Author Topic: Canadian Taxes on Contracting Work?  (Read 6719 times)

Rebecca Stapler

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Canadian Taxes on Contracting Work?
« on: May 29, 2013, 07:48:57 AM »
Can anyone point me in a useful direction regarding what country we will have to pay on income earned while (1) from a Canadian company, (2) while living in the US, and (3) not as a salaried employee?

It seems that the IRS and Canadian version of the IRS only address when you're a US citizen living in Canada and making $$ there or a Canadian citizen living in the US and making money there. What other sources of info are there on (a) who we will have to pay taxes to at the end of the year and (b) the tax rate?

We are trying to set aside our tax liability from the incoming funds and I'm getting nervous about whether the Canadians will take a bigger chunk than we anticipated when we submitted the bid for the job.

Self-employed-swami

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Re: Canadian Taxes on Contracting Work?
« Reply #1 on: May 29, 2013, 08:13:38 AM »
I have a 'co-worker' (we are all independent contractors) who is a Canadian citizen, living in the US, but still working in Canada. 

I think he pays US income tax, but at what level, I have no idea.  I know he is paid in Canadian dollars, but he puts it into his US account.

Self-employed-swami

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Re: Canadian Taxes on Contracting Work?
« Reply #2 on: May 29, 2013, 08:15:45 AM »
You could try calling the Canada Revenue Agency, and asking for a supervisor.  They might be able to provide some insight into the situation for you.

My corporate income taxes range in the rate of about 8% of my net profit, if that helps.

Kazimieras

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Re: Canadian Taxes on Contracting Work?
« Reply #3 on: May 29, 2013, 08:26:08 AM »
Can anyone point me in a useful direction regarding what country we will have to pay on income earned while (1) from a Canadian company, (2) while living in the US, and (3) not as a salaried employee?

It seems that the IRS and Canadian version of the IRS only address when you're a US citizen living in Canada and making $$ there or a Canadian citizen living in the US and making money there. What other sources of info are there on (a) who we will have to pay taxes to at the end of the year and (b) the tax rate?

We are trying to set aside our tax liability from the incoming funds and I'm getting nervous about whether the Canadians will take a bigger chunk than we anticipated when we submitted the bid for the job.

How/what you will pay depends if you are a Canadian or US citizen. The US is a unique country in that it taxes its citizens on their earnings, regardless of which country they are residing and earning the money. The US has tax treaties with a lot of countries, Canada included where you receive a credit on your taxes for money paid to the CRA (Canadian IRS). I know many Canadian/US dual citizens who live in Canada and have to file taxes in both countries (although they end up paying no US taxes).

Other considerations: Are you claiming this as a citizen or corporation? What type of work is being done, as it may be taxed differently.

Rebecca Stapler

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Re: Canadian Taxes on Contracting Work?
« Reply #4 on: May 29, 2013, 01:15:23 PM »

How/what you will pay depends if you are a Canadian or US citizen. The US is a unique country in that it taxes its citizens on their earnings, regardless of which country they are residing and earning the money. The US has tax treaties with a lot of countries, Canada included where you receive a credit on your taxes for money paid to the CRA (Canadian IRS). I know many Canadian/US dual citizens who live in Canada and have to file taxes in both countries (although they end up paying no US taxes).

Other considerations: Are you claiming this as a citizen or corporation? What type of work is being done, as it may be taxed differently.

My spouse is a US Citizen, no dual citizenship with Canada. In the US, we claim this income as self-employment income. We haven't incorporated the business. I'm not sure how it would be categorized in Canada.

I know that we won't have to pay both countries, but I'm concerned that we're not setting aside enough if it's subject to Canadian taxes.

daverobev

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Re: Canadian Taxes on Contracting Work?
« Reply #5 on: May 29, 2013, 01:43:28 PM »
If you are self employed working for a company in a foreign country, and are not tied to that country, it's easy: The foreign country has no hook into you. You pay income tax in your country of residence, that's all.

Rebecca Stapler

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Re: Canadian Taxes on Contracting Work?
« Reply #6 on: May 29, 2013, 01:51:28 PM »
If you are self employed working for a company in a foreign country, and are not tied to that country, it's easy: The foreign country has no hook into you. You pay income tax in your country of residence, that's all.
Maybe that's why I didn't find any guidance on the issue -- because it's a no-brainer? I'm just concerned about the Canadian company filing the Canadian version of a 1099 and Canada wanting to come after us for the taxes.

Self-employed-swami

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Re: Canadian Taxes on Contracting Work?
« Reply #7 on: May 29, 2013, 02:21:45 PM »
As an independent contractor in Canada, my client pays me, just like he would any other bill.  There is no payroll withholdings for them, on my behalf, and it was the same when I was a sole proprietor, before I incorporated.  I charge GST (sales tax) because I sell more than $30,000/year worth of services.

It's the same as if you went into a car repair shop.  You (the client) just pays the bill, you don't do any sort of payroll mumbo-jumbo for the car repair shop, even if you are claiming it as a business write-off.

I hope that helps a little. 


Self-employed-swami

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Re: Canadian Taxes on Contracting Work?
« Reply #8 on: May 29, 2013, 02:22:20 PM »
What is a 1099 form?  Similar to our T4/T5 system?

daverobev

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Re: Canadian Taxes on Contracting Work?
« Reply #9 on: May 29, 2013, 02:41:25 PM »
If you are self employed working for a company in a foreign country, and are not tied to that country, it's easy: The foreign country has no hook into you. You pay income tax in your country of residence, that's all.
Maybe that's why I didn't find any guidance on the issue -- because it's a no-brainer? I'm just concerned about the Canadian company filing the Canadian version of a 1099 and Canada wanting to come after us for the taxes.

Yes, it's absolutely irrelevant if you have no ties to Canada. You are billing company X; they deal with their tax implications, you deal with yours. You are doing business IN America. Not Canada. You need to check whether or not you need to charge any kind of sales tax to remit at home though (I'm a Brit, living in Canada, working for myself but for companies that happen to be in the UK; I *in theory* collect HST (harmonised sales tax) here in Ontario, but because the companies I am invoicing are not Canadian resident, it is zero rated. It mostly goes away).

The UK government has no interest in the money I earn from those UK-companies because I am *Canadian* resident. Now - my *rental* property is a different matter, because that is physically located in England - but that's another story!

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Re: Canadian Taxes on Contracting Work?
« Reply #10 on: May 29, 2013, 04:41:47 PM »