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Do you have any Tax Experts with expertise on the U.S.  – Canadian Tax Treaty (Tax Treaty).    What would be the cost of a phone consultation to resolve these questions?

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I am a citizen and resident of the U.S.A.   I am a self-employed, single person, non-incorporated Business Consultant.   Each year, I consult for numerous companies within the U.S.A., I receive Form 1099-MISC’s (self-employment) for my U.S.A. Consulting Income, and on my U.S. Income Taxes I file a Schedule C for my Consulting Business.

 

In 2007, I did a project for a Canadian Corporation, flying to Toronto each Monday and returning each Friday for a 3 week period, and I performed my consulting in their Corporate Office.   I earned in excess of $10,000, and 15% of my income was withheld for Canadian Income Taxes.   At year end, I received a Form T4A-NR.

 

Per IRS Publication 597 on the Tax Treaty, the Tax Treaty is reciprocal, the same rules applying to both countries.   I called the International Section of the IRS:

-   The IRS considers me to be self-employed (Independent Personal Services)

-   Per Article XIV (Independent Personal Services) of the Tax Treaty, my income from Canada is not taxable in Canada IF a Fixed Base is not regularly available to me within Canada

-   Article V of the Tax Treaty defines a Fixed Base, and I do not have a Fixed Base within Canada

-   The IRS says that I do not owe Canadian Income Tax, and I am entitled to a refund of my withholding.   They also said that if a self-employed Canadian performed 3 weeks of business consulting within the U.S.A., if a Fixed Base did not exist, they would consider the income non-taxable in the U.S.A.

 

I called the Canada Revenue Agency (CRA) International Tax Office:

-    Since 15% of my pay was withheld for Canadian Income Tax, the CRA considers the income to be Dependent Personal Services NOT Independent Personal Services.   The CRA does NOT consider me to be self-employed.

-   The CRA says Article XV (Dependent Personal Services), not Article XIV (Independent Personal Services) applies to me, and the income is taxable within Canada, regardless of the status of a Fixed Base.

 

Since the same rules are supposed to apply to both countries:

-   Am I self-employed?

-   Does Article XIV (Independent Personal Services) or Article XV (Dependent Personal Services) of the Tax Treaty apply to me?

-   Is the income taxable within Canada OR am I entitled to a refund of the 15% withholding.

 

IF the income IS NOT taxable within Canada, what documentation do I need to submit to support deducting all my Canadian income on Line 256 of the Canadian Income Tax return, to receive a refund of my 15% withholding?

 

IF the income IS taxable within Canada:

-   Do I use a Non-Resident Tax Package, or since all of the income was earned in Ontario, do I use an Ontario Tax Package?

-   The CRA says since I performed Dependent Personal Services, I should report the income on Line 101.   Since I consider myself to be self-employed, I would like to report the income on Lines 164 and 137, and deduct a prorated share (based on income) of my business overhead (cell phone, Internet service provider, business insurance, laptop computer depreciation, etc.).   Is there a way to deduct a prorated portion of my business overhead on my Canadian Income Tax?

-   I put 10% of my income into a SEP-IRA in the U.S.A.   I don’t see a way to deduct 10% of my Canadian income from my Canadian Income Taxes, for my contribution to my U.S. SEP-IRA contribution.

-   Since all the work was performed in Ontario, am I required to pay Ontario Income Taxes?