Independent Canadian contractors and Canadian corporations providing personal services in US

TRUCKER TAX
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Who does this apply to?

If you are a Canadian resident who derives an income effectively connected* to any business or trade in the US through your Canadian corporation, that income will be subject to US tax filing and in some cases tax liability. This holds true for both employment and personal services rendered by employees of a Canadian corporation in the US.

*Effectively connected income: This income usually includes salary and business related income connected to services provided in the US. There are other types of income that are also considered effectively connected income such as:

  • Royalties received on foreign property that are connected to business or trade in the US
  • Product sales made to a foreign country from the US
  • Profit or loss as a result of sale of US property or its shares

Extremely Important US Tax Residence Rules For Every Canadian

Canada-US tax treaty deductions

Depending on whether your income is derived from a business/trade in the US through a Permanent Establishment (PE) or not, you will be allowed to avail deductions on your US tax liability. Canadian residents are taxable only if their business income has a PE in the US connected to it. If they are deemed to not have a PE, Canadians still have to file their US tax return (including world income) but can claim deductions on their liability as per the Canada-US tax treaty.

Determining if your business/trade has a PE:

In the framework of the treaty, the following criteria determine if a Canadian service provider has a PE:

  • A PE is a fixed location through which the non-resident conducts their business in the US. Factories, offices, management premises, etc are examples of locations considered PE
  • During any 12 month period:
  • if an individual is present in the US for 183 days or longer and
  • 50% of their total business revenue is comprised of revenue generated as a result of their service in the US
  • During any 12 month period:
  • If your business provides service for 183 days or longer
  • service has been rendered for a project or connected projects involving a client who is US resident or has a PE through which your business has been conducted

Note: According to the treaty, locations used for purposes such as storage, delivery and maintenance, purchase of inventory, advertising etc., are not considered as PE.

Our cross-border tax experts can help you navigate nitty gritty of US Tax. We are an international firm with offices in Houston and Toronto. Learn more about Canadian in US or American in Canada.

Tax filing requirements

Filing to claim treaty deductions for:

Canadian CorporationsForm 1120-F (US income tax return of a Foreign corporation), to disclose corporation’s income from the US and Form 8833 (Treaty-based Return Position Disclosure), to claim deductions if there is no connected PE.

Canadian individualsForm 1040NR (Non-resident Alien Income Tax Return), to disclose personal income from business/trade in the US and Form 8833 (Treaty-based Return Position Disclosure), to claim deductions if there is no connected PE.

Filing for US tax liability:

Canadian CorporationsForm 1120-F (US income tax return of a foreign corporation)

Canadian individualsForm 1040NR (Non-resident Alien Income Tax Return)

Note: Although individuals and corporations with a PE have to pay a US tax, they are eligible to claim Foreign Tax Credits (FTC) on this income. Additionally, individuals also need to disclose their income and returns.

US Withholding Tax filing:

For the US to determine the amount of Withholding tax to be paid for your income, your status as to whether you are a US or foreign person must be ascertained. This can be done by your clients by them asking you to fill Form W-8 (W-8BEN, W-8BEN-E, etc). If you do not fill these forms, IRS reserves the right to deduct 30% withholding tax from your business income.

Filing deadlines for:

Canadian Corporations – April 15th of following year for calendar year based business. A general deadline is 15th of the 4th month from end of established fiscal year.

Canadian individuals – June 15th of following year for calendar year basis. General deadline is 15th of the 6th month from end of established fiscal year.

Other points to consider when filing

  • According to Canada’s Income tax Act, small businesses are eligible for the “Small Business Deduction”. This cannot be availed on income earned as a result of personal services rendered by the small corporation’s majority shareholder
  • Form 5471 has to be filed additionally for Canadian individuals considered US persons as a result of their residence and who operate in a foreign corporation.

 Read about Canadian Employed in US by Canadian Company, Canadian residents providing self-employed personal services in the USOnline Sales Tax Law Impact on US and Canadian Retailers Selling online in U.S. and US Canada Tax Treaty.

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AKIF CPA
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Annie Phillips
Annie Phillips
12:35 10 Oct 21
Turn around time was amazing on the project I needed done. When you don’t understand all the different forms... communication is key and you will get that here. They are there to explain what and why you need it.read more
Meru Kapadia
Meru Kapadia
23:33 01 Oct 21
I usually don't write reviews much as everyone has different experiences, but definitely wanted to share the positive... experience I have had here and why I would recommend them to all my family, friends and co-workers.I got a referral for here from a friend, so thought of giving them a try over my old CPA firm. I have been going here for a couple years now and have to say they are top notch. They are always responsive and willing to work with me even when I am delayed. I generally like to ask a lot of questions and not once did I feel like they were annoyed by it and would very thoroughly and positively answer all my concerns with detail explanations. Even during the pandemic, they worked with me 100% virtual and it was seamless. Overall, I am very happy with this firm and will continue with them for the foreseeable future.read more
Kevan Shah
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I’ve been going to them for 3 years now for multiple of my businesses. I changed to them after I had problems with my... previous CPA firm and I’m so glad I did! Best decision I ever made for my businesses. They have saved me thousands of dollars over the years as well as deal with my immensely complicated tax filling issues. No matter when I call, they always help answer all my questions (and trust me I have a lot) and put my mind at ease on all my concerns. I feel as if I am family the way they take care of me. The quality of their work has not changed; very consistent and professional. It is an understatement when I say I highly recommend them.read more
Maunil Shah
Maunil Shah
16:19 01 Oct 21
AKIF CPA is the best place for your tax needs! Saim has been easily available for my all my questions and concerns. ... Couldn’t ask for a better firm that provides excellent service and a familiarity with their clients. I always recommend family and friends to AKIF CPA!!read more
Shah Hussain
Shah Hussain
03:58 01 Oct 21
Hello AKIF CPA,I wanted to share my experience with you, your team and whomever may be reading this message. My most... humble thanks to you and your team for a being such great part of my success.You have done a fabulous job for us this year, and since you took over our books (during our most devastating times) you have literally taken weight off of our shoulders.Thanks for bringing everything up to date and also providing us with numbers or as you call it consultations, ahead of time so we could seal the holes.Great work!!!Shah H.read more
Sumit Dalwadi
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The professionals at Akif have been absolutely amazing! Quick to answer all the questions I had and always available... to offer their guidance.read more
Calvin R
Calvin R
20:21 29 Sep 21
I recommend these guys! I will be going back next year. They made everything simple and we understood what was... happening. There we issues with our taxes due to our previous accountant and these guys fixed everything. They answered our questions and service was always with a smile.read more
Ammoria Daniels
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02:11 16 Sep 21
We contacted Akif with an urgent matter regarding corporate taxes. Akif immediately understood what was needed and... within days had everything ready to sign. The level of service we received was amazing and unmatched. Waqar expertise in trucking industry made our situation seamless. His communication was outstanding; I heard from him daily and could have been completed sooner if I was as fast as he was 😃 Highly recommended!read more
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What an absolute pleasure to work with this CPA firm. My business is already seeing such a positive impact and growth.... I cannot believe I didn't connect with them sooner. This firm is helping in so many ways! 5 stars is an understatement! Thank you so much for your help AKIF CPAread more
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Saim and his team are the best CPAs in town. I have been their client for years. All started when I needed help with... company structure with multiple companies and then accounting and Taxes. I have been very happy ever since. Thank you AKIF CPA.read more
Maria perez
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Me and my husband have been getting all of our personal Taxes, business Taxes, monthly bookkeeping, accounting and... payroll done with AKIF CPA. Recently, we had more stuff come up and had detailed analysis done on capital gains, single family rentals (SFR) and business disposition. You will only know how great this CPA company is until you have worked with them and given them a chance. Words can’t describe our experience. AKIF CPA gets the job done every time - very reliable, professional and affordable.read more
Afnaan Amin
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22:14 02 Jun 21
Very good experience, we had unique situation in regards to cross border income as Canadians currently residing in the... US. Income on both sides of the border through completely different channels. Everything was very easy and completed timely, I also had lots of random questions and Mohammad provided top notch service along the way and even after we finished our taxes!! Highly recommended.read more
Ryan Paton
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I moved to the USA from Canada late 2018 as part of a promotion/relocation for work. For my 2019 returns, I used an... accounting firm recommended by the local Canadian social club in my city, which was a terrible experience. They were slow to respond to inquiries and would follow up in piecemeal requests which dragged out my return process over several months, often asking for information I had already provided.For the price I paid, I vowed to find better service. I found Mohammad online and decided to reach out. Mohammad was extremely responsive, took care of my US and Canadian returns as well as my wife's business returns in a timely manner. Overall, it was a very positive experience and I would recommend him to another in my situation.read more
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I relocated to Texas from Alberta, Canada and needed a CPA to help me with my cross-border taxes as I was not happy... with the CPA that I used previously. During my interviewing process to find another CPA, I had good feedback from Mohammad as he was able to answer my questions regarding my unique tax situation with expertise, and importantly to me, in a timely manner. I decided to use his services for the current tax year and I have nothing but compliments for the work Mohammad provided. If you are in need of a professional cross-border CPA, I highly recommend reaching out to Mohammad Akif.read more
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