Who this is for
- US and Canadian businesses considering a bookkeeper who lives and works in another country
- Owners who found a bookkeeper through a freelance marketplace and want to check the arrangement before sharing bank or accounting access
Not covered here
- Immigration, labour-law or employment-standards rules of the bookkeeper's own country
- Forms and filing steps for paying a contractor abroad, and GST/HST on foreign suppliers
- Choosing accounting software, or comparing quotes from specific bookkeepers
Is it a mistake to hire a bookkeeper based in another country?
Hiring a bookkeeper in another country is not a mistake by itself. Where the bookkeeper lives does not decide whether the arrangement works; three things do, and the business owner stays responsible for each.
| Settle first | What to do |
|---|---|
| Where the records sit | Canadian business: keep them in Canada unless the CRA gives permission to keep them elsewhere (CRA). US business: the IRS recordkeeping page sets no location rule, but you carry the burden of proof for the entries, deductions and statements on your returns. |
| Who holds access | You do. Keep bank approval and the accounting file's administrator login, and give the bookkeeper the least access that does the job. The IRS advises limiting access to personal data to people who need to know (IRS). |
| Who is accountable | You, as owner. The IRS says you are generally responsible for complying with tax law even if someone else handles your taxes (IRS); the CRA says using a third party does not relieve the taxpayer of record-keeping duties (IC05-1R1). |
The case is not simple when:
- the books are behind, or a notice has arrived
- the bookkeeper already holds bank access and you cannot tell whether the work is right
- payroll or sales-tax filings depend on the books
- a corporation or partnership return depends on them
Each of these is a reason to have the existing books reviewed before you decide who keeps them.
Gather before handing over anything:
- the scope of work, in writing
- a list of who holds which login
- the contract
- where the accounting file is hosted, and whose account it sits in
- the last filed returns
For the choice between doing the books yourself and hiring, see the US guide or the Canadian guide.
Does a bookkeeper's location change what I owe, withhold or report?
Location changes the paperwork, not your responsibility for the books. The deciding facts are where the work is done and whether the bookkeeper is a US person or a Canadian resident.
| Question | US business | Canadian business |
|---|---|---|
| Fees for work done wholly outside the country | The place where services are performed determines their source. Withholding on a nonresident alien's independent services applies to services performed in the United States, generally at 30%, so fees for work done wholly abroad generally fall outside it (Publication 515). | Regulation 105 is the CRA's withholding on fees paid to non-residents for services rendered in Canada, at 15%. The CRA's circular says payments for services performed outside Canada are not subject to it (IC75-6R2). |
| Work done partly inside the country | Income is allocated by where the work is done, in most cases on a time basis (Publication 515). | The payer needs a reasonable, documented split between services in Canada and outside Canada; with no documented split, the circular recommends withholding on the whole payment (IC75-6R2). |
| Status paperwork | The form you collect depends on whether the bookkeeper is a US person (a US citizen living abroad is one) or a foreign person (W-8BEN instructions). Forms, withholding certificates and filing dates are in the guide on paying contractors abroad. | Slips, GST/HST on foreign suppliers and proof of the expense are in the guide on foreign invoices. |
Where must my business records be kept, and can the books sit in a bookkeeper's cloud account abroad?
For a Canadian business, a bookkeeper's own cloud account abroad does not meet the records rule by itself. The CRA requires records to be kept at the place of business or residence in Canada, and says records kept outside Canada and accessed electronically from Canada are not considered kept in Canada (CRA; IC05-1R1).
- Permission. Write to your local CRA tax services office. Permission can carry conditions, such as making the records available in Canada for CRA review.
- Copies. Where the CRA allows electronic records abroad, it may accept copies its officials can read in Canada and that give enough detail to support the returns.
- Servers abroad. The CRA says you must access them, or arrange for staff to, and provide the system records its officials require.
- Production. The taxpayer must produce records for inspection wherever they are, and the CRA recommends keeping backup copies in Canada (IC05-1R1).
Keep records six years from the end of the last tax year they relate to; for a year whose return was not filed on time, six years from the day it is filed. An objection, an appeal or a CRA demand can require longer (Income Tax Act, s. 230); see how long to keep business records before the bookkeeper deletes anything. Ask where the accounting file is hosted; the answer is part of the CRA question. A monthly copy in storage you control helps, but the CRA's pages treat acceptance of copies as its call, so ask first.
A US business faces no matching location test on the IRS recordkeeping page. The test is whether the records prove what the return claims, and the regulation says they must be kept available for inspection at all times (26 CFR 1.6001-1). Keep employment tax records at least four years after the tax is due or paid, whichever is later (26 CFR 31.6001-1(e)). If the bookkeeper stops responding, only a copy you control keeps the books reachable.
How do I tell whether an offshore bookkeeper seems legitimate?
Check what can be checked, and treat reviews as a starting point: a good review shows a client was satisfied, not that the accounts reconciled or the filings were right.
- Who they are. A video call, a name that matches the contract and the payment account, and one reference you can call.
- Who else works on your books. Ask whether staff or subcontractors will see your data, and get the same terms in writing for them. The Privacy Commissioner of Canada says an organization must be satisfied that a third-party processor has policies and processes in place, including staff training and security measures (OPC).
- Proof of work. Ask for a sample monthly package (bank reconciliation, income statement, balance sheet) and run a paid trial on a closed month whose answers you already know.
- Security practice. Ask how they meet the basics in the IRS data security guide: a security plan, updated anti-malware, unique passwords, encryption, backups and limited access to client data. It is written for tax professionals, so it is a yardstick, not a legal test for bookkeepers.
- A written contract. Scope, deadlines, who files what, who owns the files, who else may see the data, how access ends, which country's law governs a dispute and where a claim would be heard.
- Credentials, only if they will prepare, sign or represent. Anyone paid to prepare a federal return needs a PTIN (the IRS preparer tax identification number). Enrolled agents are tax practitioners licensed by the IRS and certified public accountants are licensed by state boards of accountancy. The IRS keeps a public directory of credentialed preparers with valid PTINs, though a preparer missing from it may still be sound (IRS).
A bookkeeper found through a freelance marketplace is judged the same way. Ratings on a listing are not a credential check, and the access, records and data questions here apply unchanged. For the full question list and red flags, see questions to ask before hiring a bookkeeper; for who may prepare returns, see bookkeeper, accountant or CPA.
What access should an offshore bookkeeper get, and what protects my data?
Give the least access that does the job, and keep bank approval and the accounting file's administrator login with the owner. The IRS tells businesses to limit access to personal data to people who need to know, choose multi-factor authentication when available, encrypt sensitive files and emails, back up to a separate secure source, and use separate personal and business email accounts (IRS).
How to set that up without letting anyone move money is in giving a bookkeeper access to your accounts. After sharing data, watch for the IRS's signs of business identity theft, such as being unable to e-file because a return was already filed under your EIN; the same page says where to report.
What client and employee information can I send abroad, and who stays responsible for it?
The business that collected the information stays responsible for it, wherever it is processed. For Canadian businesses, the Privacy Commissioner says PIPEDA does not prohibit sending personal information to another country for processing, and that the transferring organization is accountable for it and must use a contract or other means to give comparable protection (OPC).
- Tell the people concerned. Make plain that information may be processed in a foreign country and may be accessible to its courts, law enforcement and national security authorities.
- A contract has limits. No contract overrides the laws of the country where the information goes, and some information may be too sensitive to send to any foreign jurisdiction.
- Provincial law may also apply. Alberta, British Columbia and Quebec have their own private-sector privacy laws, and the Commissioner's cross-border guidelines (2009) do not cover provincial rules on transfers. In Alberta, an organization that uses a service provider outside Canada must name the countries and purposes in its privacy policies and notify individuals when their information is collected by or transferred to that provider (Alberta PIPA, ss. 6 and 13.1). In Quebec, an organization must assess the privacy impact before sending personal information outside Quebec, and may send it only if the assessment shows it would be adequately protected, under a written agreement (Commission d'acces a l'information). PIPEDA still applies to personal information that crosses provincial or national borders in commercial activities, whatever the province. It also covers employee information of federally regulated businesses; for other employers, check the provincial law (OPC).
For a US business, the IRS business pages cited above put the duty to protect employee and customer data on the business. Send only what the task needs: a bookkeeper coding transactions may not need full identification numbers for every customer or employee.
Who is responsible if the books are wrong or a return is late?
Generally, the business owner, not the bookkeeper. The IRS lists reliance on a tax professional among reasons that do not generally excuse a late filing or payment, and says you should know what your preparer files and get proof that your return or payment was sent on time. For accuracy-related penalties, the IRS considers whether you gave your advisor all needed information and whether the advisor was competent and experienced with the situation (IRS).
In Canada, the CRA's circular says a taxpayer is not relieved of record-keeping responsibility by using a third party (IC05-1R1).
For penalties after a bookkeeper's mistake, see the US guide; for missed Canadian filings, see accountant missed filings or stopped responding.
Can an offshore bookkeeper file my return or speak to the IRS or CRA for me?
An offshore bookkeeper can file or speak for you only within limits set by credentials and by the access you grant. In the US, a PTIN authorizes a person to prepare federal returns, but unlimited representation rights belong to enrolled agents, certified public accountants and attorneys. A preparer with only a PTIN has no authority to represent clients before the IRS; a filing season program participant may represent only clients whose returns they prepared and signed, and only before revenue agents, customer service representatives and similar IRS employees, not in appeals or collection (IRS). An outside bookkeeper who is not an enrolled agent, CPA or attorney cannot represent you in an appeal or collection case, and has limited or no rights elsewhere. A regular full-time employee may represent the employer, with identification and proof of authority (31 CFR 10.7(c)). To let a bookkeeper receive your IRS account information, you can file Form 8821; it does not let them speak for you or advocate your position, and Form 2848 covers representation (Form 8821 instructions).
In Canada, you authorize a representative on your business account through My Business Account or Represent a Client, or on paper with Form AUT-01, which gives offline access only and must reach the CRA within six months of signing, and you choose the level: Level 1 is view information only, Level 2 is view and update (how to authorize; levels). Start with the level the work needs.
Filing is separate from bookkeeping. CRA EFILE is the web service for transmitting a client's T1 personal returns. Applicants, or the people who manage and control them, must be Canadian residents with a valid Social Insurance Number, and the return must be prepared in and filed from Canada (CRA). A bookkeeper living and working abroad would not meet those conditions. Decide who files your GST/HST, payroll and corporation returns, ask any bookkeeper who offers to file for you which registration they hold, and review each return before it is sent.
Will an offshore bookkeeper know my payroll, sales tax, GST/HST and year-end rules?
Not automatically. These filings are local and run on fixed dates, so ask the bookkeeper to show it: name the filings your business has, the due dates and who files each one.
- US payroll. Federal deposits follow a monthly or a semiweekly schedule set by a lookback period, with a next-day rule for large liabilities, and most employers also pay a state unemployment tax (Publication 15).
- Canadian payroll. Remittance due dates depend on the employer's remitter type (CRA).
- GST/HST. The due date of a return is determined by the registrant's reporting period (CRA).
- US sales tax. State rules differ; see local or online bookkeeper.
- Year-end. Ask who produces the year-end package and who issues the tax slips and forms due after it. See year-end financial statements for a corporation in Canada or books to the business tax return in the US.
A bookkeeper who records payroll runs but does not know the deposit rules can leave a missed deposit unnoticed until a notice arrives.
Is an offshore bookkeeper a contractor or an employee?
The facts decide, not the label in the contract. The IRS says a remote worker is a common-law employee if you control what is done and how, even when the worker chooses to work remotely (IRS). Outside Quebec, the CRA weighs control, tools, financial risk and opportunity for profit; Quebec has its own test, and the CRA lists employment outside Canada as a special situation (RC4110). The worker's own country may apply separate rules, which this guide does not cover. For the tests and the fixes, see the US guide or the Canadian guide.
When is a local bookkeeper worth the extra cost?
A local bookkeeper is worth the extra cost when the work needs local filings, review or records that stay in reach. A fee gap means little until the scope is the same, so compare quotes by what each covers, not by the monthly figure. For what drives a monthly fee, see the US or Canadian cost guide.
Local help is worth weighing when the work includes:
- payroll deposits or remittances, and sales tax, GST/HST or PST filings, that someone must own
- a corporation or partnership return that depends on the books
- books that are behind, or a notice already received
- Canadian records the CRA expects in Canada
- customer and employee data you would rather not send abroad
Offshore help may fit routine coding and reconciliations when you review the monthly package, hold the administrator login and bank approval, keep a copy of the books, and have someone local handle the filings.
In British Columbia, bookkeeping is listed among accounting services in a planned PST expansion that BC's page says is paused (BC government). Check the page again before comparing quotes.
Example
The figures are illustrative.
Calgary contractor, records in the bookkeeper's account
A Calgary contractor pays an overseas bookkeeper C$800 a month through a freelance marketplace. All files sit in the bookkeeper's own cloud account. The CRA treats records kept outside Canada and reached from Canada as not kept in Canada, so the owner writes to the tax services office for permission, or arranges for the files to be kept in Canada and asks the CRA before relying on copies.
Texas LLC with full bank login
A Texas LLC pays a bookkeeper in India US$500 a month and has given a full bank login. The LLC still carries the burden of proof for each deduction. Assuming the bookkeeper is an outside contractor, the bookkeeper cannot represent it in an IRS appeal or collection case without an enrolled agent, CPA or attorney credential. The LLC replaces the shared login with a separate user the owner can remove, and keeps payment approval.
Vancouver studio comparing quotes
A Vancouver design studio with staff and a GST/HST account compares C$1,500 a month for a local bookkeeper with C$600 offshore. The owner asks what the C$900 gap buys: payroll remittances made on time, GST/HST returns filed, records kept in Canada, and a reviewer for the monthly package. If the offshore bookkeeper covers only coding and reconciliations, the studio compares the combined cost of that plus a local professional for the filings and review. BC's page says the planned PST on accounting services is paused; the owner rechecks it before relying on any quote.
Different for you?
- Your books are months or a year behind: start with the US or Canadian catch-up guide, and have the existing books reviewed.
- A bookkeeper already has bank access and you cannot tell whether the work is right: see checking your bookkeeper's work; then a review of the books can settle who keeps them from here.
- A notice or letter has arrived: read what to do when your business gets an IRS notice or, for Canadian filings left undone, accountant missed filings or stopped responding. The books behind the notice may also need a review.
- You want to replace a bookkeeper mid-year: see replacing your bookkeeper.
- A corporation or partnership return depends on these books: see corporate tax for the return, and the Canadian bookkeeper, accountant or CPA guide for who does what.
- You keep books for a Canadian company and a US company: see books for a Canadian company and its US company.
- You pay contractors or suppliers abroad: see paying contractors abroad or the Canadian foreign invoices guide.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| Withholding rate on US-source FDAP income paid to foreign persons Applies to the gross amount of US-source FDAP income not effectively connected with a US trade or business; a treaty may lower it. Also the rate on pay to non-resident independent contractors for services performed in the US. | 30% | IRS: Fixed, determinable, annual, or periodical (FDAP) income Checked |
| Regulation 105 withholding on non-resident service fees Gross payment for services rendered in Canada by a non-resident, subject to a CRA waiver or reduction and statutory exceptions | 15% | Income Tax Regulations, section 105(1) Checked |
| General business-record retention period From the end of the last tax year to which the records and supporting documents relate; longer retention can apply | Six years | CRA: Where to keep your records, for how long and how to request permission to destroy them early Checked |
| US employment tax record retention Minimum, counted from the date the tax becomes due or is paid, whichever is later | Four years | IRS: Publication 583, Starting a Business and Keeping Records Checked |
| AUT-01 submission window Send Form AUT-01 to CRA within six months of the signing date | Six months | CRA: Form AUT-01, page 2 Checked |
Primary sources
- CRA: Where to keep your records, for how long and how to request permission to destroy them early
- CRA: Information Circular IC05-1R1, Electronic Record Keeping
- CRA: Information Circular IC75-6R2, Required withholding on amounts paid to non-residents providing services in Canada
- CRA: Authorize a representative, how to give authorization
- CRA: Authorize a representative, levels and scope of authorization
- CRA: EFILE eligibility
- CRA: Types of remitters
- CRA: GST/HST reporting requirements and deadlines
- CRA: RC4110, Employee or self-employed?
- Office of the Privacy Commissioner of Canada: Guidelines for processing personal data across borders
- Office of the Privacy Commissioner of Canada: PIPEDA in brief
- Alberta: Personal Information Protection Act
- Government of British Columbia: PST on accounting services
- IRS: Recordkeeping
- 26 CFR 1.6001-1, Records
- IRS: Understanding tax return preparer credentials and qualifications
- IRS: Identity theft information for businesses
- IRS: Publication 5293, Data Security Resource Guide for Tax Professionals
- IRS: Independent contractor (self-employed) or employee?
- IRS: Penalty relief for reasonable cause
- IRS: Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
- IRS: Instructions for Form W-8BEN
- IRS: Instructions for Form 8821
- IRS: Publication 15, Employer's Tax Guide
- Income Tax Act, section 230
- 26 CFR 31.6001-1, Records in respect of employment taxes
- 31 CFR 10.7, Limited practice before the IRS
- Commission d'acces a l'information du Quebec: Principaux changements de la Loi 25
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.