# Tax consequences of taking a job in USA?



## james4beach (Nov 15, 2012)

I've never taken a job in the US before, and am currently considering it.

What kinds of tax consequences am I looking at? Obviously I'll have to obtain a tax ID number from the I.R.S. and start filing _something_ with IRS. Will I have to submit tax filings in both countries while I live and work in the states?

More importantly, what lasting effects will this cause? Will I be obliged to file taxes with the IRS for the rest of my life, even if I move back to Canada after a few years and never work in the US again?


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## Guban (Jul 5, 2011)

You may have to file in both countries if you maintain residential ties to Canada. For example, if your spouse and children stay, you'd likely still be considered a resident and file a full T1 return.

You would not have to continue to file with the IRS after you leave unless you become a citizen or green card holder, or have US assets such as a rental property.

Tax filings in both countries! Enjoy that... Or not!


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## fatcat (Nov 11, 2009)

i was born in canada and moved to the usa as a child (where i became a citizen)
i file tax returns in both countries every year

when you leave canada, you will need to file an exit tax return where you will do a "deemed disposition" of assets in canada (obviously it is more complex depending on what assets you have and what you want to sell or keep)

there is a space on the canadian return where they ask you if it is an exit return i think ..

if you work in the usa you have to do the same thing when you leave and return to canada ... deem disposal of assets for capital gains

if you become an american citizen you then need to file a tax return in the usa as long as you are a citizen

if you don't become a citizen, you can essentially "renounce" your green card status after returning to canada and you will no longer be required to file a return in the usa

in general i would think carefully about it and consult a good accountant

this is a very broad outline, it is getting a lot more complicated


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## HaroldCrump (Jun 10, 2009)

james4beach said:


> Obviously I'll have to obtain a tax ID number from the I.R.S.


You will need a Social Security Number (SSN), not a Tax ID.
They are actually different.
http://vpf-web.harvard.edu/ofs/tax_services/emp_pay_ssn.shtml


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## james4beach (Nov 15, 2012)

Oh gosh.

Thanks everyone, lots I have to look into here.

I would probably be entering on NAFTA (TN visa), stay less than 5 years, and then come back to work in Canada.


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## AltaRed (Jun 8, 2009)

Take a look at Serbinski's crossborder tax forums for a lot of information http://forums.serbinski.com/


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## MoneyGal (Apr 24, 2009)

Goodness. You don't need to file an exit tax return and declare a deemed disposition of all assets unless you intend to leave Canada permanently.


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## AltaRed (Jun 8, 2009)

MoneyGal said:


> Goodness. You don't need to file an exit tax return and declare a deemed disposition of all assets unless you intend to leave Canada permanently.


No, but it could be to the OP's advantage to do so. For example, if CG tax is not much, or there is a capital loss situation, that would be beneficial. Also, if the OP does not sell any of his/her Canadian investments while in the USA, he/she can reset the ACB of those Canadian investments to the market value in place on the day of re-entry. Making that decision does involve some risk and depends on individual circumstances.

That is what I did for some ex-pat assignments. Example: Left Canada Jan 2003 and returned Apr 2006. I did a deemed disposition and paid some CG tax. But all of the unrealized cap gains during that period while in the USA accumulated tax free, and when I returned with much higher ACBs, I was far ahead of not having done a deemed disposition.


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## fatcat (Nov 11, 2009)

MoneyGal said:


> Goodness. You don't need to file an exit tax return and declare a deemed disposition of all assets unless you intend to leave Canada permanently.


correct, i tried to say so but poorly ...

if you are in the usa you will have to account for every penny in every account you keep in canada so if i were going to go for say 5 years, it would be worth disposing just to avoid the paperwork and reporting hassles

obviously with real estate (which doesn't need to be reported other than if it has rental income or so on) you might want to keep it and so on


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## MoneyGal (Apr 24, 2009)

Indeed. Your and AR's points are totally valid - the circumstances are really particular to the individual, their life stage, what they expect to happen over time (stay in the U.S.? return to Canada?), whether they are partnered, what investments they have, any RE holdings...


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## MoreMiles (Apr 20, 2011)

Google *FATCA*
and Google how many people are doing things to avoid it...
http://www.forbes.com/sites/robertw...s-citizenship-big-fatca-wheel-keep-on-turnin/


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## james4beach (Nov 15, 2012)

About Canadian assets. I don't have Canadian real estate but I would definitely keep all primary bank accounts and brokerages in Canada. I am not going to shut down all my Canadian bank accounts just to work in the USA for a couple years.

Does that make things more complicated?


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## AltaRed (Jun 8, 2009)

james4beach said:


> About Canadian assets. I don't have Canadian real estate but I would definitely keep all primary bank accounts and brokerages in Canada. I am not going to shut down all my Canadian bank accounts just to work in the USA for a couple years.
> 
> Does that make things more complicated?


No, as long as all your financial institutions will accept a US mailing address (they should). They will (should) withhold the necessary withholding tax obligations (per treaty) to CRA on any income earned in your accounts. You will primarily pay income tax to the IRS once a tax resident and the withholding tax in Canada will become Foreign Tax Credits on your US 1040. 

Just remember you will likely not be able to trade in your Canadian brokerage accounts (except for maybe the RRSP - depends on the broker). All you can likely do is sell assets in your brokerage accounts, so position your Canadian brokerage accounts the way you want them to be for the duration of your US residency. Talk to each brokerage before you leave Canada. Bank accounts have less restrictions. You should be able to add money, move money, hold HISA type savings accounts, etc. 

You also need to fill out a form each year with the US Treasury, one for each foreign, i.e. Canadian, account. There are severe penalties for failing to do so on time (before end of June each year if I recall correctly). There will also be a form to ensure you continue to have tax exemption on your Canadian RRSP. The USA does not recognize a TFSA so you will be paying US tax on any income from it. 

Make sure you have a good Crossborder tax accountant to keep all of this straight. 

Also remember you will have to renew your TN Visa annually, and that must be done from outside the USA. Depending where you work, it might be easier to do that from Mexico. Canadians in Houston often drive across the Rio Grande to fill out their new TN form and hand it in as they re-enter the USA.

You may not be able to get a US domiciled credit card until you establish some credit history in the USA.... about a year, although this may be outdated info and that may have changed in the last several years. If not, you would have to rely on your Cdn domiciled credit cards and/or a US domiciled debit card. If you bank and/or have credit cards with a company like TD or Capital One or Amex that also does business in the USA, that may be of some help getting a US domiciled credit card.


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## Taraz (Nov 24, 2013)

*100 32922468*



james4beach said:


> I've never taken a job in the US before, and am currently considering it.
> 
> What kinds of tax consequences am I looking at? Obviously I'll have to obtain a tax ID number from the I.R.S. and start filing _something_ with IRS. Will I have to submit tax filings in both countries while I live and work in the states?
> 
> More importantly, what lasting effects will this cause? Will I be obliged to file taxes with the IRS for the rest of my life, even if I move back to Canada after a few years and never work in the US again?


Are you talking about going down as a temporary worker under NAFTA? http://www.allhod.com/nafta.shtml

As I understand it, there are reciprocal tax agreements for Canadian citizens. You should be able to go down under NAFTA and work (assuming it's a skilled, in-demand position) without having to get a green card. You would pay US taxes, but you'd have to file in both places. (You might also have to pay a little bit of Canadian tax, but not the full amount since you'd get a credit for the US stuff.)

I think it's actually a lot simpler than everyone is making out, assuming you're just going down for a few years as a temporary worker under NAFTA (and not actually getting a green card/becoming an american citizen/giving up your canadian citizenship). You wouldn't have to file US taxes except for the years when you were actually down there.


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## james4beach (Nov 15, 2012)

I've got to learn these terms better. My friends used that NAFTA (TN visa) so I figured that's what I would do too.

I have no intention of becoming an American citizen or living there long term. I find it funny that Americans think that everyone wants to come and live there... I just want to do this job and then get the hell out of there


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## Guban (Jul 5, 2011)

james4beach said:


> About Canadian assets. I don't have Canadian real estate but I would definitely keep all primary bank accounts and brokerages in Canada. I am not going to shut down all my Canadian bank accounts just to work in the USA for a couple years.
> 
> Does that make things more complicated?


Yes. Despite what Taraz wrote, It is not straight forward maintaining your Canadian brokerage assets if you have Canadian mutual funds or non-US ETF's. It is no longer just a matter of filing a basic 1040, but you need to follow the PFIC rules. Google them, and you'll see that it is a reporting nightmare, and very punitive from a tax point point of view. The FBAR requirements may be necessary too.

Oh yes, your TFSA will no longer be tax free, so don't forget to liquidate it, or face foreign trust reporting. Not fun.


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## james4beach (Nov 15, 2012)

That point about the TFSA really scared me. Do I really have to give up the TFSA?

I wonder if it's feasible to maintain a Canadian permanent address on the record (family's home -- where I certainly will be showing up every few months) and keep filing Canadian taxes, keep all bank accounts & CRA address with my Canadian address.


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## Taraz (Nov 24, 2013)

You could pull out the TFSA before you go then re-contribute it when you come back as long as it's not in the same year. I believe you would only be able to recontribute the original amount though (i.e., if you pull out $30 000, with $25,500 in contributions, and $4 500 in interest, I think you would only be able to put the original $25,500 back in, not the full $30,000. Plus, of course, you would gain any additional room accrued while you're gone.)


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## AltaRed (Jun 8, 2009)

james4beach said:


> That point about the TFSA really scared me. Do I really have to give up the TFSA?


As I understand it, keeping it will be a nightmare, but check Serbinski's forum, or ask a cross-border tax accountant.



> I wonder if it's feasible to maintain a Canadian permanent address on the record (family's home -- where I certainly will be showing up every few months) and keep filing Canadian taxes, keep all bank accounts & CRA address with my Canadian address.


Maintaining a Canadian permanent address in itself (even with bank accounts, etc.) may not be enough. Where you have your primary health insurance and where you actually live (are present) may be most important... and the Canadian health system does not cover you for very long. The Can-US tax treaty has tie-breaker rules to determine whether you are a tax resident of USA or Canada. You would need to study them to be certain who has tax primacy.


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## Guban (Jul 5, 2011)

Taraz said:


> You could pull out the TFSA before you go then re-contribute it when you come back as long as it's not in the same year. I believe you would only be able to recontribute the original amount though (i.e., if you pull out $30 000, with $25,500 in contributions, and $4 500 in interest, I think you would only be able to put the original $25,500 back in, not the full $30,000. Plus, of course, you would gain any additional room accrued while you're gone.)


I think that you would be able to contribute the full $30,000 in a different calendar year. I suspect that you would not accumulate any more room, however while you are not a resident of Canada.


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## Taraz (Nov 24, 2013)

So according to a friend of mine who's working down there as a temporary worker:

You only get contribution room to TFSAs if you're a Canadian resident, but any space you had carries over until you become resident again. Anything you already had in the TFSA stays and is free of Canadian taxes, but not US.

You can contribute to RRSPs based on your Canadian income, but the gains and interest / distribution on any contributions you make while a US resident are taxable by the US. (You can elect to exempt existing RRSPs from US taxation, under the tax treaty.) However, the US retirement stuff --- 401ks --- can be somewhat better than RRSPs in some circumstances since you get lower fees and a wider selection of investments, along with a higher (usually) contribution limit --- $51.5k / year.

If you come back to Canada, you can keep the money in the 401k and Canada effectively treats it like it's an RRSP: no tax until you withdraw, at which point it's income. If you pull it out before age 59.5, there's an extra 10% tax from the US. There's also a TFSA equivalent where you invest post tax but withdraw tax free. (I'm assuming he's referring to a Roth IRA.)


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## james4beach (Nov 15, 2012)

I appreciate all the info here. I've gotten in touch with a family friend who's an accountant and should be able to refer me to someone who knows US/Canada tax

Anyone know off hand whether the US has any kind of capital controls in effect? If I were to earn 100k of personal income in the states, is it pretty straightforward to bring this money into Canada?


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## james4beach (Nov 15, 2012)

In the meantime -- after info from here -- I did find an accountant with tax experience on both sides of the border.

Sounds like the NAFTA visa (TN) is pretty common for people like engineers, software developers working in the states.

If anyone is able to comment on this, what is the likelihood of successfully obtaining the TN permit? I have a postgraduate engineering degree (MSc.) from a large Canadian university and the company is a software/IT firm. I enter the USA all the time, but never on a TN. Is the TN visa pretty much a guarantee?

Would love to know since the job is conditional on me being able to get one...


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## AltaRed (Jun 8, 2009)

I don't know enough about it being 'guaranteed' but there should be no obstacles if you meet the criteria. I assume you looked up the prerequisites? 

For one of my US assignments years ago, I used a TN (prof eng/executive) and a letter from my employer. No hiccups or hassles that I recall.


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## james4beach (Nov 15, 2012)

Yes I looked up the prerequisites and I appear to meet them. I also have classmates who have the exact same degree as me who have been working in the states with a TN.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> In the meantime -- after info from here -- I did find an accountant with tax experience on both sides of the border.
> 
> Sounds like the NAFTA visa (TN) is pretty common for people like engineers, software developers working in the states.
> 
> If anyone is able to comment on this, what is the likelihood of successfully obtaining the TN permit? I have a postgraduate engineering degree (MSc.) from a large Canadian university and the company is a software/IT firm.


I had to supply some extra paperwork as I didn't have the right degree but did have enough time in a job that would qualify me. 




james4beach said:


> Is the TN visa pretty much a guarantee?
> 
> Would love to know since the job is conditional on me being able to get one...


I was working for a consulting company so they a lawyer who specialised in this stuff go over everything with me.

Nothing is a guarantee as my co-worker found out ... she didn't dress the part (i.e. business clothes) and showed up with almost no time before her flight. She was turned away but when she dressed the part, the TN1 visa was approved.

The US team lead wanted me to lie at the border and skip the TN1 until later but that's about six months after the US dropped the appeals process so that if the agent I talked to decided I was lying - they could bar me from entering the US for five years, with an appeal no longer possible. I told the US team lead it wasn't worth the risk (I was granted my TN1 about a week later).


Cheers


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## james4beach (Nov 15, 2012)

AltaRed said:


> Make sure you have a good Crossborder tax accountant to keep all of this straight.


I got a referral to one through a family friend (who himself is an accountant).

This accountant deals with US and Canadian taxes, can file IRS paperwork if needed, and is a CPA in the U.S. $225 per hour... does this seem expensive for an accountant?


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## Calgary_Girl (Apr 20, 2011)

james4beach said:


> If anyone is able to comment on this, what is the likelihood of successfully obtaining the TN permit? I have a postgraduate engineering degree (MSc.) from a large Canadian university and the company is a software/IT firm. I enter the USA all the time, but never on a TN. Is the TN visa pretty much a guarantee?


Wouldn't the company be able to take care of this for you? I lived and worked in the States for a couple of years from 1999-2001 and the company took care of all of the legal stuff for me including the TN Visa. Good luck with your decision! I dragged my American husband (who now has dual citizenship) back to Canada in 2001 and he has to file a dual income tax return every year.


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## AltaRed (Jun 8, 2009)

james4beach said:


> This accountant deals with US and Canadian taxes, can file IRS paperwork if needed, and is a CPA in the U.S. $225 per hour... does this seem expensive for an accountant?


My best guess is this is about right for the going rate. The key to keeping costs down is to give the accountant a very tidy information package at the time of tax preparation.


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## james4beach (Nov 15, 2012)

AltaRed said:


> My best guess is this is about right for the going rate. The key to keeping costs down is to give the accountant a very tidy information package at the time of tax preparation.


I'm not yet convinced I need them to do the actual filings. I just want to know the right strategy and correct decisions to make re 401(k), which country to claim tax residency, etc. If the accountant can help me optimize that strategy and tell me which forms I need to file with who, it seems worthwhile doing the actual filings myself since my time is only worth around $100/hour.


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## PoolAndRapid (Dec 3, 2013)

..


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## james4beach (Nov 15, 2012)

I saw the accountant and I feel this was worthwhile doing. They explained (and I understand their point) that each situation is different due to the particulars, including type of visa, intentions, types of assets, and nature of ties to each country.

Sharing what I learned but I hope everyone keeps in mind that everyone's situation is different.

In my case, due mainly to my intention to only stay in the US temporarily, and the high tax jurisdiction of the state I'm going to, the recommendation was to remain a Canadian resident... _I would not pay much less taxes if I were a US resident_ -- that aligned with my own estimates. I will of course file taxes on my earned income in the US, however my primary ("worldwide income") filing will be with Canada. Very little changes from my current tax methodology. When I file Canadian taxes, I include the foreign tax credit for the taxes I paid to the US. There is no double taxation.

I can continue contributing to my RRSP and TFSA in Canada. Nothing at all changes at the banks and brokerages. There will be no disposition of Canadian assets, nor is the RRSP frozen. This is really, really good for me.

On the US tax side, I include a form indicating that due to my ties to Canada and permanent residence there, I elect to pay taxes to Canada under the Treaty. I would not have to report all my Canadian bank and tax slip info to the US. There is no complications from TFSA nor are there any burdensome US reporting requirements for passive foreign investment companies, etc.

The flip side of all this convenience is that I will pay slightly higher taxes in my particular Canadian province, but not by that much. The other downside is that if my American investment/business assets exceeds 100k, there will be new headaches.


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## james4beach (Nov 15, 2012)

Oh another downside of the Canadian residence approach I plan on taking... I will definitely be sending returns to both governments (more paperwork, though it's not double taxation). If I severed ties to Canada then I would only file with the US.


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