of my colleagues running into issues with the CRA for not commuting every day. A few of them have been working remotely from Canada for years now without any problems. I think as long as you're paying taxes to one country or the other, they seem okay with it for now.

You're right to be cautious going forward though. Commuting more often is probably safer long-term just in case the CRA ever decides to crack down. But I wouldn't stress too much about last year - odds are you'll be fine if you sorted it all out on your tax returns.

 

[missedTheGCBus]

@missedTheGCBus I haven't personally heard of any of my colleagues running into issues with the CRA for not commuting every day. A few of them have been working remotely from Canada for years now without any problems. I think as long as you're paying taxes to one country or the other, they seem okay with it for now.

You're right to be cautious going forward though. Commuting more often is probably safer long-term just in case the CRA ever decides to crack down. But I wouldn't stress too much about last year - odds are you'll be fine if you sorted it all out on your tax returns.

Thanks, I was thinking about this a bit more. What kind of proof does CRA ask for for commuting, or do they automatically get the data from border?

Asking because often my US side data is incomplete/missing and if that's the only thing they rely on, can I just go shopping to the US on my WFH days and return to make it look like I worked in the US that day? The US side record at least doesn't have time of exit/entry, so there is no difference between a 15 minute trip or a 10hour full day at office etc.... just trying to game this out a bit as to how much time I can WFH and how often I need to commute etc

 

[Ponga]

Thanks, I was thinking about this a bit more. What kind of proof does CRA ask for for commuting, or do they automatically get the data from border?

Asking because often my US side data is incomplete/missing and if that's the only thing they rely on, can I just go shopping to the US on my WFH days and return to make it look like I worked in the US that day? The US side record at least doesn't have time of exit/entry, so there is no difference between a 15 minute trip or a 10hour full day at office etc.... just trying to game this out a bit as to how much time I can WFH and how often I need to commute etc

Even a partial day spent in Canada counts as a full day, in trms of R.O. calculation. In theory, you enter the U.S.; fill up your gas tank and return to Canada = 1 full day in Canada.
Conversely, you stay in the U.S. for 23 hours and 59 minutes...that still counts as a full day in terms of the Residency Obligation to maintain PR status.

 

[missedTheGCBus]

Even a partial day spent in Canada counts as a full day, in trms of R.O. calculation. In theory, you enter the U.S.; fill up your gas tank and return to Canada = 1 full day in Canada.
Conversely, you stay in the U.S. for 23 hours and 59 minutes...that still counts as a full day in terms of the Residency Obligation to maintain PR status.

That part is true but what I am wondering about CRA and "days worked in the US vs Canada" ... how do they determine that I worked in the US vs Canada is my question. Is going across the border to fill a tank of gas sufficient to count as "worked in the US today" ... it seems arbitrary to me, for example if I take some time off and hence don't go to the US, CRA may think it was as if I was working in Canada if they are relying on travel history?


What I am getting at is that travel history is an unreliable way for CRA to determine how much time a commuter working in the US spent days "working" in the US vs Canada

 

[Ponga]

That part is true but what I am wondering about CRA and "days worked in the US vs Canada" ... how do they determine that I worked in the US vs Canada is my question. Is going across the border to fill a tank of gas sufficient to count as "worked in the US today" ... it seems arbitrary to me, for example if I take some time off and hence don't go to the US, CRA may think it was as if I was working in Canada if they are relying on travel history?


What I am getting at is that travel history is an unreliable way for CRA to determine how much time a commuter working in the US spent days "working" in the US vs Canada

Agreed, but then again...would they assume that a `work day' for you must equal X number of hours?

 

[missedTheGCBus]

Agreed, but then again...would they assume that a `work day' for you must equal X number of hours?

Yes exactly, this seems to boil down to that outside of obvious scenarios like someone obviously spent all their time in Canada there is no easy definition for CRA to conclude about how much time someone worked in the US vs Canada. Even a single entry/exit to/from US should suffice for plausible deniability from a cross border workers perspective in case of CRA questioning.

To me this whole thing seems like an incredibly dicey gray area about how they do or don't come after cross border workers for time worked in Canada vs USA

And that lead to my broder question of if anyone here has been asked for proof from the CRA? @mayple , @harirajmohan any thoughts? Basically wondering if CRA can ask for travel history and how reliable that is