Due to its proximity with one another, people often commute to Canada or to the U.S. to work or they may temporary work in one country for a short period of time. The US-Canada Income Tax Treaty, signed in 1980, was established in order to eliminate double taxation and to ensure that people are not cheating on their taxes. If you are a resident of Canada and not also a U.S. citizen who is working in the United States, then the treaty allows you to be exempt from U.S. taxation on employment income that is earned in the United States. Your income must either not exceed $10,000 (U.S. dollars) or you must be in the United States for less than 183 days and your wages cannot be paid by a person who is a resident in the U.S. and is not borne by a permanent establishment in the U.S. If you do not meet the criteria, then you will have to pay U.S. federal and possibly state and local taxes on your U.S. earned income, and you will have to report this on your Canadian tax return. However, in order to avoid double taxation, you may be allowed to claim a foreign tax credit on your Canadian tax return for any taxes paid to the U.S. federal government.
To ensure that you file your taxes properly in order to avoid double taxation under the US-Canada Income Tax Treat, call Boyer Law Firm today.