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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11140
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a Canadian citizen and resident who does some

Customer Question

I am a Canadian citizen and resident who does some announcing for a US television network. I spend less than 40 days a year in the US and do not have a permanent establishment in the US. What tax rate should the TV network withhold from my pay and do they have to withhold any other deductions such as medicare etc.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from mercer University’s Stetson School of Business and Economics, as well as CFP® and CRPS designations.

I can help here

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The term NRA (Non Resident Alien) withholding is used in this area descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Generally, NRA withholding describes the withholding regime that requires 30% withholding.

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Expert:  Lane replied 1 year ago.

Resident aliens, in general, have the same liability for Social Security/Medicare Taxes as U.S. Citizens.

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Nonresident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their nonimmigrant status.

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Self-Employment Tax Liability (Social Aecurity and Medicare for Self Employed Individuals)

A NONRESIDENT ALIEN is not liable for the self-employment tax. However, once an alien individual becomes a RESIDENT ALIEN under the residency rules of the Code, he then becomes liable for self-employment taxes under the same conditions as a U.S. citizen.

Expert:  Lane replied 1 year ago.

Are you an Employee? or are you a contractor?

Customer: replied 1 year ago.
I think that I am a contractor, but the network may have listed me as an employee. I work for an appearance fee for each appearance (about 15 appearances in any year) and do not earn any other income from them
Expert:  Lane replied 1 year ago.

OK, what you'll need to do is file a US tax return for non residents, and given that NRA's are taxed at the same graduated rates as citizens, you will very likely get a refund.

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Although the withholding (a pre-payment of income taxes) is required at 30%, the rates are graduated (starting at 10%) and there is an exemption of the first 4000 of income completely.

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SO once you file the 1040-NR (NR standing for Non-Resident) you will be refunded for the amount that was over-withheld

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As you can see here (remember to subtract 4000 to get to TAXABLE income) you'd have to get to 22,000 or so befor being taxed at anything higher than 10%

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[Tax Rate Schedule Y-1, Internal Revenue Code section 1(a)]

  • 10% on taxable income from $0 to $18,150, plus
  • 15% on taxable income over $18,150 to $73,800, plus
  • 25% on taxable income over $73,800 to $148,850, plus
  • 28% on taxable income over $148,850 to $226,850, plus
  • 33% on taxable income over $226,850 to $405,100, plus
  • 35% on taxable income over $405,100 to $457,600, plus
  • 39.6% on taxable income over $457,600.
Expert:  Lane replied 1 year ago.

Further, if you are taxed by Canada on this you can use the Foreign Tax Credit to offset (on that 1040NR) double taxation

Expert:  Lane replied 1 year ago.

Going forward, you may be able to submit to them a W8-Ben showing that your are the beneficiary of the US/Canada Tax Treaty to get a reduced or eliminated withholding ... Let me look at the treaty rates ... Just a moment

Expert:  Lane replied 1 year ago.

See this from IRS:

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Claiming Tax Treaty Benefits

Exemption from Withholding

If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, withholding for certain items of income, you should notify the payor of the income (the withholding agent) of your foreign status to claim the benefits of the treaty. Generally, you do this by filing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding with the withholding agent.

Customer: replied 1 year ago.
Thanks, ***** ***** are listing me as an employee, can I elect to not pay US Social Security and Medicare since I already pay for these services in Canada?
Expert:  Lane replied 1 year ago.

Yes, there is a totalization agreement ( SS tax treaty) there as well

Expert:  Lane replied 1 year ago.

See this: https://www.ssa.gov/international/Agreement_Pamphlets/canada.html

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  • While you work––If your work is covered by both the U.S. and Canadian Social Security systems, you (and your employer, if you are employed) would normally have to pay Social Security taxes to both countries for the same work. However, the agreement eliminates this double coverage so you pay taxes to only one system (see the section on "Coverage and Social Security taxes" section).
Expert:  Lane replied 1 year ago.

In looking at the treaty ... It appears that you may be abnlt to submit form 8833 with your return and exempt ALL from taxation IF you are payingn taxes on that income to Canada (and as a Canadian resident you should be)

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See this: From US Canada Tax Treaty

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Income from personal services while working in the other country as a nonresident may be exempt from the other country’s income tax if one of the exemptions in the treaty is met.

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For example, Article XV states that personal services performed by an employee working in the other country is exempt if the total payment is under $10,000 (special rules apply to public entertainers).

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If earnings exceed $10,000, the income may still be be exempt if the nonresident is present in the other country for less than 183 days in any 12-month period and the payment is not received by or on behalf of a resident of that country or borne by a permanent establishment in that country.

Expert:  Lane replied 1 year ago.

Questions?

Expert:  Lane replied 1 year ago.

Still with me?

Expert:  Lane replied 1 year ago.

OK here's the form to use with your US taxes to elect the treaty provision making the US income exempt (personal services - employment)

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Income from self-employment, treated as business profits in Article VII, is taxed by the US or Canada if attributable to a permanent establishment in that country.

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https://www.irs.gov/pub/irs-pdf/f8833.pdf

Expert:  Lane replied 1 year ago.

Hope this has helped ... let me know if you have questions.

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If this HAS helped, (and you don’t have additional questions on this), I'd really appreciate your positive rating … (by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Thank you,

Lane

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Customer: replied 1 year ago.
Thanks, ***** ***** believe that TV personalities cannot claim exemption form US tax; I believe that we are excluded from Article VII. Is that not correct?
Expert:  Lane replied 1 year ago.

There is an exception for "entertainers" let me check

Expert:  Lane replied 1 year ago.

here we go ... (Article 16)

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Income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State, except where the amount of the gross receipts derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities do not exceed fifteen thousand dollars ($15,000) in the currency of that other State for the calendar year concerned

Expert:  Lane replied 1 year ago.

So, yes, now we are back to filing the 1040NR

Expert:  Lane replied 1 year ago.

You should still provide a W8-Ben to the employer, to reduce or eliminate withholding:

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Where the competent authority of a Contracting State considers that an amount that would otherwise be deducted or withheld from any amount paid or credited to an individual who is a resident of the other Contracting State in respect of the performance of independent personal services in the first-mentioned State is excessive in relation to the estimated tax liability for the taxable year of that individual in the first-mentioned State, it may determine that a lesser amount will be deducted or withheld.

Expert:  Lane replied 1 year ago.

Are you still with me?

Expert:  Lane replied 1 year ago.

Are you familiar with the term; Central Withholding Agreement?

Expert:  Lane replied 1 year ago.

Ok, I still don't see you coming back into the chat and I need to help others.

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I think if you will look at what I am going to past below, the dots will connect for you ... then further, I will link a site that may help to make the withholding commensurate with your actual tax level

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If you need further help or clarification just ask and I'll get the alert to come back to this conversation

Expert:  Lane replied 1 year ago.

If you are a foreign athlete and/or entertainer performing independent personal services in the United States, you must generally pay U.S. income tax on your U.S. source income. This includes compensation for performances, endorsements, the sale of merchandise, and royalty, or other, income closely related to the event. Consequently, you are required to file a U.S. federal income tax return to report and pay any U.S. tax.

Generally, if you are a nonresident alien entertainer or athlete performing independent personal services or participating in athletic events in the United States, you are subject to the following special tax and withholding rules.

Expert:  Lane replied 1 year ago.

None of this changes, however, the fact that you must file the 1040-NR

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https://www.irs.gov/uac/Form-1040NR,-U.S.-Nonresident-Alien-Income-Tax-Return

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In order to get a refund of any withholding after applying your specific graduated rates, as we discussed above

Expert:  Lane replied 1 year ago.

Hope this has helped...Let me know if you have questions.

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If this HAS helped, (and you don’t have additional questions on this), I'd really appreciate your positive rating … (by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

...

Thank you,

Lane

Customer: replied 1 year ago.
Thanks, ***** ***** to go to a meeting now.
Thanks for your help.
Expert:  Lane replied 1 year ago.

You're very welcome...

If this HAS helped, I'd really appreciate your positive rating … (by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

Expert:  Lane replied 1 year ago.

And feel free to come back for reference or to ask clarifying questions