There are 119 border crossings between the US and Canada. Professionals like nurses, autoworkers, or even executives in demand may cross the border regularly to a job in Detroit, Seattle or other border towns. Chris Gandhu talks to Kim Parlee about what that means from an immigration and financial perspective.
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There are 119 border crossings between the US and Canada. And while much of the traffic may be due to vacations, visiting family or friends, or even just some shopping, some of those travelers are headed to their daily jobs. Yes, professionals like nurses, autoworkers, or even executives in demand may cross the border regularly to a job in Detroit, Seattle, or other border towns.
So when you are going back and forth like that, what does that mean from an immigration and financial perspective? Here to give us his perspective is Chris Gandhu. He's a High Net Worth Planner with TD Wealth here to answer all these questions. Great to see you.
Great to see you again, Kim.
Let's start off with just who this applies to. Who are these people? And where are these cross-border communities?
Right. Well, they're just ordinary Canadians. So they could be at a border crossing such as Buffalo-Niagara, maybe nurses in the Detroit-Windsor area, tech workers out West in BC-Seattle-- but really, anybody who finds a better job opportunity in the US.
And what do they need to know then? Let's start with immigration. If they're crossing the border each day, I'm assuming you can't just say, oh, there's a job over there. I'm just going to go do it.
Yeah, absolutely not. So you can't go as a visitor. You do need some sort of a work visa. So typically, you may have heard of an H-1B, H-2B, B-1, those sort of visas. But being a Canadian citizen, the easiest thing for you is going to be a NAFTA visa. So under the NAFTA agreement, there is an enumerated list of professionals. If you happen to be one of them and you have a job waiting for you in the US, you can apply for what is called a TN visa. And that's the easiest way for you to be able to work in the US
OK So I've got my visa. I'm all set, got the offer. And I'm now there, and I'm making money in US dollars from a US employer. What does that mean for me in terms of benefits or just the things I need to think about?
Yeah. I mean, the most obvious thing is you're earning in US dollars, but you're a Canadian resident so you're spending in Canadian dollars. So you have to be comfortable with the foreign exchange gyrations. Obviously, right now, it works to your benefit. But that historically hasn't been the case, and it may not be the case in the future. So make sure you're comfortable with that.
The second thing is that it is not uncommon in Canada. Along with your wages and salary, typically, employers may help you in other ways. So they may top up your RRSP, for example. In the US, their RRSP equivalent is a 401(k). So your US employer may sponsor a 401(k) plan for you. But being a commuter, you're in a very unique situation because the plan is now housed in the US, but you're a Canadian resident, which means your Canadian financial planner cannot help you with that because they don't have the assets in Canada. The assets are in the US.
Your US money management firm cannot help you because you're not a US person. You're not a US resident. You're a Canadian resident. So you're in this no-man's land.
Who can help us? Because you've told us who can't help at this point.
I mean, you have to go in with your eyes open. Either you're doing your own financial planning, or you hire a cross-border advisor who understands. But they still will not be able to manage that money for you.
Got it. So you just have to have somebody who understands the intricacies, I'd say, on both sides.
Yeah, that's exactly right. For example, what you may not be aware of is that a 401(k), because it's housed in the US, is an asset similar to, for example, owning a house in the US or having US stock. So now, are you exposing yourself to US estate tax? Something you should probably have answered.
Yes, probably something you should have answered. You're absolutely right. What about taxes? I mean, every government, of course, is happy to take money from your income when they're taxing you. So how does that work if you're cross-border?
Right. So under our treaty with the US, if you're earning US-sourced income, which you would be as a commuter, then clearly you have to file with the IRS. Being a Canadian resident, our rules say that you must report your worldwide income to CRA. So the same dollar is reported to the IRS. The same dollar is also reported to CRA. So definitely, there's double compliance. That doesn't, of course, mean double tax because the way our treaty works with the US is that the tax you have paid to the IRS is creditable in Canada.
So let's say on $100, you pay $25 to the US. Your Canadian tax bill is $30. Well, you'll get a credit for the $25, and you'll only pay $5 in Canada. So definitely double compliance, perhaps not a double tax.
What you also do need to know is that the provinces are not bound by the Canada-US tax convention so they will not offer you a credit for the US taxes. So there's a bit of a leakage there.
Interesting. Bottom line, what do people need to keep in mind when they're considering going over across the border?
Right. So go in with your eyes open. It might be a lucrative job offer. But understand that with the foreign exchange and the dual reporting, is that all going to work out for you at the end? So hire somebody who gets both sides of the picture.
Chris, thanks very much.
Glad to be here.
So when you are going back and forth like that, what does that mean from an immigration and financial perspective? Here to give us his perspective is Chris Gandhu. He's a High Net Worth Planner with TD Wealth here to answer all these questions. Great to see you.
Great to see you again, Kim.
Let's start off with just who this applies to. Who are these people? And where are these cross-border communities?
Right. Well, they're just ordinary Canadians. So they could be at a border crossing such as Buffalo-Niagara, maybe nurses in the Detroit-Windsor area, tech workers out West in BC-Seattle-- but really, anybody who finds a better job opportunity in the US.
And what do they need to know then? Let's start with immigration. If they're crossing the border each day, I'm assuming you can't just say, oh, there's a job over there. I'm just going to go do it.
Yeah, absolutely not. So you can't go as a visitor. You do need some sort of a work visa. So typically, you may have heard of an H-1B, H-2B, B-1, those sort of visas. But being a Canadian citizen, the easiest thing for you is going to be a NAFTA visa. So under the NAFTA agreement, there is an enumerated list of professionals. If you happen to be one of them and you have a job waiting for you in the US, you can apply for what is called a TN visa. And that's the easiest way for you to be able to work in the US
OK So I've got my visa. I'm all set, got the offer. And I'm now there, and I'm making money in US dollars from a US employer. What does that mean for me in terms of benefits or just the things I need to think about?
Yeah. I mean, the most obvious thing is you're earning in US dollars, but you're a Canadian resident so you're spending in Canadian dollars. So you have to be comfortable with the foreign exchange gyrations. Obviously, right now, it works to your benefit. But that historically hasn't been the case, and it may not be the case in the future. So make sure you're comfortable with that.
The second thing is that it is not uncommon in Canada. Along with your wages and salary, typically, employers may help you in other ways. So they may top up your RRSP, for example. In the US, their RRSP equivalent is a 401(k). So your US employer may sponsor a 401(k) plan for you. But being a commuter, you're in a very unique situation because the plan is now housed in the US, but you're a Canadian resident, which means your Canadian financial planner cannot help you with that because they don't have the assets in Canada. The assets are in the US.
Your US money management firm cannot help you because you're not a US person. You're not a US resident. You're a Canadian resident. So you're in this no-man's land.
Who can help us? Because you've told us who can't help at this point.
I mean, you have to go in with your eyes open. Either you're doing your own financial planning, or you hire a cross-border advisor who understands. But they still will not be able to manage that money for you.
Got it. So you just have to have somebody who understands the intricacies, I'd say, on both sides.
Yeah, that's exactly right. For example, what you may not be aware of is that a 401(k), because it's housed in the US, is an asset similar to, for example, owning a house in the US or having US stock. So now, are you exposing yourself to US estate tax? Something you should probably have answered.
Yes, probably something you should have answered. You're absolutely right. What about taxes? I mean, every government, of course, is happy to take money from your income when they're taxing you. So how does that work if you're cross-border?
Right. So under our treaty with the US, if you're earning US-sourced income, which you would be as a commuter, then clearly you have to file with the IRS. Being a Canadian resident, our rules say that you must report your worldwide income to CRA. So the same dollar is reported to the IRS. The same dollar is also reported to CRA. So definitely, there's double compliance. That doesn't, of course, mean double tax because the way our treaty works with the US is that the tax you have paid to the IRS is creditable in Canada.
So let's say on $100, you pay $25 to the US. Your Canadian tax bill is $30. Well, you'll get a credit for the $25, and you'll only pay $5 in Canada. So definitely double compliance, perhaps not a double tax.
What you also do need to know is that the provinces are not bound by the Canada-US tax convention so they will not offer you a credit for the US taxes. So there's a bit of a leakage there.
Interesting. Bottom line, what do people need to keep in mind when they're considering going over across the border?
Right. So go in with your eyes open. It might be a lucrative job offer. But understand that with the foreign exchange and the dual reporting, is that all going to work out for you at the end? So hire somebody who gets both sides of the picture.
Chris, thanks very much.
Glad to be here.
