Canadian Freelancer With US Clients: What to File

Do I charge GST/HST to my US clients?

A Canadian freelancer generally zero-rates an eligible service supplied to a nonresident US client. Zero-rated means a taxable sale with no GST/HST charged; it does not mean that every invoice with a US address qualifies. The Excise Tax Act's export rules and CRA guidance distinguish the service, its recipient, and any Canadian property involved.

A client's US billing address is not proof of nonresidence. Keep the contract, the contracting party's address and residence evidence, the invoice, and a description of the work. The CRA says suppliers must support the client's nonresident status. Zero-rated export sales count toward the GST/HST small-supplier test; see When to register for GST/HST for when registration starts. If registered, file a GST/HST return for each reporting period, even when all sales are zero-rated and no tax is payable.

Do Quebec freelancers charge QST to US clients?

A Quebec freelancer generally zero-rates a qualifying service supplied to a nonresident, so no QST is charged on that sale. Revenu Québec lists exceptions involving a nonresident individual who is in Canada and identifies certain professional and consulting services as zero-rated.

Check who bought the service and what the work relates to before treating a Quebec invoice as an export. A contract with a US company for advice is different from a service tied directly to property in Quebec. Keep evidence of the client's residence and the work performed. For registration, check Revenu Québec's GST/QST rules and When to register for GST/HST. A QST registrant files a return for each reporting period, even with no QST payable.

Do I owe US tax on work I do from Canada for US clients?

A Canadian freelancer who is not a US tax person and performs all the services in Canada generally does not owe US federal income tax on those fees merely because the client pays from the US. The IRS sources personal-service income where the work is done, regardless of the client's residence, contract location, or payment account.

US state rules need a separate check even when all work is done in Canada. For example, California sources a sole proprietor's service income where the customer receives the benefit, regardless of where the work is performed; whether that rule applies to a particular Canadian contract depends on the facts.

Keep a work-location record for each project. If a contract covers work in both countries, allocate the fee between the work performed in each place; the IRS generally uses service days for this allocation. The broader US rules for service income belong in When foreign owners owe US tax. A US company is not required just because the clients are in the US; compare structures in Setting up a US business as a Canadian resident.

What is Form W-8BEN, and should I give it instead of Form W-9?

Form W-8BEN tells a US payer that an individual is a foreign person. A Canadian sole proprietor who is not a US person can generally give it to a client requesting US tax documentation for work done from Canada. Give it to the payer, not the IRS. IRS W-8BEN instructions explain its purpose and delivery.

The IRS tells foreign individuals performing services in the US to use Form 8233 or another applicable form instead of W-8BEN. The Form 8233 instructions require a US taxpayer identification number. If the client asks for W-9, explain that you are a foreign individual and offer the correct form. IRS W-9 requester instructions state that a foreign person may not provide W-9.

What if a US client sends me Form 1099 or insists on W-9?

A Form 1099 or a request for W-9 does not by itself turn Canadian work into US-source income or create a US filing duty. The work location and your tax status still control. Compare the form's amount with your invoices, and ask the payer to correct its records if it reported you as a US payee. The IRS source rule still applies, and the W-9 certification is for US persons.

Keep the Form 1099, your W-8BEN, correspondence with the payer, and proof of where you worked. Report the income in Canada even if the payer's form is wrong. If the payer actually withheld US tax, follow US tax withheld on payments to Canadians to assess a refund or Canadian credit.

When would I have to file US Form 1040-NR?

A Canadian freelancer who is a US nonresident generally files Form 1040-NR if engaged in a US trade or business, including where personal services performed in the US create one. The IRS filing instructions say filing may still be required when a treaty exempts the income from US tax. Other US-source income with insufficient withholding or a refund claim can also call for a return.

A narrow statutory exception keeps US services out of a US trade or business if US presence totals no more than 90 days in the tax year, pay for those services totals no more than US$3,000, and the contract is with a qualifying foreign person or a US person's foreign office. A direct contract with a US client for its US office does not meet that exception.

A treaty claim on a return may also require Form 8833; the IRS instructions list exceptions. Do not assume that a tax exemption removes the filing duty.

What changes if I travel to the US to do the work?

Work performed during a US visit is generally US-source service income, so the US tax and Form 1040-NR analysis changes. Split mixed-location contracts by the work performed in each country and keep a dated record of US workdays, deliverables, invoices, and travel. IRS sourcing guidance generally allocates personal-service pay by workdays.

US work can require Form 1040-NR even when a treaty removes US federal income tax. Under the Canada–US treaty, the US generally taxes a Canadian resident's business profits only to the extent attributable to a US permanent establishment. That can be a fixed place where the business operates, such as an office; longer service projects can also create one under the treaty's separate tests. A short visit alone does not settle the filing or tax answer.

If you expect US work, resolve the treaty and withholding position before the first payment. Form 8233 may document a treaty exemption from withholding on US-performed independent services. You sign Part III; the payer signs Part IV and forwards the form to the IRS within five days of accepting it. Keep a copy and any US payer statements with the eventual return. Immigration permission and state tax rules require their own review.

Do I owe US self-employment tax on income from US clients?

A Canadian nonresident generally does not owe US self-employment tax merely because a client is American. The IRS says nonresident aliens generally are not subject to that tax, subject to social-security agreements. Under the US–Canada agreement, a self-employed person resident in Canada is generally covered by the Canadian or Quebec system even if work spans the border.

If you work in the US and claim Canadian or Quebec social-security coverage, request a certificate of coverage: Form CPT56 for CPP coverage or Form QUE/USA 101 for QPP coverage. If you file a US return, attach a copy as proof of the exemption from US self-employment tax. Canadian CPP or Quebec plan calculations are covered in How self-employed income is taxed.

How do I report US-dollar income on my Canadian return?

A Canadian resident sole proprietor reports US client fees as Canadian-dollar business or professional income, usually on Form T2125 with the T1 return. The CRA's self-employment instructions require gross and net amounts on the applicable self-employment lines; a US Form 1099 does not replace Canadian records.

Quebec residents with a filing duty also report business income on Schedule L of their provincial TP-1 return and enclose Form TP-80 or financial statements, as applicable. Revenu Québec explains the sole proprietor filing.

Convert revenue and expenses when the amounts arise, generally using the Bank of Canada rate for that day. The CRA's income-tax currency folio allows an average rate for certain income items when practical, but generally rejects an average if rates fluctuate significantly. Keep the rate and source used for each conversion. For entries, payout fees, and later exchange gains or losses, see US-dollar sales and marketplace payouts.

Example

Illustrative only. In one calendar year, a sole proprietor living in Quebec invoices a US company US$100,000 for consulting performed entirely from Quebec and incurs US$20,000 of business expenses. Assume, solely to show conversion, that every relevant amount arose when US$1 equaled C$1.30. The Canadian figures would be C$130,000 of revenue, C$26,000 of expenses, and C$104,000 before other adjustments. Actual transactions can require different daily rates.

The consulting service may be zero-rated for GST/HST and QST if the client is nonresident and no exclusion applies. These sales exceed the GST/QST small-supplier threshold, so the freelancer must register and file both returns even though no sales tax is charged. The freelancer keeps the contract, proof of client residence, invoices, exchange-rate records, and a calendar showing no US workdays. The net business income goes through Form T2125 to the federal return and Schedule L to the Quebec return. The US client can receive Form W-8BEN; the fees alone generally do not require Form 1040-NR. A later trip to perform part of the contract in the US changes the source and filing analysis.

Different for you?

• You worked in the US, had US tax withheld, or need a treaty position reviewed: gather travel dates, contracts, invoices, payer forms, and withholding statements for cross-border tax. For a withheld payment, start with US tax withheld on payments to Canadians.
• You are a US citizen, green card holder, or possible US tax resident: the nonresident answer above may not apply; use cross-border tax.
• You are actually an employee of the US company: see Working across the border.
• You invoice through a corporation or are considering a US LLC: see Setting up a US business as a Canadian resident.
• You need the GST/HST registration test: see When to register for GST/HST.
• You hold a US bank or payment account: check Foreign property and affiliate reporting.