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sj1980

Member
Joined
Aug 19, 2012
Posts
5
Hi everyone,

I have a quick question that I hope someone here can answer. I work for a company that allows me to work from the comfort of my home. No, no, this is not a scam that I'm posting here....LOL. Truly, it's a legitimate company and I am the administrative assistant. Anyway, what I'm wondering is, while we're in the states for six months, can I still do my work and earn an income without having to file income taxes in the United States? Basically, it's a Canadian company which only does business in Canada, and all the clients I would deal with are Canadian.

Anyone have any answers for that? I'd call the IRS, but, well, they're the IRS and I don't like dealing with them.... :D

Thanks!
sj1980
 
Hi sj1980,

Not a lawyer or tax accountant but I am a business person. As long as you don't make any sales to Canadians on US soil then I would think that it would not be a problem since you are not living here. Once you make a sell to someone in a state of the US, then the state sales tax must be collected (you need to get a merchant certificate from said state)  and federal tax form would have to (should be) filed. Obviously people make small sales without collecting sales tax but you are taking your chance if you have an inventory and transportation in that state.

I am sure there would have to be forms filled out since your not a citizen here if you made sales here. My opinion (which might be wrong) is that you can conduct business in Canada from the US without violating any laws.
 
Sorry, but if your income is EARNED here, the IRS will want a share.  You should get in touch with them and explain the situation and see if there are ways to work around it.  In addition the state where you are will also want to ding you.  I've had that experience and states where I have been feel that if you reside in their state, you owe them regardless of where the income comes from.  I guess you would want to check out residency status where you will be and if they have a state income tax.  There may be ways around some, or most, of this but you need to have it checked out before you get here so you do it right.
 
I'm not a tax professional, just someone who has been through this. Bottom line is you'll be required to pay Federal income tax and, depending on the state(s) where you work, you may also pay state income tax. Some easy reading:

http://www.irs.gov/pub/irs-pdf/p519.pdf  Tax guide for aliens (you'll initially be classed as a non-resident alien).

If you'll be paid in Canada, you might also pay taxes in both countries, then figure out how to get relief for one or the other.

You're supposed to obtain a Sailing Permit before leaving the US as proof you paid taxes, although I was never asked to produce one. More here:

http://www.irs.gov/businesses/article/0,,id=207261,00.html

Good luck.
 
Technically I suppose you are earning the money while in the USA and it is taxable here. But I suspect you are being paid in Canada, into your Canadian bank account, as if you were home in Canada, and realistically nobody is going to know the difference as long as you keep all your activities inside the "home". 

I used to travel internationally on business, and didn't file a tax return in any country that I happened to visit for a few days or weeks in the course of my duties. But six months is stretching it...

There are some subtle distinctions that might conceivably exempt you, e.g. your principle work location is still your home in Canada, since you are on a vacation (of sorts) in the US. And the "work" you are doing may actually be in Canada, on a Canadian computer, accessed remotely.  I wouldn't begin to try to advise guess on that sort of thing - even tax professionals would probably scratch their heads (and probably disagree with each other).
 
The real question here for both Federal and State income taxes comes down to whether "legally" you are working in a state. As a consultant for a few years I would travel to State X and work at their offices and my company (me) would be paid by them. I had to file taxes in every state I worked in along with a my federal taxes.

I currently consult for just one company and I'm paid by that company, but for 7 months out of the year I travel in my motorhome and do my work from the coach via the internet (actually connecting to my computer at work). I do NOT consider myself to be "working" in the state I happen to be located in at the time, since I am just "remote" working at my company's office in AZ. I am not doing anything in the state I happen to be located in that would be considered as work in that state. ALL my work is via the internet to the office in AZ.

Think of it this way. You are a business person vacationing in country X, you call your office every day to check on how things are going at home. Are you working in country X?

Then as Gary said, how is anyone going to know? You are paid in Canada and assuming you have no business contact in the US (except to "home" via the internet).

I would consult a tax expert, but if you have NO business contact with anyone in the US while you are in the US, I don't think you are "working" in the US. There is a legal concept called Nexus, which defines (some vaguely) what constitutes a "taxable" situation. So the legal question is whether you have done anything in the US that gives the IRS the right to tax you. This (as with many tax issues) may be a "gray" area that is not well defined.

ken
 
Interesting interpretation Ken; I hadn't considered the 'working remotely' aspect. If sJ can legally not pay taxes in the U.S., things would be far less complicated.
 
I can complicate this even further. When working for Blue Cross South Carolina in South Carolina, I paid South Carolina taxes, even though I had a house in Arkansas, and maintained an Arkansas residency. When I returned to Arkansas, and worked remotely for BCBSSC, I paid Arkansas taxes because I no longer maintained my office in SC and my work product originated in my "office" in Arkansas. My tax attorney fully concurred.

Then I transferred to a Dallas subsidiary of BCBSSC, had an office space, established residency in Texas via Escapees, and then worked remotely, i.e. from wherever I am parked. Texas has no state income tax which simplifies things immensely.

The problem, especially for non-US residents, can get complicated in a hurry. This is one of those problems that has more than one answer. I strongly suspect that as more and more people work remotely, there will be revisions to the tax code with case law. The desire to squeeze tax revenue in these days and times is pretty strong.

I would think the Canadian consulate and/or work visa people would be the best source of information for you as they have surely seen this question come up.
 
I just reviewed an article in the Journal of Accountancy. It was concerning tax issues between states for "remote" work. The various states are at odds as to whether taxes are collected based on the state of the "company" or the state of the residency of the worker. Nothing was said about taxing remote worker except either the state of residency of the worker or the state in which the company was located. But it does show that this is a relatively new issue that hasn't been resolved.
I still think my previous discussion is valid. BUT every state (and the IRS) are always looking for new ways to collect taxes.

Personally I am a resident of SD (I don't need to worry about tax issues between AZ and SD because SD has no income tax), but I pay my taxes based on the location of my work (or in my case the company that I work for from where ever).

ken
 
There were some good personal pieces of information provided as well as some personal opinions. However, none of them seem to relate specifically to your issue nor would be a defense if IRS decided to do something different. The best advice you got was to talk to a tax advisor or the Canandian consulate.

Many times the quick answer to a quick question can lead to a long problem. :-X
 
Some years back I watched a panel discussion on the concept of working remotely and the tax aspect - are you working where your body is located or working at the location of the data being manipulated. The IRS itself wasn't represented, but a lawyer participated and brought up the key points, both yea and nay.  In my experience the IRS tends to be very literal and I suspect the location of your body is the key point for them. But maybe a good tax attorney somewhere has convinced them otherwise in the past.

Like Ken, I never considered that I was working in another state or country. My job involved giving advice on technical matters to others and reporting back to my office on the status of projects worldwide.  I was always working for & at my home office, regardless of where I was. And paid taxes accordingly.  But if I actually worked as a consultant somewhere, as I did after retirement, then I was working in that temporary location and paid taxes there.

Another example is an author gathering data for a book.  As I understand it, he is not "working" at the "fact finding" location during that phase, but if he actually writes a chapter of the book somewhere then he is considered to be working at that location. The bizarre thing is that the cost of the research travel is considered a deductible expense for the book writing income!
 
If you pay the US income tax and state tax you are doing the legal and morally right thing to do. If you do pay US income taxes then I don't think you would also have to pay Canadian income tax. You will be paying income tax either way so why not do it the correct way?
 
Kim,

But when you work remotely from Oregon, do you think you are "working" in Oregon and need to pay Oregon taxes? I don't think so.

ken
 
Ken,

If I was living in Oregon, working remotely, yes, I would be subject to Oregon taxes. The last two Fortune 1000 companies I have worked for have handled it that way. Since I am traveling through Oregon, no. That's on the advice of my tax attorney.

Again, since I am legally domiciled in Texas and working for a Texas corporation, I have a very legitimate tax status.

Kim
 
Tom,

Unfortunately doing the "morally" right thing doesn't necessarily keep you out of tax problem anymore. It's just too complicated with many competing factors. I been involved in several international/US corporate tax fights as well more than my share of issues between states trying to collect taxes. Being a corporate CFO is no fun when dealing with tax issues. Since states are prohibited (by Federal Law) from collecting income taxes on out of state companies without clear Nexus, the state of Michigan has done a "end around" and created a VAT (value added tax) tax on out of state manufacturers who sell product to retailer in Michigan. This one still hasn't made it to the Federal courts and my company isn't big enough to pay for the fight so we just pay the tax.

ken
 
From the IRS manual:

"A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States."



 
Ken & Sheila said:
Unfortunately doing the "morally" right thing doesn't necessarily keep you out of tax problem anymore. It's just too complicated with many competing factors.
I agree with you completely. I think that in his situation the odds of getting caught are virtually non-existent so I think it just comes down to doing the morally right thing. He is working in this country so he should pay income tax just like the rest of us do.
 
[quote author=COMer]A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien ...[/quote]

Based on the info provided, it appears that the OP will be considered a non-resident alien. Still subject to our tax laws (and loopholes), but there are some subtle differences. Having been both resident and non-resident aliens, in one case very similar to the original question, I'd say that life would be simpler if the OP could legally avoid US taxes.

FWIW the U.S.has a tax treaty with many other countries, but it can be a pain to get both countries to comply with the respective treaty.
 
[quote author=SeilerBird]If you do pay US income taxes then I don't think you would also have to pay Canadian income tax.[/quote]

That might be good in theory but, as someone who legally and morally paid taxes in two countries concurrently, I can say it was a real pain to get relief from, in our case, the U.K. When it finally arrived (in the form of a large refund check), we again did the morally and legally right thing i.e. we reported it as income and mailed a check to the IRS for tax on the 'income'. That started a fiasco lasting months, during which the IRS was days away from seizing property from us.

It finally got resolved when our then-tax pro visited the IRS in person and got them to agree we didn't owe any taxes, interest, or penalties, and correct their file. The IRS agent then told the tax pro "If your client wasn't so honest, we would not have known about that refund check, and he would not have had to pay tax on it, nor would he have gone through this fiasco".

I second the suggestion to get some tax advice although, in our case, it didn't avoid tangling with the IRS.
 
SeilerBird said:
I agree with you completely. I think that in his situation the odds of getting caught are virtually non-existent so I think it just comes down to doing the morally right thing. He is working in this country so he should pay income tax just like the rest of us do.

But I don't think that morally he is working in this country by using the computer to work at the company in Canada (of course the IRS could take a different view). As Kim said he is just "traveling" through the US, not working here. Now if there are any business contacts made it the US that would make him working here.

ken
 
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