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rramsook
rramsook, Enrolled Agent
Category: Tax
Satisfied Customers: 307
Experience:  Specialize in Individual,Corporate, and payroll tax matters.
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I am a CanadXXXXX XXXXXving in Canada but travel to USA every Sun-Thur

Customer Question

I am a CanadXXXXX XXXXXving in Canada but travel to USA every Sun-Thur to work with a TN visa. I have been offered a 3 year job as an independent contractor in the USA. I would like to discuss all the things I need to consider with respect to taxes, banking, pension, SSN, etc.
Submitted: 4 years ago.
Category: Tax
Expert:  rramsook replied 4 years ago.

rramsook : Hello welcome to just andwer
rramsook : Answer
JACUSTOMER-3xxqngz2- :

hello

JACUSTOMER-3xxqngz2- :

hmmmm you appear to be offline

JACUSTOMER-3xxqngz2- :

can anyone else help me?

rramsook :

I do apologize

rramsook :

You will need to fill out form W-7 in order to be given a Taxpayer Identification number considered to be just like a SSN.

rramsook :

you will need this in order to open up any bank accounts and file your tax return come year end.

rramsook :

Being that your an independent contractor you will pay taxes as an sole proprietor and report your income and expensed on form SCH-C on your 1040 tax return.

JACUSTOMER-3xxqngz2- :

is there any benefit to starting my own LLC? 1099?

JACUSTOMER-3xxqngz2- :

would I open a US bank account or could I use a US account from a Canadian bank?

JACUSTOMER-3xxqngz2- :

If I didn't have an SSN then, i wouldn't qualify for social security correct? I would have to somehow continue to pay CPP in Canada?

rramsook :

Well as a subcontractor you would be issued a 1099 for the income that your receive. Creating an LLC would be not beneficial in your case because you only have one source of income and more importantly people create LLC to legal reasons so that they can't get sued personally.

rramsook :

I think in your situation 1099 would be best option.

rramsook :

it is also less costly in regards to filing your taxes at year end

rramsook :

Yes, you do need a SSN to qualify for Social Security.

JACUSTOMER-3xxqngz2- :

and i wouldn't qualify for a SSN because I would still live in Canada and just stay in the US four days/week?

JACUSTOMER-3xxqngz2- :

would I then send the client an invoice just payable to my own name? (if i didn't set up a company)

JACUSTOMER-3xxqngz2- :

and would I need a US bank account?

rramsook :

You will still need to fill out an application for an Taxpayer Identification number even though you do not reside in the US. You will have to file a non-resident Tax Return

rramsook :

You do not neccessarily have to open a US bank account if the US is not your residence

rramsook :

but since the companu will be paying you directly via check you will then need to have a US bank account as i do not believe you may be able to cash the check in Canada.

JACUSTOMER-3xxqngz2- :

but canadian banks have USD bank accounts

JACUSTOMER-3xxqngz2- :

that's what i was thinking - then don't have to worry about exchange rates etc

JACUSTOMER-3xxqngz2- :

but that's the least of my worries in trying to make this work

rramsook :

You are correct in that you will have to send them an invoice for your services

JACUSTOMER-3xxqngz2- :

what could i expect to pay in taxes?

JACUSTOMER-3xxqngz2- :

what information would you need from me to be able to answer that?

rramsook :

Well, we would have to determine what will be your expenses that will offset the income that your received. You can estimate roughly 25-30% tax

rramsook :

on the income dpending on how high the income is.

JACUSTOMER-3xxqngz2- :

it would be about $250,000 per year

JACUSTOMER-3xxqngz2- :

would taxes be higher then? and then would i get some kind of foreign tax credit toward my canadian income tax?

rramsook :

you can average about 28-33%

rramsook :

at that level of income

JACUSTOMER-3xxqngz2- :

that's good to know

JACUSTOMER-3xxqngz2- :

do you know about the canadian side or would i need to speak to someone else?

rramsook :

You will also qualify for a foreign tax credit for any taxes paid in Canada

rramsook :

I am not familiar with Canadian tax Laws

JACUSTOMER-3xxqngz2- :

ok - i'll find someone who does

rramsook :

ok no problem.

JACUSTOMER-3xxqngz2- :

so in summary...I would start by getting a TIN by filling out a W-7 form. I do not qualify for SSN or social security. I do not need to setup an LLC. I could just invoice in USD payable to myself and then make sure I reserve about 35% of my salary to pay US income tax which I could then get a foreign tax credit.

JACUSTOMER-3xxqngz2- :

Do I have that right?

rramsook :

That is correct.