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Income Tax Guide for US Expats Working in Canada

  To many Americans, Canada might appear to be a parallel universe: a land of courteous people who generally speak English yet do not hold American citizenship—a country that is both close and far away. Others remember Canada as the country that invaded the United States in 1812 and burned down the White House (despite the fact that Canada did not exist at the time, and the British bear sole responsibility for the attack on Washington, DC). However, approximately 800,000 US citizens call Canada home. Cities such as Toronto, Calgary, Vancouver, and Edmonton, as well as other parts of the country near the US border, have large numbers of US expats. Taxpayers in Canada must pay both federal and provincial (or territorial) taxes, much as citizens of the United States do to the IRS and state governments. The primary distinction is that most Canadian provinces (with the exception of Quebec) do not need the filing of a separate return; the federal government collects provincial. Because o...
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Navigating US Tax Rules for Jobs in Canada

 In most cases, if you are a "tax resident" of a country, you have to pay taxes on all of your income in that country. It is normal for someone who moves around the world to be a "tax resident" of more than one country. If you don't get the right help, this could mean that two countries can tax your income from all over the world, which is also known as "double taxation." A good tax treaty between the two countries can often make this situation less of a problem. You are automatically a "tax resident" of the United States if you are a citizen of that country. However, you can easily be a "tax resident" of Canada if your move there for work makes it seem like you will stay there permanently (for example, if you sell your American home and buy one in Canada and bring your spouse and children with you).

It is the responsibility of employers who pay workers for work done in Canada to withhold payroll source charges on those amounts.

This duty must be met by all employees, whether they work in Canada for one day or twelve months. Due to the administrative burden of having to withhold and remit taxes for workers who only spend a short time in Canada, the CRA offers a few possible tax exemptions from withholding and remitting, as long as the right forms are filed on time. The R102-R: Regulation 102 Waiver Application is one of these forms. It needs to be filled out by each employee at least 30 days before they start working in Canada. Another exemption form is the RC473: Non-Resident boss Certification. This is a general form that can be used for all U.S. workers sent to Canada by their U.S. boss for up to two years. Please fill out this form only if your employee is in Canada for less than 90 days in a year. Also, because of the Canada-US Social Security Agreement, some withdrawals will not have to be made, like Canada Pension Plan premiums and Employment Insurance contributions. This is based on the idea that the worker has to pay social security taxes in the U.S. 3. You might need to fill out a Canadian tax form.

A worker from the United States who is not a tax resident of Canada only has to pay taxes on some of their Canadian income

According to the Canada-U.S. tax treaty, if your U.S. company took Canadian payroll taxes out of your pay while you were working in Canada, you may be able to get these taxes back. If you worked in Canada and made less than $10,000 CAD, or if you stayed there for less than 183 days in a 12-month period, and the amount is not paid for by a fixed establishment in Canada, you can get your money back. The following table shows a summary of your Canadian tax obligations:American workers who make money in Canada may have to pay income tax in Canada, but most American workers won't have to pay personal income tax in Canada because of the Canada-US tax treaty's deductions. Figuring out if you need to file a Canadian income tax return to pay tax or get your refund can be hard to understand depending on your case. Talk to an expert at Crowe Soberman to help you figure out your Canadian income tax duties. This piece was written so that our clients can learn more about it. Before putting any of the ideas in this piece into action, you should get specific professional advice. Please keep in mind that this publication is not meant to replace getting personalized tax help that is tailored to your needs.It can be annoying to see the difference between your gross and net pay. Do you really have to pay that much in taxes? Where does the cash go? We all feel the same pain from the moment we get our first paycheck.

It doesn't help that we know our taxes keep the roads safe, our medical bills low, and our society running smoothly most of the time.

A High-Net-Worth Planner at TD Wealth named Geoff Chen says that taxes are used to move our money into different places and pay for services that we all use. "Canada wants us to do some things by giving us tax breaks, and it also wants us not to do other things by taxing them," he says. He says that everyone should look into these tax tactics.Chen says one of the main components of tax strategy is to utilize tax-deferred or tax-friendly accounts: Registered Retirement Savings Plans (RRSPs), Registered Education Savings Plans (RESPs) and Tax-free Savings Accounts (TFSAs). Each plan defers or mitigates tax obligations in different ways.Contributions to an RRSP lower your taxable income. You can generally contribute up to 18% of your previous year’s earned income up to an annual maximum ($31,560 for 2024). The investments in the plan can grow tax-free until you withdraw the funds. As the funds are geared to providing retirement income, the key is to withdraw the funds in retirement when your income — and therefore your tax rate — is potentially lower.

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