# US Resident working in Canada



## Wandraam (Sep 13, 2014)

I've been looking around trying to find some information about this, and this forum seems to be a suitable place to ask the question. (Some of the discussions have already been informative, thank you Bevdeforges, BBCWatcher, and Nononymous.)

Is there anyone on here who lives in the US and commutes into Canada to work? If so, how do you handle the tax situation? (And, on a somewhat related note, what about health insurance?) With border cities it's theoretically possible, although most of what I've found so far seems to be about doing it the other way around.

I am being offered an inter-office transfer by my company from a US office to one of its Canadian subsidiaries. Due to the Canadian branch's proximity to the border, I was considering the possibility of continuing to live in the US and commuting in to work. I'm a Canadian citizen, so living and working in Canada isn't a problem, but I'm also a US citizen (and I currently have no plans to renounce), so I would have to file a US tax return whatever I do.

If the situation becomes too complicated, I may simply move to Canada full-time, but I did want to at least consider all the possibilities before making a final decision. I know it's been done before (one of Montreal's most popular news anchors, for example, lives in Vermont and commuted into Montreal every day for 40 years until he retired), I just don't know much about the details.


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## Bevdeforges (Nov 16, 2007)

First of all, you probably want to take a look at IRS publication 597 which is about the US-Canada income tax treaty.

Basically, Canada taxes based on residence, whereas the US taxes based on citizenship (plus kind of sort on residence). It looks like you're clearly resident in the US, so should be subject to US taxes and withholdings even if you are commuting to work in Canada. Perhaps you can (and should) be retained on the US payroll and let your employer work some sort of inter-company billing for your payroll costs to the Canadian subsidiary.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

I don't think it's all _that_ complicated, Bev.

1. If you work in Canada you have Canadian-source income, taxable in Canada. You'll pay tax in Canada.

2. As a U.S. resident (citizen or not) you're obliged to file a U.S. income tax return if you meet the filing threshold (as you probably would). You simply take the Foreign Tax Credit to account for the Canadian income taxes that you pay.

3. If the U.S.-Canada tax treaty says something else -- probably not -- then you can take advantage of any tax treaty provisions that apply.

4. The U.S.-Canada social security treaty will probably say that you will have to pay into the Canadian system when working in Canada, but check that treaty for further guidance.


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## Wandraam (Sep 13, 2014)

Thank you both for your replies. I'll check out the IRS publication.

I did come across one article that kind of helped me to understand the scenario, but there was a lot of legalese in it. From what I think I understood, if I was in Canada almost every day (or rather, more than 183 days) I would probably be considered a "de facto" resident of Canada, even if I was only there for part of the day and returned to the US at night. I'm not sure whether that would even make a difference in terms of taxes if I was also earning money, because I think I also saw something to the effect of the country in which the income is earned having "first dibs" (so to speak) on claiming taxes for it.

The part that wasn't so clear to me was that, since I would have to file both US and Canadian forms, what I would claim on each. If you're right, BBCWatcher, then I can take the Foreign Tax Credit for taxes paid to Canada, which will probably cover most if not all of the US taxes due.

I'll see what else I can dig up, but perhaps the scenario wouldn't be quite as complicated as I originally thought it might be. Thank you again.


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## BBCWatcher (Dec 28, 2012)

Chances are excellent your FTC will fully offset your hypothetical U.S. income tax on that Canadian source income. Indeed you may get some excess FTCs that you can use to offset current and future U.S. income tax liabilities.

I think it's just that simple, but yes, check all the various references including the U.S.-Canada income tax and social security treaties. I think the IRS even has some tax guides dedicated to cross-border worker scenarios. IRS Publication 54 is another good tax guide and well worth reading.


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