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Thread: Tips on switching from employee to contractor?

  1. #61
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    Quote Originally Posted by ExtraSlow View Post
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    NOw keep in mind I have never had a successful corp or sole prop.
    But, it's my understanding that it can be helpful in the following situation:
    - You earn a high amount for part of the year, and have seasonal layoffs or slow periods - in "normal" years that averages out
    - If you have a special busy year and don't have a slow time for one year, your company earnings will be abnormally high.
    - In a sole prop, your personal earnings will be identical. In a corp, you can choose to "smooth out" your personal earnings over periods where you may have low or no earnings.

    I know a drilling consultant who does this, helps with personal financial planning, and has covered his ass during the oilpatch downturns.

    Does that make sense?
    if you are a psb, they effectively tax you so that your earnings are personal, so whether you keep it corporate or not doesn't help the tax status.

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    Quote Originally Posted by rage2 View Post
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    She does marketing. She’s basically a remote employee year round. The company she works for has zero Canadian presence hence the contract route (that’s what everyone else outside us does). Shouldn’t have any liability issues.

    If she can get away with sole proprietorship that’s the best path. I doubt the tax advantages are there. I was more curious if US somehow wants a slice of the pie here.
    The US will take a slice by default if she doesn't fill out the form that exempts her from withholding tax. And that's a relatively straight forward process once the incorporate-or-not situation is decide.

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    Just have to make sure the employer fills out the relevant forms otherwise good chance US will apply withholding tax. Good luck getting that back ever.

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    Quote Originally Posted by kertejud2 View Post
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    The US will take a slice by default if she doesn't fill out the form that exempts her from withholding tax. And that's a relatively straight forward process once the incorporate-or-not situation is decide.
    But US company isn’t employing her. To them she’s a foreign contractor.
    Originally posted by SEANBANERJEE
    I have gone above and beyond what I should rightfully have to do to protect my good name

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    Quote Originally Posted by rage2 View Post
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    But US company isn’t employing her. To them she’s a foreign contractor.
    Doesn't matter. By default, they will demand the withholding tax.

    Ask me how I know.

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    Quote Originally Posted by Buster View Post
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    if you are a psb, they effectively tax you so that your earnings are personal, so whether you keep it corporate or not doesn't help the tax status.
    yes. I agree with that.

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    Quote Originally Posted by rage2 View Post
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    But US company isn’t employing her. To them she’s a foreign contractor.
    Indeed, if she is an employee, there will certainly be source withholdings. If she's a foreign contractor, whether or not a W-8BEN form needs to be completed really depends on how the US employer/client is handling things on their end. I've seen more instances where the US party did withhold than not, but there are many instances where the US party sees the Canadian service provider as a vendor to whom withholding taxes won't apply.

    If taxes are withheld at source, it's a fairly straightforward process to avoid the scenario of double-taxation... Personal tax filings will need to be made on both sides of the border, and through foreign tax credits, the net result will be paying tax in the higher of the two jurisdictions (typically Alberta, but California is an example of the converse). In such a situation, the taxpayer would be "pre-paying" the tax to both authorities and then be getting a refund from some blend of one or both of them.

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    Yeah it seems completely random. Once in a while we'll get a notice from the IRS asking us to pay withholding tax for income from a US client.

    Despite us filling out the proper forms, they'll be like "we can't find them". No fuckface, that's on you.

    They're so fucking disorganized down there.

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    Quote Originally Posted by rage2 View Post
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    She does marketing. She’s basically a remote employee year round. The company she works for has zero Canadian presence hence the contract route (that’s what everyone else outside us does). Shouldn’t have any liability issues.

    If she can get away with sole proprietorship that’s the best path. I doubt the tax advantages are there. I was more curious if US somehow wants a slice of the pie here.
    So on what basis is she immigrating to Canada?
    ...

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    Quote Originally Posted by Maxx Mazda View Post
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    So on what basis is she immigrating to Canada?
    She's sworn to vote Liberal.

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    Quote Originally Posted by Maxx Mazda View Post
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    So on what basis is she immigrating to Canada?
    Her husband works for us. They’re relocating to Calgary.
    Originally posted by SEANBANERJEE
    I have gone above and beyond what I should rightfully have to do to protect my good name

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    Quote Originally Posted by statick View Post
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    Indeed, if she is an employee, there will certainly be source withholdings. If she's a foreign contractor, whether or not a W-8BEN form needs to be completed really depends on how the US employer/client is handling things on their end. I've seen more instances where the US party did withhold than not, but there are many instances where the US party sees the Canadian service provider as a vendor to whom withholding taxes won't apply.

    If taxes are withheld at source, it's a fairly straightforward process to avoid the scenario of double-taxation... Personal tax filings will need to be made on both sides of the border, and through foreign tax credits, the net result will be paying tax in the higher of the two jurisdictions (typically Alberta, but California is an example of the converse). In such a situation, the taxpayer would be "pre-paying" the tax to both authorities and then be getting a refund from some blend of one or both of them.
    Listen to this man.
    Originally posted by arian_ma
    your stomach is full of sulfuric acid

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