| I hope the accounting firm explained why there might be a problem and how to fix it. That would be the mark of a trusted advisor. "Oh, you might have cancer! Bye!" The reason for your problem is that a human working in the USA is "doing business". And if the human is a company's employee, then the "doing business" attribute belongs to the employer. This is standard principal-agent theory. There are a couple of ways around this. One is the income tax treaty. It says, interpreted, "you don't have to worry about US tax if you don't have a _permanent establishment_ in the USA". That magic phrase is jargon and means an office or factory etc. a single human wouldn't necessarily be a "permanent establishment". Unfortunately the Canada/USA treaty was amended in 2010 to put companies like yours at risk. (Ask Mr Google about the Fifth Protocol). Now, a single human's presence can be a "permanent establishment" subjecting the employer to income tax. There is a day-count test. Too many days in the USA for that human and the Canadian employer is doing business in the USA. The reverse is true for US employers with Canadian-located employees. So a sane employer will not rely on the treaty. A sane company will spin up a little US corporation, wholly owned by the Canadian corporation. The only thing this US corporation does is hire the US employee and provide the results of that employee's labour (see what I did there?) to the Canadian corporation. The US corporation runs at break-even profitability. It pays no tax but spawns a buttload of tax paperwork on both sides of the border. By "buttload" I mean that I wouldn't be surprised if it adds $10,000 per year to overhead to do this. You can question the sanity of your diplomats and government bots now. The US and Canadian diplomats who negotiated the Fifth Protocol made it more expensive to hire people across the border. I am an international tax lawyer. But right now I am eating a carne asada burrito at Lucky Boy. |