Archive for June 27th, 2016


US Tax Obligations for Canadians Working In US

Posted in Tax Accountant

US Tax Obligations for Canadians Working In US

When you talk about tax obligation for Canadian working in the US, there remains a dichotomy in regards to the basis of taxation in the two countries. While taxation laws in Canada is fundamentally based on residency (which means Canadian residents are obligated to file and pay for their taxes in Canada on the basis of their worldwide income. The US taxation system is however, based fundamentally on citizenship.

US Citizens or Green Card Holders

According to tax laws for US green card holders and citizens who are residing abroad, they are obligated to file their US tax returns on a yearly basis irrespective of residency in light of their worldwide income. Therefore, a Canadian who holds a green card or an American citizenship is liable to file for both his US and Canada based tax returns (Canadian Income Tax Return T1 and a US Income Tax Return Form 1040).

The deadline for Form 1040 tax return is April 15. However, there is an automatic extension to June 15 for US citizens or green card holder living outside of the US. The dual tax filing obligation does not translate into more taxes being paid by Canadian individuals who file for their Form 1040. And that is primarily because the Canada-US Tax Treaty comes into effect, acting as a shield for a person from double taxation.


Canadians that don’t have a green card or a US citizenship may still be subject to US tax laws. This is solely determined by a ‘substantial presence test’, which presented by the US Internal Revenue Code. Under the test, US residency is calculated by the total number of days a Canadian green card holder or citizen has spent in the US. This number is derived looking at the individual’s history over the past 3 years and if the number of days spend equals 183 or goes over it, and if the individual has spent more than 30 days in the current year, then US residency will be established.
The substantial presence bears quite a lot of important for a majority of employees in the US, especially for ‘snowbirds’, who enjoy working in the summer in the US, escaping the harsh winters of Canada. If the substantial presence test is satisfied by a Canadian individual he or she will automatically be deemed as a resident of the country, this is done to include them in tax bracket – making it mandatory for them to pay their taxes.

US Gift and Estate Tax

US estate tax is in most case mandatory to be paid by Canadian individuals that are green card holders or have an American citizenship. To prevent US citizens from gifting their properties to their next of kin and not paying their real estate tax, they have to pay a gift tax.

All in all, these are some of the most important tax issues and obligations for Canadians seeking employment in the US. And it is important to always be professionally represented by a tax specialist when going over these tax obligations.

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