Hi spyderman,
Unless the US company is paying you in cash and has no intention of
claiming your services as an expense, they will file forms 1042 and
1042-S (using Code 03) with the IRS and send you copies of the 1042-S
to attach to your Canadian income tax form.
Form 1042: Annual Withholding Tax Return for Source Income of Foreign Persons:
http://www.irs.gov/pub/irs-pdf/f1042.pdf
Form 1042-S: Foreign Person?s U.S. Source Income Subject to Withholding:
Box 6, Exemption Code 03: Income is not from U.S. sources:
* "Non-U.S. source income received by a nonresident alien is not
subject to U.S. tax. Use Exemption Code 03 when entering an amount for
information reporting purposes only."
http://www.irs.gov/pub/irs-pdf/f1042s03.pdf
Canada and the United States have a tax treaty and therefore share
information under the agreement.
Instructions for Forms 1042 and 1042S:
"The recipient?s country of residence for tax purposes... is extremely
important in order to reconcile the tax per return for administrative
purposes and to identify the information required to be furnished to a
foreign government under a mutual exchange of information agreement
provided under the treaty."
http://www.irs.gov/pub/irs-92/i1042%23s.pdf
US-Canada Tax Treaty (597) - IRS publication providing guidance on the
application of the tax treaty. PDF format (4 pages).
http://www.irs.ustreas.gov/pub/irs-pdf/p597.pdf
Therefore, you can conclude that it would not be difficult for the two
governments to put two and two together. If you have any questions,
please post a clarification request *before* closing/rating my answer
and I'll be happy to reply.
Thank you,
hummer
Search Strategy:
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Request for Answer Clarification by
spyderman-ga
on
15 Oct 2004 12:18 PDT
Thanks for the clarification. I spoke to the company that is paying me
in the US and they tell me they indtend to issue me a 1099 form..now
I'm really confused. which is more advatagous for tax purposes?
|
Request for Answer Clarification by
spyderman-ga
on
15 Oct 2004 12:21 PDT
Thanks for the clarification. However, I spoke to the US company I am
doing business for and they tell me they are going to file a form
1099. Now I'm really confused....which one is the correct one?
|
Clarification of Answer by
hummer-ga
on
15 Oct 2004 14:05 PDT
Hi again spyderman,
I know income tax can get confusing, especially when dealing with two countries!
1) US source income = services performed in the US.
Therefore, your income is Non-US source.
2) You are a non-resident alien (non US citizen not in the US).
Therefore, the company will have to file forms for non-resident
aliens, non-US source income:
Form 1042: Annual Withholding Tax Return for Source Income of Foreign Persons:
http://www.irs.gov/pub/irs-pdf/f1042.pdf
Form 1042-S: Foreign Person?s U.S. Source Income Subject to Withholding:
Box 6, Exemption Code 03: Income is not from U.S. sources:
* "Non-U.S. source income received by a nonresident alien is not
subject to U.S. tax. Use Exemption Code 03 when entering an amount for
information reporting purposes only."
http://www.irs.gov/pub/irs-pdf/f1042s03.pdf
Please have a look at a similar question I answered, it is from the
employer's point of view. Perhaps it will help to make it a bit
clearer.
http://answers.google.com/answers/threadview?id=317817
If not, or if you need further clarification, please let me know.
There are no limits to the number of clarifications requests you can
post and it is important to me that your question is thoroughly
answered.
Regards,
hummer
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