Consulting Cross Border – Canada to USA
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Trade NAFTA (North American Free Trade Agreement), written into law many years ago, allows professional consultants to work in each others countries (Canada, USA and Mexico) with minimal cross border paperwork to be completed. For Canadians, if you have the correct documentation along with $50.00 US with you as you reach a USA border crossing; you will be passed right through. Note: Be sure to have the exact amount with you – border officials do not give change.
When you cross, you will receive a “TN” card that you need to carry with you in your passport while abroad. This is a repeat entry card good for up to one year for the client you are contracted to so if a Canadian border official tries to take it from you on your return, be sure to tell him this is a re-entry situation and you will be going back down to consult to the same client again. They have to then give the card back to you. If you let them have it, you will have to get approved all over again on your next trip south. Note: Even with this card in hand, you will need to return to Canada at least once every six months – even if only for a weekend.
Note that your family can come with you to the USA but they are not allowed to seek employment there. They cross as normal tourists and need no paperwork to cross if they are Canadian citizens. There are also a few banking considerations you need to be aware of. For example:
Ø A US dollar cheque from a Canadian bank account often is not cashable when presented in a US bank for payment (Issues with ACH clearing transactions) – vice versa usually an issue as well. Clearing a foreign cheque is at the discretion of the bank involved and it is a headache for them to process the transaction so they will often just not do it.
Ø If they do process it, be aware that they could put a hold on the cheque for a considerable amount of time – could take as long as 30 days before you get access to those funds.
Ø Under Trade NAFTA as a consultant, you can get a “limited – TN” U.S. social security card and number that will allow you to open a US bank account. Therefore, if you are a Canadian receiving US checks from American clients, you can accept these cheques and can deposit them in a US Bank Account you have set up for this purpose.
Ø Lastly, a few Canadian banks do have agreements in place with certain banks in the USA so you can clear cheques cross border – you will need to research this on a bank by bank basis.
Some Tax Information Relating to Getting Paid in the USA
Ø Under a B2B contract, a USA employer may request that you as the contractor have a USA issued corporation E.I.N. number and a USA Bank account set up. Under this structure, you might have to find a US consulting corporation to go through to work for this client, and they may require a percentage of your rate in order to handle the processing and billing work around your project. Be careful to ensure that your “TN” status stays clean through whatever structure you ultimately set up. It has to be clear to the immigration officials who your client is, that you are coming from Canada to consult to that US based client and that you, the Canadian will be getting paid by that client. This may mean in certain circumstances that your client becomes the go between consulting organization.
Ø Under a B2-Consultant, “TN” contract, if the client company agrees to retain you under a “TN” status contract, you will need to complete a 1040NR and an 8840 form. Then you just get a W-2 from the client for the work performed in the US that year and that makes filing your tax forms very easy in Canada. You will convert the amount received into Canadian dollars and then you claim a foreign tax credit in your Canadian return using the appropriate schedules to the T1.
In closing, cross border consulting can be very lucrative for Canadians, especially with favorable currency conversion rates in effect such as they now are. You will most likely require at a minimum a college level degree in place and a minimum of around 5 years of consulting experience in your area of expertise to be allowed across the border to consult under the Trade NAFTA agreement terms. To get your “TN” card, you will require a letter from your client in the other country requesting your assistance as part of your package.
Be sure to specifically mention your expertise as one of the categories found in Appendix 1602.D.1 of the NAFTA agreement. I once listed my trade as “Computer Systems Architect” instead of “Computer Systems Analyst” and got turned back at the border crossing. Use their exact terminology!
You will find that there is paperwork to deal with, but it is not insurmountable – just a little complicated. By the way, there is some new legislation relating to “TN” related accounting currently being contemplated in the USA – so do keep watching the news on this – as the full effects of this are still to be understood.
Best of luck with your cross border consulting plans.