Do I Need to Pay US Taxes on Income Earned in Canada

How to Report US Income on Your Tax Return As a Canadian freelancer or business owner in Canada, you are required to report any and all income you earn throughout the year to the Canada Revenue Agency (CRA), regardless of the source. This means that you must report all income you earn, whether through contracts or full-time employment, to the CRA on your income taxes. Do not forget! When submitting your T1, you must indicate the amount in Canadian dollars.   If you work for a US company, you will receive a W-2 form at the end of the year that shows all of your earned income in USD for tax purposes.  As a Canadian, you must convert these amounts to CAD from USD before reporting them to the CRA. When filing.

Have you received varying amounts of US revenue this year Not an issue

You can use this list of annual average exchange rates to convert different amounts paid during the year. Sometimes the W-2 form you receive from your US employer contains information about deductions such as US taxes, benefits, or retirement plans. If this is the case, provide this information on line 207 of your CRA tax return, as you may be allowed to deduct these contributions through the Federal Foreign Tax Credit. If my US employer did not send me a W-2 form, do I still have to record my international income Yes, you must disclose all income to the CRA. Whether or not your employer sends you a W-2, you still have obligations to complete. You must always report and pay taxes on any income you earn. If your employer fails to send you information or record any revenue, you should take steps to shield yourself from any liabilities. You may be tempted to not report your foreign income to the CRA. Still, if they discover that you neglected to disclose any amount of income on your taxes, you will be required to pay not only back taxes, but also a penalty! To put these penalties into perspective, in Canada, the minimum penalty for failing to declare income is CAD 100.00. Any income over $100 earned but not reported to the CRA may result in you paying 50% of the missed tax due to your false statement or omission. 

Furthermore if you repeatedly fail to declare revenue generated to the CRA you may face

Federal and provincial penalties. It's better to keep on the straight track and declare all revenue correctly. We promise you'll sleep better at night! Are you an employer seeking to ensure compliance when recruiting from abroad Use our advice to keep compliant with tax and labor rules. Start by being straightforward. Knowing your status with the organization hiring or contracting you before you begin work will help you avoid future complications. For example, if you commute to work for a company in the United States, or if your company provides you with benefits and work equipment, as well as regulates specific areas of your day-to-day activities, you are most likely a full-time employee and cannot be classified as self-employed. Need more information? In this informative blog from Knit Payroll, we go deeply into the classification of employee/employer relationships. US corporations must automatically withhold tax on all payments given to their employees, which means that as a Canadian employee, freelancer, or contractor, you may be taxed twice: in Canada and in the United States. Here's where the W-8BEN form comes in. Canadians who work for US employers should complete this form to prevent double taxation by the CRA and the IRS. Did you know.

According to these laws, as a non-resident Canadian citizen you will only be liable

To pay taxes on income received from Canadian sources.  An example of this would be if you work for a US corporation but own a rental property in your home province. In this situation, you will only have to pay Canadian income tax on the rental income you received throughout the year. If all of your income comes from sources outside of Canada and you have no income earned in Canada, you are not required to file a Canadian tax return. your T1 return, be sure to include all foreign income on line 104. We recommend utilizing an accredited bank exchange rate, such as the Bank of Canada. Exchange rates fluctuate and alter throughout the day, but choosing a recognized institution can help you feel confident about the sums you report.  that if you live and work outside of Canada for more than 183 days a year, the CRA classifies you as a non-resident of Canada for tax purposes.