Justification for forbidding foreign freelance work while on non-immigrant work visa?

[yellownoodle 0]

Hello, I'm posting this because I've been having a hard time finding justification for this particular scenario I'm interested in...

 

I am a Canadian entering the US to start a full time job for the next few years on TN status. I have a few clients in Canada that are interested in having me do some small projects for them (I'm a graphic designer/illustrator) that I could easily manage on weekends/in my down time.

In my search for finding out how to make this permissible, I keep finding that this is NOT permitted and in fact a violation of the TN visa conditions.

I understand that answer, but I don't understand it's justification.

 

I was hoping someone could explain to me why this is an issue.

Why does the US care if I work for a non-competing company/business in a foreign country and put those earnings into a Canadian account?

What if I didn't want to use any of this money while I was staying in the US?

Why is doing this freelance work suddenly permitted if I physically was in Canada? Could I not do the work in the US, visit Canada for a weekend, and file an invoice while I'm out of the country? How would they know? How does any of this work?

I'm really confused on how this is monitored, why the sudden physical act of doing work on US soil is a violation, and how to legally and lawfully make this work...

I understand additional TN visas can be applied for to be an independent contractor with US employers, but why does this matter if it's Canadian or foreign?

What business does the US have in any of this?

Sorry for the ranty/multiple questions... just don't really get the reasoning.

I could always give up the freelancing, or just do it in lieu of payment, since I'm really just interested in maintaining a creative portfolio with great clients while I'm in the US, but I'm curious anyhow..

 

Thanks!

 

 

 

 

 

Edited April 1, 2018 by yellownoodle

[Boiler 45,525]

Why does the US need to justify?

 

PS have you considered the rax issues?

[yellownoodle 0]

Maybe it's entitled for me to assume justification, but I just don't understand why and how the US would bar me from working for non-Americans.

 

I'm unaware of any tax issues as of yet. If I have to file taxes in two countries, could I do that?

Must I claim that money to the US? Why? What if I don't?

[geowrian 22,337]

A TN visa requires employment only by the sponsoring company. It does not permit work for any other employer while inside the US. I would suspect the reason is to prevent having a company sponsor a TN position only to have the applicant use it to enter the country and work for somebody else (presumably their original intent). Working for a foreign employer was probably not the intent of it, but that's the rule.

 

18 minutes ago, yellownoodle said:

Why does the US care if I work for a non-competing company/business in a foreign country and put those earnings into a Canadian account?

What if I didn't want to use any of this money while I was staying in the US?

Why is doing this freelance work suddenly permitted if I physically was in Canada? Could I not do the work in the US, visit Canada for a weekend, and file an invoice while I'm out of the country? How would they know? How does any of this work?

1. They probably don't want to be in the business of looking too in-depth at the cases (i.e. competing companies). You work at the authorization and convenience of the US as an alien on a work visa.
2. Makes no difference.
3. Because the US has no say on what you do or who you work for while abroad.
   1. How they would know is irrelevant. You would need to report the income on your taxes anyway.

11 minutes ago, yellownoodle said:

I'm unaware of any tax issues as of yet. If I have to file taxes in two countries, could I do that?

Must I claim that money to the US? Why? What if I don't?

You have to follow Canadian tax laws and US tax laws. I don't know the Canadian tax system so I don't know what the requirements to file are there, but that's independent of the requirements to file US taxes.

You would need to at least report the foreign income to the US. If you intentionally don't report something for which you must report, that's technically tax evasion...a felony with serious jail-time. In practicality, if it results in a tax liability then they will assess a penalty upon learning of it. The Foreign Tax Credit likely will wipe away or severely reduce the tax liability.

[yellownoodle 0]

7 minutes ago, geowrian said:

You would need to at least report the foreign income to the US. If you intentionally don't report something for which you must report, that's technically tax evasion...a felony with serious jail-time. In practicality, if it results in a tax liability then they will assess a penalty upon learning of it. The Foreign Tax Credit likely will wipe away or severely reduce the tax liability.

But...why? Why does the US need to know about this income if it's not being done on US soil, it's not in a US bank, and I'm not using it in the US at all? Just because I'm present in the States during the time of my visa?

 

There's probably a Tax 101 thing I'm missing here, I just don't understand why this would matter to the US at all.

[SusieQQQ 11,586]

Just interested to know what practical difference knowing the justification would make in your life?

im sure there is something that sparked that law...maybe something you don’t agree with or something you do... I just don’t see what difference it makes knowing?

 

If you are here on a TN visa you are a US tax resident so you need to report all income on your irs returns including that from abroad. As to why ... because that’s how the irs does it, in fact I believe that’s how most countries do it. When I lived elsewhere I also had to report all income earned even if earned offshore from offshore sources and it was taxable (again as usually happens if there’s a tax treaty you’re not doubly taxed). I believe part of the justification arises from anti-money laundering initiatives and obviously part of it is to work against tax evasion.

 

 

53 minutes ago, yellownoodle said:

But...why? Why does the US need to know about this income if it's not being done on US soil, it's not in a US bank, and I'm not using it in the US at all? Just because I'm present in the States during the time of my visa?

 

 

 

Yes.

 

honestly, if you don’t like the irs rules no-one is forcing you to move here...

 

 

Edited April 2, 2018 by SusieQQQ

[janet3 1,170]

1 hour ago, yellownoodle said:

But...why? Why does the US need to know about this income if it's not being done on US soil, it's not in a US bank, and I'm not using it in the US at all? Just because I'm present in the States during the time of my visa?

 

There's probably a Tax 101 thing I'm missing here, I just don't understand why this would matter to the US at all.

Because of you....your body is on US soil. It is what is required of people residing in the US....if you make money  (no matter how.....even if illegally...like drug dealing or illegal gambling) you claim it. It is the price you pay for being on US soil. 

 

Just read @SusieQQQ response.....Susieqqq is absolutely correct. 

Edited April 2, 2018 by janet3

[geowrian 22,337]

1 hour ago, yellownoodle said:

But...why? Why does the US need to know about this income if it's not being done on US soil, it's not in a US bank, and I'm not using it in the US at all? Just because I'm present in the States during the time of my visa?

 

There's probably a Tax 101 thing I'm missing here, I just don't understand why this would matter to the US at all.

If you have a tax home in the US (you do/will), then you must report worldwide income.

 

As an aside, permanent residents and US citizens are always taxed on worldwide income, even if they live completely abroad and never set foot in the US that year.

Edited April 2, 2018 by geowrian

[yellownoodle 0]

Thanks everyone! Seems like it's a case of standard practice, even outside of the US (double checked this with a visa opportunity I had for Sweden, and thought to compare with Swedish laws and they are similar).

 

@SusieQQQthanks for the response. I was seeking justification because I would imagine these laws and regulations would be written with intention and to impede certain infractions or unfairness, and was curious what those might be. Knowing it certainly doesn't change anything, but at least it can satisfy wondering why we have it in the first place... but even "it is what it is" can certainly be the case!

 

[SusieQQQ 11,586]

IRS’s main objective seems to be to curtail tax evasion.

 

https://www.irs.gov/businesses/income-from-abroad-is-taxable

 

[Jorge V 195]

19 hours ago, yellownoodle said:

But...why? Why does the US need to know about this income if it's not being done on US soil, it's not in a US bank, and I'm not using it in the US at all? Just because I'm present in the States during the time of my visa?

I think this has mostly been address but just want to add a bit more color. When it comes to income and taxes, the US considers that the income is earned wherever the work is performed. So you may be doing business with Canadian entities and dealing with Canadian currency, but as the work is being performed on US soil, the US considers the proceeds to be US income.

 

This works in the opposite direction as well. If a US citizen living abroad works remotely for a US company, the income is considered to be foreign earned and can be excluded (up to $102k/year at least) from your taxes under the Foreign Earned Income Exclusion. It doesn't matter that you're paid in dollars into a US bank account. In the IRS' eyes, theres no difference between a US citizen living in France working for a French company earning euros and another USC living in France working remotely for a US company earning dollars. The work is being performed in France and the income is considered to have been earned in France.

 

Not all countries work this way, though. Mexico actually has a complementary view on things: If you are a non Mexican Citizen residing in Mexico and working remotely for a company that does not have a presence in Mexico, then SAT (Mexico's IRS) will consider your income to be foreign earned and will levy no taxes on it.

 

I was in the above scenario for several years before moving back to the US. I worked remotely for a US employer that has no international presence, but was a resident of Mexico. Both my country of citizenship (US) and my country of residency (Mexico) considered my income to be foreign earned, leaving me in a sort of limbo. It didn't cause any problems and actually had the advantage of giving me a tax break, but it's a limbo nonetheless. Many people take advantage of such scenarios to lower their tax burden.

 

So you can see how this can be applied to you. You may not be working with US entities or currency, but the US has decided to look at where the work was performed to determine whether or not it is foreign earned. There's really no justification for it other than it was decided to be like this one day. Whether planned or not, this decision extends to scenarios such as yours.

Edited April 2, 2018 by Jorge V

[CEE53147 559]

Don't even think about lying to the IRS.  If you think the USCIS is hard on fraud, you will be in a world of hurt getting on the wrong side of the IRS.

[iwir 337]

Piggybacking OP question. Can we declare our income offshore to IRS which is subject to tax on host country? Do we have to pay tax to IRS too for that income? Cause if we do, then it's double taxation.

[geowrian 22,337]

2 hours ago, iwir said:

Piggybacking OP question. Can we declare our income offshore to IRS which is subject to tax on host country? Do we have to pay tax to IRS too for that income? Cause if we do, then it's double taxation.

Declared? Yes. But that's where for Foreign Tax Credit usually comes into play. If you pay more taxes abroad on that income than in the US, then that should wipe out the tax liability on that foreign income completely. If the foreign taxes are less than the US taxes, then you would effectively pay the difference.