# Canadian Citizen on CAD payroll with US company - US Taxes Still Possible?



## tmlinfinity (Sep 17, 2014)

Hello,

If I am working for a US company but they establish a Canadian Payroll (to withhold CAD taxes etc..) But travel to the US frequently for work (approx. 60 to 70% and under TN status), will I still need to file a US tax return (whichever 1040* form is appropriate) if I surpass the Substantial Presence Test?

Would FATCA and FBAR reporting still apply?

Thanks.


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## Eclectic12 (Oct 20, 2010)

I'm not sure the SPT matters, except possibly for the FATCA & FBAR reporting.

Years ago, when I worked in the US on a TN1 visa. The Canadian company kept me as an employee where they paid me. The related US company was billed by the Canadian company for my work (100% in the US). I was told upfront by the company tax specialists that I would have to file a US and Canadian tax return.

The work in the US started late in the year so I would not meet the SBT until the following year.


In my case, being paid by a Canadian company mean filing a US tax return for US work.
I'm not sure how in your case, a US company establishing a Canadian payroll for US work could avoid needing to file a US tax return.


My understanding is that what triggers the need for a US tax return is the US work.
The IRS web site says that one must file a return if the individual is:


> ... engaged or considered to be engaged in a trade or business in the United States during the year.


http://www.irs.gov/Individuals/International-Taxpayers/Taxation-of-Nonresident-Aliens


Cheers


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## tmlinfinity (Sep 17, 2014)

That is interesting.

My impression was that if you get paid by the Canadian subsidiary of a company yet work in the US under TN for the US subsidiary (for a project let's sat) it meant no US tax return was required either because you were only compensated by the Canadian side?

Thanks.


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## Charlie (May 20, 2011)

practically....I think if they give you a W2 (US form) you'll need to file US taxes and if they give you a T4 (cdn form) then just Canadian.

You may also have to file some sort of 'closer connected' form if you're in the US for the 150-180 day test. 

I'd let the company make the call whether you're a Canadian or US employee.


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## Eclectic12 (Oct 20, 2010)

Charlie said:


> tmlinfinity said:
> 
> 
> > ... My impression was that if you get paid by the Canadian subsidiary of a company yet work in the US under TN for the US subsidiary (for a project let's sat) it meant no US tax return was required either because you were only compensated by the Canadian side? ...
> ...


It's been around fifteen years so maybe the laws have changed.

At that time, the project work was in the US for US company where they paid the Canadian company.
Despite only receiving a T4, one of the first things the US firm had me do was go get a SSN for filing the US tax return.


Cheers


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## Charlie (May 20, 2011)

i don't think anything has changed in 15 yrs. If anything, they're wanting more.

Your advice is better than mine.

thanks.


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## Eclectic12 (Oct 20, 2010)

Charlie said:


> .. You may also have to file some sort of 'closer connected' form if you're in the US for the 150-180 day test...


The SPT uses a two part criteria with 31 days for current year and 183 days *over a three year period*.
http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test

The net result for someone in the US for as little as 123 days is that by the third consecutive year, they will be considered a US resident for tax purposes. For part 1, 123 is greater than 31 and for part 2, the total is 184.5, which greater than 183.

I suspect this is why the snowbirds association recommendation is to file for the closer connection excemption *every* year instead of taking the chance of a mistaken calculation.


Cheers


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