Confusing situation with TN status to green card

[alundy 0]

Hello,

This forum is a lifesaver, and I'm hoping some knowledgeable members can guide me in the right direction.

I feel like I have a somewhat unique or weird situation so I'll explain it and get to my questions.

I am a Canadian citizen, Ontario resident. I worked for a Canadian company out of London, ON. A couple years ago they asked me to take a position in Michigan and I obtained TN status. I commute on a weekly basis back and forth from MI to ON (Ontario on weekends). Upon taking TN status and starting the work in Michigan, they transfered my employment to an American subsidiary which I believe is sort of a "front" company for Canadian workers who are temporarily employed in the States. However my paycheck and administrative stuff is still handled by someone in Canada, although the paycheck technically comes from the American subsidiary.

My paycheck currenly deducts Canadian taxes, CPP, Canadian EI, etc. No U.S. deductions.

At tax time, I file in the U.S. as an alien non-resident, with Canada winning the tiebreaker rule for residency.

However I am marrying my USC fiance in December, and will be applying for a green card. My employment afterwards will remain the same.

My questions are:

1. Once I am a U.S. resident, will my company be required to make U.S. deductions from my pay (Social Security instead of CPP, etc)? I guess I just find the situation strange, I don't think my company will ever have encountered someone "switching sides" and I'm not sure that they'll have a clue what to do.

2. I guess I would then be on the hook to provide my own U.S. health insurance (through my husband's coverage) since I will no longer be covered under OHIP?

Thanks in advance for your help!

Ashley

[Alex B 9]

Hello,

This forum is a lifesaver, and I'm hoping some knowledgeable members can guide me in the right direction.

I feel like I have a somewhat unique or weird situation so I'll explain it and get to my questions.

I am a Canadian citizen, Ontario resident. I worked for a Canadian company out of London, ON. A couple years ago they asked me to take a position in Michigan and I obtained TN status. I commute on a weekly basis back and forth from MI to ON (Ontario on weekends). Upon taking TN status and starting the work in Michigan, they transfered my employment to an American subsidiary which I believe is sort of a "front" company for Canadian workers who are temporarily employed in the States. However my paycheck and administrative stuff is still handled by someone in Canada, although the paycheck technically comes from the American subsidiary.

My paycheck currenly deducts Canadian taxes, CPP, Canadian EI, etc. No U.S. deductions.

At tax time, I file in the U.S. as an alien non-resident, with Canada winning the tiebreaker rule for residency.

However I am marrying my USC fiance in December, and will be applying for a green card. My employment afterwards will remain the same.

My questions are:

1. Once I am a U.S. resident, will my company be required to make U.S. deductions from my pay (Social Security instead of CPP, etc)? I guess I just find the situation strange, I don't think my company will ever have encountered someone "switching sides" and I'm not sure that they'll have a clue what to do.

2. I guess I would then be on the hook to provide my own U.S. health insurance (through my husband's coverage) since I will no longer be covered under OHIP?

Thanks in advance for your help!

Ashley

I've just gone the other way. I'm USC and claimed the tie-breaker rule so I wouldn't be considered as having ties to Canada.

I didn't think the tax treaty works in the way your employer thinks. (Warning - I have zero experience with TN stuff though!) I thought that, regardless of your treaty/residency status, each country "owned" the revenue obtained within that country. Where the treaty comes in, along with your non-resident status, is that the US won't tax you on Canadian source income. Normally with a USC you have to pay on your world wide income.

Once you get your GC the tax treaty is of no use to you. You must file US taxes as a resident (kind of paying Uncle Sam back for allowing you to live here) and the tax treaty can't protect you from anything Canada wants to do because on of the first clauses in the treaty is that it won't affect a country's rights over their citizens.

Once you switch sides you should become a non-resident in Canada (from what my CPA has said so far), which I think is similar to my situation with the UK, so no tax is paid. Then you pay US taxes as a US resident. If you have any Canadian source income (maybe a rental house, dividends etc.) you would file a non-resident return in Canada to pay what's due on that amount. You would then file both Canadian and US source on your US return but claim an exemption for foreign taxes paid.

I think it may be easiest for your company to just start classifying you as a US resident. Mind you, it's complex which is why I went running for a CPA this year. There are a number of firms who specialize in cross-border issues. I used agtax.ca who are out of the Vancouver area but seemed pretty knowledgeable and fairly priced. Also neither CRA nor IRS have come calling. And so far dealing with the two groups, the CRA make the IRS seem like a bunch of kind well meaning people!

Good luck!

Edited August 9, 2011 by Alex B