Double Taxation on the same Income (US and Canada)

D

dipb

New Member
Hello friends,
I have a taxation question

I am about to leave for Canada(I just got my Canadian PR). The company that I work for currently(in US), is interested to work with me and asking me to work from Canada, form my home office. Now my boss wants to transfer my salary here in US in my US bank account. Now my question is as my H1 is pretty much over (July 2002),and I have no intention to come back here, am I going to be taxed in both the country. What is going to happened if I have to pay taxes in both the countries?. Can somebody with experience explain it to me whether it is worthwhile to go through this headache at all or it will bring more complication in to my life?
 
I went through similar situation last year

I think a bigger headache for you will be to abandon your US job and look for a new job in Canada with the same salary.
 
If you employer is ready to have you work in Canada and pay you in US dollars then you have got yourself a great deal. Even though the taxes are higher in Canada, still the cost of living is lower than US so you will be able to save more money (and in US Dollars).

Here is how the tax system works:
1) For this year you will be considered a full year resident of US for tax purposes because you have lived there for more than 183 days.
2) Your Canadian tax will be on your worldwide income that you earn AFTER you land.
3) Canada and US have a tax treaty whereby you will be only taxed once (this is rather simplistic, see my explanation below):

Start with your Canadian income tax. Report all your income AFTER the date you landed and calculate your Canadian income tax (both Federal and Provincial).

Next work on your US income tax and calculate all tax just as you would have done if you were still living there.

After taking deductions but before taking credits, determine your tax-credit for the tax paid in Canada (it is not 1:1). You will have to use Form 1116 to determine the credit (it is cumbersome but not very complicated).

Deduct this credit from your US income tax and take any other credits which apply to you (child-care etc.)

The final figure will be your US tax.

Good luck.
 
Thanks for your erudite input!!!

Thank you for your valuable information. It is great to know that somebody has such a good idea about tax laws and regulations about both the countries. I need one more clarification from you. As my salary(or money) gets deposited in US bank how do I prove Canadian Government that I am employed. Then reason being is I want to sponsor my mother within July 2002 from India, so that she can join my family in Canada.

One more question, How bad is the job situation in IT field in Canada?

Birdy I think you know what you are talking about and you have pretty good idea about different things in Canada. I will really appreciate and great full if you can answer my above mentioned questions

Thank you again,
dipb
 
I wonder if there will be problem if I report the US income from a date

that is after I landed. I am in a kind of unique situation, my
company is in the USA and allows me to work part time from Toronto.
?
 
Tax for Canadian PR working on H1-B

Birdy

I am here in the US working on an Work visa (H1-B). I recently obtained my Canadian PR. Will I have to pay taxes as mentioned in your posting too?! Now that C-11 has passed, if I live here in the US for a longer time(couple of years), will I be subject to double tax as mentioned??
 
Your tax returns will be your proof.

Sorry for the delayed response. I was actually in US over the long weekend looking for apartments.

When you file your tax return you will be indicating a US salary converted to Canadian Dollars.
I think if you include a copy (even photocopy) of your W2 with your Canadian return, it will be sufficient.

BTW, since you would have received the salary at different dates (e.g. twice a month), you will have to call CCRA to find out the conversion rate to use.

The IT situation in the BC area is not very good. There have been quite a few layoffs (including some in my company). Alberta may be slightly better. Still, at this point if you have a job in US which you can continue then stick to it like a leech :)
 
Not until you start living in Canada.

The tax will be applicable to the income you earn AFTER moving to Canada.
That date may be different from the date you get your PR stamped on the passport.

e.g.
You land at a Canadian airport with your Landed Immigrant papers on Nov 1, 2001.
You stay for a few days in a hotel and look for apartments etc.
You leave Canada on Nov 4, 2001.
You return to Canada on Dec 1, 2001 to start living here permanently.

In this case your taxation commencement date will be Dec 1 and not Nov 1.

I don\'t think I understand your question about living in US for 2 years. I dont know enough about C-11 to comment on that.
 
No problem

I don\'t see a problem.
As a matter of fact, that is exactly what you are expected to do.

Any income (world-wide) that you earn AFTER you start living in Canada must be reported on Canadian income tax return.
 
Thank You again

Thank You for your advise. Please keep posting the informative reply like this and the one we find in "Comparing Life in US-Canada etc. etc.". I want to thank you again for such quick and effective response
 
Tax when you are out for a longer period

Birdy

According to C-11, you can stay in Canada for 2 years in a five year period. If I am stay back here in the US, how will my taxes be calculated? Again, If I apply for returning-resident stay outside Canada for a longer time, what will my taxes be? Will I still be paying double tax??? Appreciate your inputs.
 
No double tax ever

Nobody living in Canada or US (or both) will have to pay double tax at any time. That is the purpose of the tax-treaties.

However, that does not exempt anyone from paying tax in both countries. Let me explain:

If you are a resident of Canada and earn income in USA then you will have to pay Canadian income tax and US tax (after deducting Canadian tax equivalant from it). Since in most cases your Canadian tax will be higher than US, you may end up paying only Canadian tax (and zero US tax), but you will need to FILE US tax return just the same.

Keep in mind that the tax laws of different countries are designed to make you are resident than not. This is because they get more tax revenue if you are resident than if you are not.

To give you an example, Even if you don\'t live in US but earn some income from US sources, you have to file a tax return. Whether you file as a resident or a non-resident is determined by whether you can show substantial disconnect from the US. According to IRS you CANNOT show substantial disconnect if your US Green Card is in process in US (it could be at any stage, Labor, I-140 etc.).
So even though you are not living in US, you will still be considered a US resident for the tax purposes if you have applied for Green Card.

I have less knowledge of the Canadian Income Tax laws than US. You will have to talk to a local accountant to know the effect of C-11 on Canadian taxes. My guess is that Canada will consider you to be a resident for tax purposes and will require you to file a return even for the years that you do not live here. Whether it exempts you from paying taxes is another matter.

Therefore, I have decided to abandon my Landed Status when I return to US. That way I will not have to worry about Canadian taxes while living in US (that will be a double whammy).
 
Good Luck in the US

Thanks for you detailed reply Birdy!! BTW, looks like you are planning to abandon Canada?! Any strong reasons ?!
 
No particular reason. I loved my stay in Canada.

I have decided to terminate my Canadian residency because legally I can only live in one country permanently. At this time I have to move to US because of my job and then stay there because of green card. I know some people keep both their Canadian and US residency at the same time by hiding one from the other when crossing the border, but I have no such intentions.

I thought about the RRP, but even that has a time limit. Since I don\'t think that I will ever be back in Canada on a permanent basis again, it seems pointless to keep the residency intact. Hopefully, this will free up a spot for someone waiting to get in.

I will certainly visit Canada again as a tourist. This is by far the most beautiful country in the world. If you don\'t trust me, just visit the Canadian Rockies during summer. The people here are some of the nicest that I have encountered. Overall, if you are planning to settle here permanently then I think you are lucky.
 
hi birdy

hi
I live in toronto but work for a US company and get paid in US dollars. I do plan on paying taxes of course to both countries. I am getting married in Jan 2002 and planning on sponsering my wife. Will that be a problem getting PR for her considering i work for a US company. Also what documents do i need to sponser her?
I know i need fiancial statements ? Is there anything else
 
I am not sure I can answer all these questions.

I did not encounter this situation, so it is hard for me to tell you one way or the other.

But in general if you have enough funds to show that you can support your wife then it does not really matter where you work.

Speak to a immigration attorney about this and share it here with the rest of us.
Good luck.
 
Re: support family class to Canadian

Hi, Birdy,

I am very interested in your dicussion. I am a Canadian Citizenship, but working in USA. Do you think that i can support my parents to Canada? To be a sponsor, they said the sponsor have to be physically resident in Canada. Does that means if you work in USA, you are not eligible to sponsor parents?
I am looking forward to hearing some advice from you.

abc
 
I would be in a similar situation.

I am currently sponsoring my Mom and brother. Once they get it I plan to go back to US (I got the i-485 approval but have not stamped the passport). So I also want to know whether I have to be physically present to keep their residentship.
 
Birdy, one question for you.

I came to Canada in Nov 2000. In 2001 I filled both Canada tax forms and US Federal and State tax forms. The whole of last year I was here and worked and got payed here. My GC was in process in US but I was not residing there or in any sort of Visa. Do I have to fill the Federal taxes in US for 2001. Or is doing it in Canada enough.
From this site they say you have to pay tax in US if your a Citizen or resident (I assume GC or H1). I was none. Could you please help. thanks in advance.

While in canada I was paid in Canadian $$.

http://www.irs.gov/individuals/overseas/display/0,,i1=1&i2=10&genericId=12236,00.html
 
You don\'t need to file a US return

Since you did not have any income from US sources and you were not a US resident for the entire year 2001 you dont need to file a US tax return.

While you may still have an \'INTENT\' of returning to US, your lack of income from US sources is enough to not have to file a US return.
 
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