If you’re a Canadian working for a U.S. company and making a U.S. salary, you may wonder what your tax filing obligations are. Do you have to pay tax in both jurisdictions? Mindi Banach, Tax and Estate Planner, TD Wealth, joins Kim Parlee to dig into what to know.
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* Today on Ask MoneyTalk, we answer a question we're hearing around working for a US company as a Canadian. Mindi Banach, Tax and Estate Planner at TD Wealth, joins me now to weigh in. Here's the question -- I work remotely for a US company. How will my taxes be impacted if I'm making a US salary? There's all sorts of delicious complication in there.
* That's the word-- "complication." Whenever you're dealing with cross-border US tax issues, it's really tricky to navigate. And there are always unique circumstances that arise that can alter standard guidance. Now, I think it can be universally acknowledged that nobody wants to be in a position where they have to pay taxes twice on the same income. Thankfully, there is a US-Canada tax treaty that provides a framework to prevent double taxation and lets you know who basically can tax your income.
* OK, what does an individual need to file to make sure that that happens, that there is no double taxation?
* So as a Canadian resident, regardless of where you earn your income, so whether you're earning income in the United States or Canada, and regardless of how you're earning that income, whether it's earned remotely or in person, as a Canadian resident, you are required to report your worldwide income, which includes any US income, on your Canadian T1 tax return.
- Now, the next question then becomes, what are, if any, your US income tax filing requirements? And that's kind of going to determine based on your US citizenship status. So as a US citizen, all US citizens are required to file a US income tax return. The form is form 1040.
- So if you are a US citizen residing here in Canada, working remotely for a US company, you're going to have a filing obligation in both countries, both the United States and in Canada. But if you are not a US citizen, you likely only need to file a Canadian income tax return. But that doesn't mean that you're not going to have to file any US types of forms. There is a form, W-8 BEN, that you may be required to file.
- What's interesting to note about this form is that you actually don't file it with the Internal Revenue Service, the IRS. You actually give it to a US employer. And what that-- the employee completes it, gives it their employer, and what it tells the employer is basically, I'm not a US person. I'm a Canadian. You shouldn't be withholding any taxes from my income.
- There are those circumstances where a non-US citizen will still be required to file a US income tax return. And if you fall under those circumstances, the form happens to be form 1040-NR. So really important to get the right guidance to figure out which forms you're going to be required to file.
* Really important to get the right guidance because, again, this is not something you want to get wrong.
* No, it's not. And I have to tell you, way too frequently, I have clients coming to me and saying, my circumstances are super simple. As soon as you add in any sort of cross-border element to your facts, that in and of itself adds complexity. And it's really important that you consult with a tax professional that has special experience in international taxation. Specifically, you want to be contacting either a tax lawyer or a tax accountant that has expertise in US tax law, Canadian tax law, that, again, can give you that tailored advice based on your own unique facts and circumstances.
* Mindi, thanks so much.
* My pleasure.
* Mindi Banach, Tax and Estate Planner with TD Wealth. And if you have a question, please send it to moneytalk@td.com.
* [MUSIC PLAYING]
* That's the word-- "complication." Whenever you're dealing with cross-border US tax issues, it's really tricky to navigate. And there are always unique circumstances that arise that can alter standard guidance. Now, I think it can be universally acknowledged that nobody wants to be in a position where they have to pay taxes twice on the same income. Thankfully, there is a US-Canada tax treaty that provides a framework to prevent double taxation and lets you know who basically can tax your income.
* OK, what does an individual need to file to make sure that that happens, that there is no double taxation?
* So as a Canadian resident, regardless of where you earn your income, so whether you're earning income in the United States or Canada, and regardless of how you're earning that income, whether it's earned remotely or in person, as a Canadian resident, you are required to report your worldwide income, which includes any US income, on your Canadian T1 tax return.
- Now, the next question then becomes, what are, if any, your US income tax filing requirements? And that's kind of going to determine based on your US citizenship status. So as a US citizen, all US citizens are required to file a US income tax return. The form is form 1040.
- So if you are a US citizen residing here in Canada, working remotely for a US company, you're going to have a filing obligation in both countries, both the United States and in Canada. But if you are not a US citizen, you likely only need to file a Canadian income tax return. But that doesn't mean that you're not going to have to file any US types of forms. There is a form, W-8 BEN, that you may be required to file.
- What's interesting to note about this form is that you actually don't file it with the Internal Revenue Service, the IRS. You actually give it to a US employer. And what that-- the employee completes it, gives it their employer, and what it tells the employer is basically, I'm not a US person. I'm a Canadian. You shouldn't be withholding any taxes from my income.
- There are those circumstances where a non-US citizen will still be required to file a US income tax return. And if you fall under those circumstances, the form happens to be form 1040-NR. So really important to get the right guidance to figure out which forms you're going to be required to file.
* Really important to get the right guidance because, again, this is not something you want to get wrong.
* No, it's not. And I have to tell you, way too frequently, I have clients coming to me and saying, my circumstances are super simple. As soon as you add in any sort of cross-border element to your facts, that in and of itself adds complexity. And it's really important that you consult with a tax professional that has special experience in international taxation. Specifically, you want to be contacting either a tax lawyer or a tax accountant that has expertise in US tax law, Canadian tax law, that, again, can give you that tailored advice based on your own unique facts and circumstances.
* Mindi, thanks so much.
* My pleasure.
* Mindi Banach, Tax and Estate Planner with TD Wealth. And if you have a question, please send it to moneytalk@td.com.
* [MUSIC PLAYING]