US citizen in the US working remotely for Canadian company

[rememberstarfox]

Hello, I'm considering working for a Canadian company while being a US citizen and working remotely in the US. 

What would deductions, taxes, and paycheck look like in this scenario? I don't want to be considered self employed. What about social security, medical and other deductions you would usually see on paychecks?

Thanks!

[rjs]

---

@rememberstarfox wrote:

What would deductions, taxes, and paycheck look like in this scenario?

---

It should look exactly the same as if you were working for a U.S. employer, because you are working in the U.S., not in Canada. It doesn't make any difference that the company is located in Canada, if you are working in the U.S.

---

@rememberstarfox wrote:

I don't want to be considered self employed.

You have to discuss that with the employer and make sure you have a clear understanding, before you start the job, that they will treat you as a U.S. employee and give you a U.S. Form W-2.

[pk]

@rememberstarfox , for a foreign  entity with no US presence , there  may be no EIN and therefore they will have a difficulty  withholding and transmitting  your federal , State and  FICA taxes.  Generally  such foreign entities, when employing an US person  remotely, tend to pay directly  and issue an income statement.  Such case is equivalent to Self -employment  in that the  "employee" is responsible for making estimated payments  for federal, State and FICA ---- all you have o do is make sure that  the "employer " pays  you his share of the  FICA tax   ( 15.3 %  shared equally between employee and employer in case of W-2 employees).  I suspect similar arrangement  also makes  the foreign entity's  local tax reporting easier.   That is my take on this

I agree  with @rjs  , that you need to clarify this situation with the Canadian entity.

[ALHAINVale]

I am researching this similar situation, but in reverse for eventually moving to the UK. I would not be moving to the UK on a work visa, but a settlement one since my spouse is a UK citizen. However, I'd like to keep working for my US company on a trial basis for 6 to 12 months after arriving in the UK and getting settled, longer term if possible.

I am a US Citizen, would be working for a US-based company (which has overseas presence in India, but not the UK), and would eventually have UK residence. I assume none of my benefits would transfer (life, health, other health/vision/dental coverages/perks), and that I would have to pay 'self employed' taxes on the UK side. I would likely qualify for the Foreign Earned Income Tax credit, since I would be 100% based out of the UK at that point (no more permanent address in the US except for some mail to my parent's house or something.)

Bottom line I know I have to talk to my current company's HR team first, and see if it's possible at all - but I am having difficulty finding information for people in this arrangement. The taxes and benefits is probably the primary concern for me (and I assume my company... wouldn't I be a less expensive employee if they didn't have to cover me for health/life/vision/dental since I could technically get some of it from the UK NHS?)

@pk @rjs 

[Chris12122]

What if I’m an independent contractor working for a Canadian company but live in the US?  Do I get double taxed? Need a special EIN number?  Any advice would be greatly appreciated  

[Pongko]

Hi @pk, my wife is in the similar situation. She’s working full time for a foreign company, getting paid and paying tax in her country. Her company doesn’t have any business in the US. She work remotely in the US because we are married and she is a legally US resident now. Her company doesn’t want to file or deal with the US gov period. How can we file and how can we be responsible for the social security and medical tax? Just file as a self-employ and calculated the social security tax with the 8919 form at the end of the year? Thank you very much!

[Vanessa A]

How you file will depend on the country her employer is located in and if she acts as an employee or independent contractor.  If she is an independent contractor, then yes, you would file using a Schedule C to report her income.  However, if she is an employee, the US has Totalization Agreements with several other countries.  So, depending on the country of her employer, she may be exempt from Social Security and Medicare taxes. 

[Pongko]

Thank you @Vanessa A , Her company is a Hong Kong company and only based in Hong Kong. She is hired as a full-time, but her company is not willing to file any form for the US gov. Anything we can do at this point to file for this year tax season. And would that work if she change her hire position to freelancer, will her company need to file anything to the US gov? The whole problem began simply because her company doesn't want to do more document works for her. Thank you in advance!!!!

[Chris12122]

Any advice for my situation? 

There is a clause in my offer letter that states

The Consultant shall ensure that he is registered with the British Columbia Workers Compensation Board as required by law and shall be solely responsible for obtaining all necessary insurance coverage, licenses and permits and for complying with applicable laws, codes and regulations in connection with the provision of the Services.

my assumption is they want me to create an EIN number so I can be taxed in Canada, and since I’m an American working in the US I might get double taxed?!

[Vanessa A]

No matter what she does have to report her income earned with this company.  Since she works for Hong Kong and they are not one of the countries that are part of the Totalization Agreement, she is responsible for Social Security and Medicare taxes. 

You can enter her wages as W2 income, but you won't have an EIN to enter so this will give you an error when e-filing so you would have to print and mail the return.

The easier option would be to file as a freelancer since either way she will be responsible for paying the Social Security and Medicare taxes.  

And no, even if she is a freelancer, the company based in Hong Kong does not have to provide any type of documents to her.  She will need to track her income. 

(Edited 1/19/2022 @ 12:24 PM PST)

[Pongko]

@Vanessa A THANK YOU SOOOOO MUCH!!!!!!!! You just saved me from getting crazy because all this!

[DaveF1006]

@Chris12122  There is a US/Canadian tax treaty that stipulates if Canada charges you an income tax, you can claim a foreign tax credit on your US tax return. Please read here  for more details.

[pk]

@Pongko , @Chris12122 , having read through all of the above  interaction(s) and generally agreeing with @DaveF1006  and partially with @Vanessa A , let me cover some general  points:

(a) US tax position as enunciated by the IRS, any and all work done in the US is  US work i.e. the earnings  is generally US sourced, (no matter where the  "employer/payor" is ) and therefore taxable  by the US. 

(b) Most tax treaties do recognize this position but some still retain the right to  tax  this outflow -- especially if the entity gets to exclude this from local taxation as wages AND the  "recipient " is a citizen of that country.

(c) tax treaties are  generally to ameliorate the effects of the possible double taxation by allowing  the income to be  resourced  to the foreign country and  avail the taxpayer of foreign tax credit  ( form 1116 ).

(d) Totalization agreement is applicable  ONLY for US persons ( Citizen/Greencard ) if they performed work in a foreign country , paid by a local entity, and "FICA" local equivalent was  collected by the local govt.  This is because irrespective  of where the  wages/self-employment is earned, a US person must still pay FICA/SECA.  Generally tax and  totalization treaties  cover this area , including what happens when the US person is repatriated and/or retired

(e)  Generally , if a US person  ( Citizen/Green Card/Resident for tax purposes ) has earnings  from a foreign source  ( including working for foreign govt. such as  embassies  and sometimes for international organization  ) and performed the work in the US, he/she is treated as  self-employed and therefore  SECA ( the full employer & employee's portion of  FICA ) is applicable --- Schedule -C , except there  may not be any "expenses" deduction available .

(f) It is generally advisable  that  one has something from the  foreign entity to show the actual amounts earned -- an annual statement of payments  should be sufficient.  Foreign entities  are not under US laws and therefore  cannot be required to provide  1099s  etc.

Does this clarify the situation or can I provide more info ?

pk

[Pongko]

Hi @pk, This is great, we get the general idea of how will we do tax this season. And again Thank you everyone for sharing your expertise and knowledge. We really do appreciate it!

[JHLangCPA]

My understanding is that a US based contractor for a Canadian business is ONLY subject to US income tax (and self-employment taxes) as well as any applicable state and local income taxes on the earned income.

In accordance with the provisions of the Canada-US Tax Convention, if the service is rendered in the US, then the Canada-US Tax Convention would alleviate any right of Canada to tax the income earned by the US contractor and there would be no requirement for Reg 105 withholding.

I hope that was clear.