There’s a lot of fragmented information about how to file your taxes as a Canadian working in the US. While most blog posts and reddit threads answer one-off questions about specific scenarios, we’ve struggled to find information on many of the questions answered below during our first few years of filing taxes as TN visa holders.
We’ve created a complete guide to help you through tax season as a Canadian working in the US on a TN visa. Hope this answers some of your questions and happy filing!
Related:Â Financial Checklist for Canadians Moving to the United States
Disclaimer: The content on this website represents the views of the authors and does not represent professional advice. Please use the information at your own discretion.
TN Visa Taxes: An Overview
Okay here’s the game plan. Taxes in the US are due April 15, 2024 and taxes in Canada are due April 30, 2024. In this article we’ll help you determine which taxes you need to pay and how you should pay them. Let’s dive in.
Paying Taxes as a TN Visa Holder
How to Determine Your Tax Residency and Which Returns to File
Knowing what to do with taxes starts with figuring out your tax residency so you can file the correct tax forms. Your tax residency is often determined by the number of days you’ve spent in a country. In most cases, you are considered a tax resident of the country you spent the majority of the year in. For example, if you spent 8 months in Canada and 4 months in the U.S. throughout 2023, you would likely be considered a tax resident of Canada and a non-resident of the US.
As a Canadian, there are rare scenarios where you are considered a tax resident of Canada despite spending the majority of your days in the US such as being a government employee or have significant residential ties. Most TN holders can simply determine their residency by whether they’ve spent at least 183 days in Canada.
On the US side, this 183 day rule-of-thumb has a proper name called the Substantial Presence Test. It’s actually a little bit more convoluted than 183 days in a calendar year but as a rule-of-thumb just ask yourself “did I spend most of the tax year in the US?”.
To meet this test, you must be physically present in the United States (U.S.) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
Source: IRS
Which Taxes do TN Visa Holders Pay in the U.S.?
All income earned in the US is subject to US tax whether you are filing as a tax resident or non-resident. The main difference is that non-residents will file the non-resident tax form (Form 1040-NR) while residents file the resident tax form (Form 1040).
US tax non-residents usually only have to report and pay taxes on income earned in the US or are connected to a US source. Non-residents don’t have access to many standard deductions and refunds.
US tax residents must report all income including income from other countries. One benefit tax residents enjoy is being able to claim standard deductions and refunds. For example, many Canadians who resided in the US during the pandemic also received stimulus cheques from the government.
How to File Foreign Asset Reporting in the US
One thing that not all TN visa tax guides talk about is foreign asset reporting. If you have more than $10,000 in foreign bank accounts (i.e. in Canada or a non-US country) then you must file the FBAR. Filing can be done online on this FBAR filer page. For those who are lucky (or unlucky) enough to have over $50,000 in foreign assets, there’s an additional IRS form to file. You can learn more about Form 8938 on the IRS website.
How do I File US Taxes in the US?
For US tax non-residents, one inconvenience about filing these American 1040-NR forms is that non-resident forms typically require you to mail out a hardcopy to the IRS because online tax filing software does not support non-residents. If you end up mailing your forms, we recommend choosing USPS certified mail to ensure you have proof that you mailed out the forms in time. You can ask for this mailing option at your local USPS office.
US tax residents can enjoy the use of tax filing programs online. Many of these online tax filing solutions are easier to reason with than filling out a government tax form and free of charge such as CreditKarma Tax. Filing online means skipping a trip to the post office and getting tax refunds back into your bank account sooner.
Which Taxes do TN Visa Holders Pay in Canada?
Similar to the US, all income earned in Canada is subject to Canadian tax whether you are filing as a tax resident or non-resident. If you were working in Canada for part of the year, then all the income you earned in Canada is subject to taxes by the CRA. Again, there are two separate forms for non-residents (Form 5013) and residents (T1 Income Tax Package).
Canada tax non-residents only have to report Canadian income such as passive income or investment income. If you have no income in Canada, you can actually skip filing your taxes as a non-resident.
Canada tax residents must report all income earned regardless of where the income was earned. Tax residents can benefit from Canadian deductions, refunds, and credits.
?Tax Tip: Even if you have no Canadian income to report to the CRA, you may want to keep filing every year to carry forward unused tax credits such as the tuition credit accrued from paying tuition in Canada. This can be used to offset taxable income in Canada if you start earning a Canadian income in the future.
How do I File Canadian Taxes in the US?
Non-resident CRA forms need to be mailed in. Since USPS certified mail is only domestic, you may want to consider using a trusted courier service such as UPS or FedEx to ensure the timely delivery of your tax forms.
Resident CRA forms can be filed electronically using free tax software. The Canadian Revenue Agency has a helpful page listing some good tax filing options. Personally I recommend using WealthSimple Tax.
TN Visa Taxes: Wrapping Up
At this point you should know enough to file confidently in both the United States and Canada for most TN visa tax scenarios. There may be some more intricate tax scenarios which may require advice from a cross-border professional. If you have any questions about that feel free to leave your information in the form below and we’ll be in touch to see how we can help.