Working for Canadian Company

[payxibka 10,045]

One way around this ordeal is if your fiance is an owner of his own corporation, it only costs a few hundred to incorporate yourself. So the company that he works for will essentially just pay his company and not him. As an owner of the shares of the company he can take shareholder loans and dividend payments. Thus his company would get paid, and the money would sit in his business account, he could then take a "shareholder loan" to himself and pay it back when he takes a dividend payment later on in the year, like the following quarter when he has his EAD. Is this legal?

Well since he's a shareholder of a company he's not working, his company is. He is not making salary, unless he sets up his company that way and you aren't required to set up salary when you incorporate right away unless you actually have other employees you are paying.

The income from dividend payments will have to be recorded with his tax returns to both countries but I believe since he's considered a non-resident you don't need to pay Canadian taxes, you'll just pay what you owe the IRS. Also getting paid corp-to-corp he must charge and remit GST to the Canadian gov't from his company, and he won't have to pay taxes until June I believe, you can actually defer your tax payment for up to 53weeks I believe when you open a new company. Since he's company gets all this money pre-tax, make sure he doesn't transfer it all into his personal account since that will mean he owes the appropriate amount of tax back to Canada Revenue Service.

Finally, I was told from my accountant that you can take up to 30K or 35K in dividend payments from your corporation so you pay business tax on your revenue but you are able to avoid personal tax for that amount. Since business tax rate is around 16% it's better than paying 30% on personal tax rate. Only thing you'll have to realize is that whatever he takes as income he'll have to file with the IRS and whatever he didn't pay to Canada on income he may have to pay to the IRS.

But as Zyggy says, it's best to check with legal council to see what the deal is. Or perhaps try calling the NVC but don't give them your name or case number so they can't really keep an eye out for your fiance and flag him for working illegally.

This scenario does not work, as you will run amuck of the "common law employee" definition if it is ever challenged.

Employee (Common-Law Employee)

Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

http://www.irs.gov/businesses/small/articl...=179112,00.html

[Reba 2]

Again, these statements would be based on an interpretation or misinterpretation of facts or words. If this is taken literally many people travelling to the US for whatever legitimate reason could be breaking US immigration laws. With today's technology, the ability to connect remotely to their foreign employer's network is done without any second thought.

The intent of the law is to protect US jobs and I just dont view this as being the case here.

Sly.

So the laws haven't kept up with technology, that's nothing new. However, under the CURRENT law, and the border officials current interpretation of it (which really is what counts), it is not legal for someone without work authorization to work for anyone while on US soil.

A person could decide to take the chance, or could decide to not to. Its completely up to the individual. But if it could in the end render one deportabnle and/or ineligible for a US visa or green card in the future, I personally would not take the chance.

[monicatony 0]

While we are on the topic..... I was curious about the tax situation myself and haven't yet researched what to do for this coming spring. I work in Canada for an airline and have continued to work there during this whole process. I was granted PR status April of this year but have not been able to transfer to a job in the US so I continue to fly back to Canada to work and then fly back to the US on days off. During the first year of our marriage, before I became a Permanent Resident, I declard on my Canadian taxes that I was married and that my spouse did NOT make any income in Canada. He declared something similar on his US taxes. What is the process for declaring income in the US for me this year? I still do not technically make any income in the US.

Any tips?

[Caladan 19]

We had a similar situation, except that while the employer was Canadian, the physical work was also in the U.S. It was my understanding that because the work was occurring in the U.S., C. needed U.S. work authorization, even if the employer was Canadian.

Online work is a little weird, and I don't think the law's caught up, but back when I was researching this the interpretation ended up being that either you ended up counting as self-employed (and thus hiring yourself without work authorization), or that you were working in the U.S. illegally for a foreign employer. It's not like a businessperson here on vacation who checks his e-mail or calls a client while here, because the K-1 isn't a tourist visa. The work, under one interpretation, would be being done in the U.S. because that's your new place of residence.

To be honest, I'm still not sure. We ended up getting work authorization so it became a moot point, but it's not something I'd want to try without serious legal counsel first, even if just to sort out the tax situation. (Kathryn, as I understand it, your vacation days already (or plausibly already) counted as earned. Here, at least, the vacation and overtime is accrued per pay period, even if you don't cash out till much later. So you were on the payroll, but not working, just getting reimbursed for what was due.)

Illegal work isn't usually a bar to adjustment of status, but that doesn't make it totally innocuous, either.

(Uh, hi everyone! Hope you all are well. Back to lurking for a bit while I finish up my degree, but we're all fine here. )

[Krikit 1,163]

While we are on the topic..... I was curious about the tax situation myself and haven't yet researched what to do for this coming spring. I work in Canada for an airline and have continued to work there during this whole process. I was granted PR status April of this year but have not been able to transfer to a job in the US so I continue to fly back to Canada to work and then fly back to the US on days off. During the first year of our marriage, before I became a Permanent Resident, I declard on my Canadian taxes that I was married and that my spouse did NOT make any income in Canada. He declared something similar on his US taxes. What is the process for declaring income in the US for me this year? I still do not technically make any income in the US.

Any tips?

Use Form 2555.

[DeadPoolX 9]

I did it, and so did a lot of others. It's not illegal. Though you'll find many on VJ who will argue the point. Some feel they are experts in things which they have no expertise or background in. Suffice it to say they are wrong and don't even bother arguing the point.

The EAD only authorizes work for an American employer. The US has no jurisdiction for authorizing employment for a Canadian-based company. Just make sure the Canadian company knows he's a non-resident so he gets taxed appropriately, then claim that income in both your US and Canadian tax return. Easy peasy.

Not to be too picky, but isn't that what this whole website is essentially built around? This is a place for the "common man and woman" to handle the legalities of immigration law by themselves. How many of us have actually gone to law school? Out of those who have, which ones have specialized and practice in immigration law?

It's commonly repeated on VJ that an immigration attorney is a "waste of time" and will only "drain your wallet." Perhaps in some or even most cases, that might be true. However, if we're only looking at who the "experts" are and who has the "qualified expertise and background" in this area, then very, very few of us would really fit that bill.

Reading information on websites (including VJ) and listening to second-hand advice from strangers on the Internet only means we're banking on the information we believe to be accurate. We're taking a huge risk by relying on people we don't know and who probably have no qualifications in this area (other than the ability to use Google efficiently) to guide us.

[Flames9_RN 358]

Most immigration attorneys offer a free consult, contact a few of them and see what they have to say, if they all say the same thing,then should be a close case

[Emancipation 2]

(Uh, hi everyone! Hope you all are well. Back to lurking for a bit while I finish up my degree, but we're all fine here. )

Good to see you Caladan!! Welcome back to lurking

[monicatony 0]

Thanks for the tip on form 2555 Krikit!

[zyggy 9]

While we are on the topic..... I was curious about the tax situation myself and haven't yet researched what to do for this coming spring. I work in Canada for an airline and have continued to work there during this whole process. I was granted PR status April of this year but have not been able to transfer to a job in the US so I continue to fly back to Canada to work and then fly back to the US on days off. During the first year of our marriage, before I became a Permanent Resident, I declard on my Canadian taxes that I was married and that my spouse did NOT make any income in Canada. He declared something similar on his US taxes. What is the process for declaring income in the US for me this year? I still do not technically make any income in the US.

Any tips?

Use Form 2555.

Watch yourself Krikit... that doesn't apply in this case.

CRA and the IRS generally recognize that on the day you received your GC, you ceased to be a tax resident of Canada and became a tax resident of the US. You should use the resident date on your GC as the date you left Canada on your Leaving Canada return. Form 2555 cannot be used to exclude any foreign income once you became a tax resident of the US, but can be used to exclude foreign income that was earned prior to issuance of your GC. You can claim a foreign tax credit against your US taxes for any income earned in Canada after your Green Card was issued using Form 1116.

TO the OP, at this point in time, you would be better off requesting that your employer not withhold any Canadian taxes on your income and instead see if they can treat you as a contractor and you pay estimated tax payments to the IRS for US self-employment taxes if you can. If not, you would most likely be better off informing them of your non-resident status and be taxed at the non-resident rate of 25%. In any case if you continue to work in Canada, you will lose out on the foreign tax credit as Canada taxes a lot higher than the US especially with the currencies almost at par. You can only obtain a credit against the maximum the US would tax you at.

You most likely should have informed your employer of your status as a tax non-resident at the time of you received permanent resident status. If you didn't, you're probably going to be hit with a large tax bill this year as your deductions end with your leaving Canada date. I would suggest looking into your situation and consider informing your employer of your non-resident status and request to be taxed at the non-resident rate of 25%. But that may not be the case depending on your income, but in most cases it is.

In your case, if you are going to continue residing in the US and working in Canada, it is imperative that you consult with a cross-border tax expert who can help you make the right choices to minimize your cross-border tax burden.

Edited September 22, 2008 by zyggy

[Krikit 1,163]

I think I love you, Zyggy. Will you be my new tax accountant?

[zyggy 9]

I think I love you, Zyggy. Will you be my new tax accountant?

Chuckle... sure... no problem...

[sly_wolf 199]

While we are on the topic..... I was curious about the tax situation myself and haven't yet researched what to do for this coming spring. I work in Canada for an airline and have continued to work there during this whole process. I was granted PR status April of this year but have not been able to transfer to a job in the US so I continue to fly back to Canada to work and then fly back to the US on days off. During the first year of our marriage, before I became a Permanent Resident, I declard on my Canadian taxes that I was married and that my spouse did NOT make any income in Canada. He declared something similar on his US taxes. What is the process for declaring income in the US for me this year? I still do not technically make any income in the US.

Any tips?

Use Form 2555.

Watch yourself Krikit... that doesn't apply in this case.

CRA and the IRS generally recognize that on the day you received your GC, you ceased to be a tax resident of Canada and became a tax resident of the US. You should use the resident date on your GC as the date you left Canada on your Leaving Canada return. Form 2555 cannot be used to exclude any foreign income once you became a tax resident of the US, but can be used to exclude foreign income that was earned prior to issuance of your GC. You can claim a foreign tax credit against your US taxes for any income earned in Canada after your Green Card was issued using Form 1116.

TO the OP, at this point in time, you would be better off requesting that your employer not withhold any Canadian taxes on your income and instead see if they can treat you as a contractor and you pay estimated tax payments to the IRS for US self-employment taxes if you can. If not, you would most likely be better off informing them of your non-resident status and be taxed at the non-resident rate of 25%. In any case if you continue to work in Canada, you will lose out on the foreign tax credit as Canada taxes a lot higher than the US especially with the currencies almost at par. You can only obtain a credit against the maximum the US would tax you at.

You most likely should have informed your employer of your status as a tax non-resident at the time of you received permanent resident status. If you didn't, you're probably going to be hit with a large tax bill this year as your deductions end with your leaving Canada date. I would suggest looking into your situation and consider informing your employer of your non-resident status and request to be taxed at the non-resident rate of 25%. But that may not be the case depending on your income, but in most cases it is.

In your case, if you are going to continue residing in the US and working in Canada, it is imperative that you consult with a cross-border tax expert who can help you make the right choices to minimize your cross-border tax burden.

Ziggy in regards to your statement "you would most likely be better off informing them of your non-resident status and be taxed at the non-resident rate of 25%"

I thought that this does not apply with employment income? I was reading some tax book to get better informed and I find I am getting more confused ... this stuff really hurts my brain.

I have heard that you can' t use ignorance as an excuse for not filing taxes correctly, but I think those tax lawyers make it complicated on purpose.

Sly

[July09Bride 1]

*bumping this for my own knowledge*

So... lemme see if I get this right. Basically, if my fiance' works for himself (de does website design & development)... and he has clients IN Canada who own their own businesses... he can but should not continue to work for them until he receives his EAD/AoS. Right?? Wow... this is SOOOO confusing.

[Reba 2]

Correct. He cannot legally work in the US, even for a foreign company, until he has EAD.

Unfortunately, the law has not kept up with technology. So while it is technologically possible, it is not legally advisable.

K1 is work authorized, but only if he gets the stamp at POE I think. And only for the 90 days. So the quicker you get married and file AOS/EAD the better.