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Old 12-10-2014, 11:13 AM
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US Contractor working in Canada

I am a US citizen who this year (2014) was hired by a US company [to keep things straight, let's call this "Company A"] as an independent contractor. I want to emphasize that I am not an employee of "Company" and I identified myself as a "1099 contractor" (although I don't remember completing an IRS W9 form from them).

"Company A" contracted me out to an Indian company (which we can call "Company B" and which does have a subsidiary in the United States) who then contracted me out to a Canadian company ["Company C"]. In fact, the only reason I took the contract with "Company A" is because of a particular project with the Canadian firm (Company "C") and most of my time working on the project I am in Canada.

I submit time sheets to both "Company B" and "Company C" in order to track my time on the project with "Company C" but I am paid by "Company A" (the US firm) in US$ based on monthly invoices I send them for my work. "Company A" does not take out any taxes in their payments to me. Moreover, I pay all of my expenses related to this engagement, such as flights to and from Canada, hotel stays in Canada, meals, etc.

My question is, how should I report my "income" from "Company A" on my tax returns?

My assumption is that it will be "regular" 1099-MISC income with my related expenses deducted but since my primary working location is in Canada (and with a Canadian firm), if this will further complicate matters.

But again, is this correct and, if not, how should I report my income and related expenses?

Or better yet, if I have several legal reporting options, which one is the most advantageous for me?



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Old 12-10-2014, 03:18 PM
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I am a US citizen who this year (2014) was hired by a US company [to keep things straight, let's call this "Company A"] as an independent contractor. I want to emphasize that I am not an employee of "Company" and I identified myself as a "1099 contractor" (although I don't remember completing an IRS W9 form from them).=>>correct as an IC, you need to submit your ER form W9; the company wants to get your SSN and is requesting you send it in via the IRS form W-9, where you sign under penalty of perjury that this is your SSN

"Company A" contracted me out to an Indian company (which we can call "Company B" and which does have a subsidiary in the United States) who then contracted me out to a Canadian company ["Company C"]. In fact, the only reason I took the contract with "Company A" is because of a particular project with the Canadian firm (Company "C") and most of my time working on the project I am in Canada.

I submit time sheets to both "Company B" and "Company C" in order to track my time on the project with "Company C" but I am paid by "Company A" (the US firm) in US$ based on monthly invoices I send them for my work. "Company A" does not take out any taxes in their payments to me. Moreover, I pay all of my expenses related to this engagement, such as flights to and from Canada, hotel stays in Canada, meals, etc.

My question is, how should I report my "income" from "Company A" on my tax returns?=>>As a US citizen or resident, you must report your US source and world wide income that you earn; as a 1099 worker, the company never takes out any taxes in their payments to you.AS you are filing as a sole proprietor and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1k or more when you file your return;however, You do not have to pay estimated tax for the current year if you had no tax liability for the prior year;you were a U.S. citizen or resident for the whole year;your prior tax year covered a 12 month period.aslongas the amount on your Sch C line 29/31 is $400 or exceeds $400 then you must file Sch C and pay self employment tax on Sch SE however, you can deduct 50% of the seca tax on your 1040.


My assumption is that it will be "regular" 1099-MISC income with my related expenses deducted but since my primary working location is in Canada (and with a Canadian firm), if this will further complicate matters.=>>as you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the US or abroad.i mean if you must pay taxes to Canadian taxing authority(ies) on your 1099 income that you earn in Canada then you may claim foreign tax credit(or deduction on Sch A of 1040) on your US return.. also, US has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. These agreements are commonly referred to as Totalization Agreements. Under these agreements, dual coverage and dual contributions ,taxes, for the same work are eliminated. The agreements generally make sure that social security taxes including self-employment tax are paid only to one country.
If your self-employment earnings should be exempt from foreign social security tax and subject only to U.S. self-employment tax, you should request a certificate of coverage from the U.S. Social Security Administration, Office of International Programs. The certificate will establish your exemption from the foreign social security tax. For more info, please contact the Social Security Administration.


But again, is this correct and, if not, how should I report my income and related expenses?====>>>>>> you may deduct/claim foreign taxes paid on your income to Canada on your US return.

Or better yet, if I have several legal reporting options, which one is the most advantageous for me?=>>>As mentioned previously, you may file form 1116 to deduct your foreign tax on line 47 of 1040 or you can claim it as deduction on Sch A of 1040 line 8 whichever is larger; however, you must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U.S. income under the foreign earned income exclusion or the foreign housing exclusion if you are subject to either foreign earned income exclusion or the foreign housing exclusion.



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