Weekly Q&A #3

Ben: Well, my case is a little complex (for me anyways)! I’m about to move from Canada to the USA, allowed to work n the USA (green card) but will keep on working for my Canadian employer and travel in Canada to see clients.

What do I need to do to ensure that I’m protected? Example: I know I need to file Canadian Taxes and US Taxes. I also know that Kentucky (where ‘ll be living) does not have any foreign tax credits thingy so I’ll be taxed fully. How do I go about this? I’ll be doing about 70% of my work (phone calls) n the US and 30% (in person meetings) in Canada…

Would it be better that I be self-employed and simply send my Canadian employer (who would then be a client only) my bills and they pay me? If so, how would that work?

I don’t know if this apples to your AMA or not. If it doesn’t. Sorry about that (I’m a Canadian, I need to say sorry at least once!)

Locus Tax: This is indeed a very complicated situation. With the limited information given, here are the best answers to your situation.

1) You can keep getting paid by your Canadian employer.
2) Your personal service income (salaries) would be categorized as a US source income because the determining factor for the source of your salary is typically where the services are performed regardless of who the employer is.
3) If your compensation is related to the work performed both in the U.S. and Canada, the compensation is typically sourced based on the relative workdays in the locations. In this case, only 70% of your income would be considered a US source income.
4) Assuming your US assignment is a long-term assignment, any employer-provided benefits such as lodging, travel, and certain other items related to the assignment would be considered taxable wages.
5) If you clam yourself as a self-employed, you will have to pay self-employment taxes (FICA taxes) which can be waived by the totalization agreement between the US and Canada f you get paid by the Canadian employer.
6) Since Kentucky does not have a tax provision equivalent to Fed FTC benefit, you might be fully taxed.

Cynthia: US expat living in the Netherlands. Currently, DH is on an expat assignment here under the 30% and gets paid in the US in a US bank account as we pay US taxes on that. I’m employed on a Dutch contract and pay Dutch taxes (since they are higher than what I would pay in the US, I don’t have to pay any additional US taxes). We file jointly.

I’m looking at getting a job with a US based company where I would work 100% remote from here in NL but get paid in to a US bank account. We would both continue to reside here. What would be the tax implications/is this legal? Thanks!

Locus Tax: Since you are a U.S. citizen who will be working for a U.S. based company and will receive payments into your U.S. bank account, we assume that you are going to receive a W-2 from the new employer. And being a citizen of the U.S. means that you are required to file a tax return regardless of where the income is earned. However, where you performed service also matters. You’d have to report all your income to the Dutch authorities. But through Foreign Earned Income Exclusion and Foreign Tax Credit, you should be able to exclude all your income for U.S. income tax purposes. In this case, you’d have to file U.S. income tax returns but no taxes.