How are taxes assessed for U.S. citizens working in Canada?
For a person living (and working) in Canada, as a United States expat, there are a few tax-related things that need to be addressed. If you’re one of them and facing obvious issues on handling your tax situation in Canada, seek help from expats tax consultants in Toronto or any other Canadian city.
The major differences between Canada and U.S.
The main difference between Canadian income tax and American Income tax is the fact that in Canada, it’s based upon residents working in Canada; while, in the U.S., it’s based on both residence and citizenship.
But, there’s a treaty agreement between the two countries that exempts an expat American citizen working in Canada, from being taxed by the U.S. on his Canadian earnings.
What’s it like for U.S. citizens working in Canada?
Canada, in general, has a rather flexible taxation system, based on the time a tax payer spends in the country. In a calendar year, if you live more than 183 days, you’re eligible to fall under Canadian residency for tax purposes.
Since Canada and United States share a huge border, it’s common for the citizens of both countries to commute to the other nation on a daily basis. And, hence any American can be working in Canada. If you’re a taxpayer working in Canada for an American company and also paid by it, tax consultation services in Toronto will let you know that your income is exempt from Canadian taxation, since you’re not residing in Canada.
Double taxation problems
There are, quite understandably, a few complicated issues regarding the situation. According to the Canada-U.S. Income Tax Convention of 1980, there are certain circumstances where both countries can claim the right to tax the same income from the same person. That circumstance being a person having a fixed residence in a country when he pays income tax to the country where he works currently!
In such scenarios, the taxpayer or their spouse can choose whether they are to be taxed by their native United States Government, or by Canada.
At Accounting And Tax, a Canadian tax consulting service, we provide tax solutions to various problems, including the aforementioned issues that expats are likely to face. Our company is dedicated to serve small businesses as well as personal tax problems at an extremely affordable rate.
