Who this is for
- Canadian residents sent by a Canadian employer to a US job site for weeks or months, then home
- Electricians, controls technicians, commissioning engineers and other crew on US data center builds
- Workers with both a T4 and a US W-2 or Form 1042-S for the same year
Not covered here
- US citizens and green card holders
- Canadians working for a US employer, remotely or by commuting
- Contractors who bill US clients themselves or through their own company
- The employer's payroll, Form 8233 acceptance, certificate application and permanent establishment questions
- Work authorization and visas, trade licensing and union travel rules
- Whether a living-out allowance is taxable in Canada, and stock awards earned during a rotation
Do I owe US tax when my Canadian employer sends me to a US job site?
When you live in Canada and a Canadian employer sends you to a US build, the US can tax the pay for your US-site days from the first day, unless the treaty exempts it. Article XV of the Canada–US tax convention keeps that pay taxable only in Canada if either route applies:
- Route (a), small pay: your pay for US work is no more than $10,000 in US dollars for the calendar year.
- Route (b), short stay: you are in the US no more than 183 days in any 12-month period starting or ending in the year, AND no US resident pays your pay or pays it on your employer's behalf, AND no permanent establishment in the US (a US branch, or a project that counts as one) bears it, meaning deducts it as its own cost.
Either way, you file Form 1040-NR to claim the exemption and get back US tax withheld. Canada taxes all of your pay and credits the final US tax, if any.
Your case needs professional judgment when the build runs past a year, a US company pays or is recharged for your wages, rotations straddle two years, or both countries withheld tax.
| Question | United States | Canada |
|---|---|---|
| Pay for US-site days | Taxable unless Article XV applies | Always taxed |
| Return and due date | Form 1040-NR, April 15 or June 15; a state nonresident return where due | T1, April 30; Quebec residents also file a Quebec return |
| Getting withholding back | Form 8233 up front, Form 1040-NR afterwards | T1 refund; a letter of authority to reduce it |
| Social security | Social Security and Medicare unless the agreement keeps you in CPP; Form 843 for errors | CPP or QPP continue; EI under four conditions |
| Double-tax relief | The treaty exemption | T2209 and T2036 credits for final US tax |
| State or province | Some states ignore the treaty; Texas has no income tax | Your province taxes all of the pay |
How do I count the days and the pay limit, and what if rotations cross into next year?
Test each route separately; passing either is enough.
The pay limit (route a) is in US dollars and applies per calendar year to any form of pay, "including payments in kind" (US Treasury Technical Explanation). Count wages, overtime, per diem, living allowances and in-kind benefits for US work. A second rotation in the same year can push you over. Salary is split by US workdays over total workdays; housing-type fringe benefits follow your main place of work (1040-NR instructions). Convert each Canadian-dollar payment and keep the workings.
The day count (route b) is days present in the US, not workdays: weekends, days off, and arrival and departure days count. The window rolls, so 120 days in the fall and 90 days the next spring inside one 12-month window fail route (b) for both years.
What sinks route (b) is two facts only your employer knows:
- A permanent establishment in the US bears your pay: usually your employer's own project, if it is one. An installation project is one if it lasts more than 12 months (Article V(3)); a services rule in Article V(9) can also create one. "Borne by" means deducted in computing that establishment's income. A data center build can run past a year.
- A US resident, such as a US affiliate or the US customer, pays your wages or pays them on your employer's behalf. In abusive cases the tax authorities can look past who formally pays you.
Ask your employer in writing who pays and bears your pay and how long the US project runs. Its side: sending employees to work in the US; its US return: a Canadian corporation's US tax return.
Why was US tax taken off my pay, and can Form 8233 stop it?
US payroll withholds federal tax on US-day pay unless the employer accepts Form 8233, which claims the treaty exemption up front. No US payroll does not mean no US tax.
Form 8233 rules (Form 8233 instructions):
- It needs an SSN or ITIN. Most crews have no SSN, so they apply for an ITIN on Form W-7, with its documents, before the trip; a copy of the pending W-7 can go with Form 8233.
- A new form is needed for each tax year and each employer.
- The employer forwards it to the IRS within 5 days and waits at least 10 days for any objection.
- The employer may still withhold when eligibility is not known until after the year ends (Publication 519), which is usual when rotations straddle a 12-month window.
Exempt pay under an accepted Form 8233 goes on Form 1042-S, not in W-2 box 1.
Do I have to file Form 1040-NR if the treaty exempts my pay, and by when?
Yes. A nonresident who worked in the US must file Form 1040-NR even if the income "is exempt from U.S. tax under a tax treaty" (1040-NR instructions, Table A).
- Due: April 15 after the year if your wages had US income tax withholding; otherwise June 15.
- Exempt pay goes on line 1k, not line 1a, with Schedule OI item L: Canada, Article XV, the amount.
- Without Form 8233, reduce your W-2 wages by the exempt amount, attach the W-2, and attach a statement with the information Form 8233 would have held.
- No ITIN yet: attach Form W-7 to the return.
- Form 8833 is not needed for an Article XV claim. It is needed if you rely on the treaty's residence tie-breaker; the penalty for not filing it is US$1,000.
How do I get back the US tax withheld from my pay?
Claim it on Form 1040-NR. Unless you give a bank account for direct deposit, the IRS mails the refund to your address, which can be in Canada (1040-NR instructions, line 35e). Wage withholding counts as paid on April 15 after the year (26 USC 6513), and a refund is limited to tax paid within three years before you file (26 USC 6511). So file within 3 years after the April 15 following the tax year, or the refund is generally lost.
Does the state where I worked tax me even if the treaty exempts me?
It may. The IRS says "some states honor the provisions of U.S. tax treaties and some states do not" (IRS: Tax treaties).
- California taxes nonresidents on wages for California work, and a treaty limited to federal income tax does not bind it (FTB Publication 1031). The Canada treaty covers US federal income taxes.
- Virginia requires nonresidents with Virginia income to file Form 763 "unless exempted from the requirement by federal treaty" (Virginia Tax).
- Texas has no personal income tax (Texas Constitution, Article VIII, Section 24-a).
Elsewhere, check the state's nonresident instructions and filing threshold. State withholding comes back only through that state's nonresident return. For central Ohio builds, see Ohio city income tax for traveling crews.
I have a T4 and a W-2: how do I report the US pay on my Canadian return?
Report the total of box 14 of your T4 slips on line 10100 (CRA). A T4 from a Canadian employer normally includes the US-site pay already, so do not add the W-2 wages again; the W-2 is proof for the credit. Only US pay missing from the T4, such as pay from a US affiliate, goes on line 10400.
How do I avoid paying tax twice on the same pay?
Canada credits US tax: Form T2209 federally and Form T2036 provincially outside Quebec; Quebec residents claim the Quebec credit through Revenu Québec. The credit is generally the lesser of the foreign tax paid and the Canadian tax on that income (CRA: line 40500).
- US federal tax: claim the final tax on your filed 1040-NR, never the W-2 withholding. Tax that is or will be refunded is not tax paid (CRA Folio S5-F2-C1, paragraphs 1.33 and 1.35).
- State income tax is generally creditable: the Income Tax Act counts a state as a foreign government. The treaty covers state taxes only if not imposed inconsistently with it, and the CRA may ask for the state return and proof of payment.
- US Social Security and Medicare actually paid may also count (treaty Article XXIV(2)(a)).
File the US return first; it is due earlier. When both countries withhold, ask the CRA for a letter of authority so payroll takes less Canadian tax (CRA: employment outside Canada; Form T1213). Calculation details: foreign income on a Canadian return.
Do CPP and EI still come off, or do I pay US Social Security?
An employee sent temporarily to the US normally stays in CPP and is exempt from US Social Security and Medicare, for up to 60 months (CRA IC84-6). The employer requests a certificate of coverage on Form CPT56, or from Retraite Québec for QPP. Ask before you leave. IC84-6 adds that Canada will not normally issue one for US visits of 6 months or less. Where no certificate is issued, Publication 519 says to request a statement that your wages are not covered by US Social Security.
- Without the agreement's cover, US employee work is generally subject to Social Security and Medicare (Publication 519).
- Taken in error: ask the employer first, then claim from the IRS on Form 843 with your W-2, the employer's statement of what it refunded, and any other item on the IRS list that fits you (IRS).
- EI continues only if you ordinarily reside in Canada, the employer is resident or has a place of business in Canada, the work would be insurable in Canada, and it is not insurable under US law.
What if my rotations run long enough to make me a US resident for tax?
The treaty's day count is not the IRS residence test. The substantial presence test makes you a US resident at 31 days this year and 183 days weighted over three years (Publication 519). The closer-connection exception needs fewer than 183 days this year, a tax home in Canada and a closer connection to it, and Form 8840 filed by the 1040-NR due date, or the exception is lost; otherwise the treaty tie-breaker with Form 8833 decides. See Canadians on a TN visa.
What records prove my US days and pay?
Keep, for each year:
- A dated presence log: border entries and exits, flights, lodging, site badge records.
- A workday and pay split for each rotation, with exchange-rate workings.
- T4, W-2 or 1042-S, and pay stubs.
- The employer's written answer on who pays and bears your pay and how long the project runs.
- Any CPP or QPP certificate of coverage.
- The filed 1040-NR, any state return, the IRS account transcript and proof of payment.
If the CRA asks for proof, see foreign tax credit review.
Example
Illustrative only, in US dollars. No tax rate is assumed.
Six weeks commissioning in Abilene, Texas
An Alberta electrician employed by a Calgary electrical contractor is in Texas 42 days, weekends included, and earns $15,000 for them. Route (a) fails. The contractor's whole Texas job runs 4 months with no connected US work, the contractor has no fixed place there, and it pays him from Canada with no recharge to a US company, so route (b) exempts the pay.
Payroll had no Form 8233 and withheld $2,500 on a W-2. By April 15 he files Form 1040-NR with Form W-7, puts $15,000 on line 1k, completes item L, attaches the Form 8233-type statement, and claims the $2,500 back. Texas has no income tax. His T1 reports T4 box 14 once, with no US tax to credit. Under the social security agreement he stays in CPP; if his W-2 shows Social Security or Medicare, he asks his employer for a refund first.
Five months on a Loudoun County build that runs past a year
An Ontario commissioning engineer is in Virginia 150 days, with no earlier US days, and earns $60,000 for them. Her employer's installation contract runs 18 months and her pay is charged to it, so route (b) fails and the $60,000 is taxable in the US.
She files Form 1040-NR, claiming her W-2 withholding, and Virginia Form 763. On her T1, T2209 and T2036 credit the final federal and Virginia tax from those returns, not the amounts withheld, capped at the Canadian tax on that pay. She asks the CRA for a letter of authority for next year. Another long rotation next year would bring the substantial presence test into play.
Three weeks in Santa Clara, California
A BC controls technician earns $8,000 for 21 days, his only US work in the year. Route (a) exempts it federally, but he still files Form 1040-NR. California can tax it anyway, so he files a California nonresident return. His T1 credits the final California tax, and he keeps the return and proof of payment.
Different for you?
- You are the employer: see sending employees to work in the US.
- You work for a US employer, remotely or by commuting: see working across the border.
- You bill US clients as a contractor or through your own company: see Canadian freelancer with US clients.
- Your stays may make you a US resident, or you hold TN status: see Canadians on a TN visa.
- The IRS refunds or changes your US tax after you filed your T1: see amending after the other country changes your return.
- You are a US citizen or green card holder in Canada: see Americans living in Canada.
- You are moving to the US for good: see moving from Canada to the US.
- You live in the US and were sent to a Canadian site: see US employee working in Canada.
- Both countries withheld, the build ran past a year, or several states are involved: the answer turns on facts in both countries; talk to a cross-border accountant before filing either return.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| Canada–US treaty employment income limit in the country where work is performed Article XV(2)(a): remuneration for employment exercised in the other country does not exceed this amount in that other country's currency, applied per calendar year (Treasury Technical Explanation of the Fifth Protocol); separate from the alternative 183-day test | $10,000 | Department of Finance Canada: Canada–US tax convention, Article XV(2)(a) Checked |
| Canada-US treaty employment short-stay day limit Measured within a rolling twelve-month period starting or ending in the relevant tax year | 183 days | Canada-US income tax convention, Article XV Checked |
| Canada-US treaty employment short-stay measurement period Period starts or ends in the relevant tax year | 12-month period | Canada-US income tax convention, Article XV Checked |
| Calendar-year Form 1040-NR deadline with wages subject to withholding Following the tax year, before applicable extensions or weekend and holiday adjustments | April 15 | IRS: Publication 519, When and Where To File Checked |
| Calendar-year Form 1040-NR deadline without wages subject to withholding Following the tax year, before applicable extensions or weekend and holiday adjustments | June 15 | IRS: Publication 519, When and Where To File Checked |
| Usual Canadian individual return filing date The following April 30, subject to the self-employed and other exceptions in section 150 | April 30 | Income Tax Act, paragraph 150(1)(d)(i) Checked |
| Canada-US treaty installation permanent-establishment duration Article V(3): installation project is a permanent establishment only if it lasts more than this period; V(9) services rule is subject to V(3). | 12 months | Finance Canada: Canada-US tax convention, Article V Checked |
| Employer deadline to forward an accepted Form 8233 to the IRS Within 5 days of accepting the employee's Form 8233, the withholding agent forwards a signed copy to the IRS | 5 days | IRS: Instructions for Form 8233, Withholding Agent's Responsibilities Checked |
| Wait after mailing accepted Form 8233 to the IRS Minimum wait after properly mailing Form 8233 before applying the treaty withholding exemption | 10 days | IRS: Instructions for Form 8233 Checked |
| Penalty for not disclosing a treaty-based return position Per failure, under section 6712; applies to taxpayers other than C corporations. | US$1,000 | IRS: Form 8833 (Rev. December 2022) Checked |
| Refund lookback for a late original income-tax return Refund generally limited to tax paid within three years before filing the late original return, plus any extension of time to file | Three years | US Code: section 6511(b)(2)(A) Checked |
| Window to file a late original return and still recover US income tax withheld from wages Wage withholding is deemed paid on the 15th day of the fourth month after the tax year (26 USC 6513(b)(1)); a refund cannot exceed tax paid within 3 years before the claim plus extensions (26 USC 6511(b)(2)(A)), and an original return is the claim | 3 years after the April 15 following the tax year | 26 USC 6513(b) and 6511 Checked |
| Canada–US social security agreement temporary transfer limit Article V(2): expected assignment length for the ordinary sending-country coverage rule; longer assignments require prior mutual consent | 60 months | SSA: US–Canadian Social Security Agreement, Article V(2) Checked |
| US visit length up to which Canada does not normally issue a CPP certificate to a resident of Canada Canada will not normally issue CPP certificates of coverage to residents of Canada for work done in Canada, or for work done in the United States during visits of this length or less | 6 months | CRA: Information Circular IC84-6, Canada-United States Social Security Agreement, paragraph 9 Checked |
| Days in the US in the current year needed for the substantial presence test Also needs 183 weighted days over three years | 31 days | IRS: Substantial presence test Checked |
| Weighted three-year US days that meet the substantial presence test Current-year days plus one-third of last year's days plus one-sixth of the year before's days | 183 days | IRS: Substantial presence test Checked |
| US days in the year below which a closer-connection claim is available Also needs a foreign tax home and a closer connection to that country; Form 8840 is due by the Form 1040-NR due date | 183 days | IRS: Publication 519, Closer Connection to a Foreign Country Checked |
Primary sources
- Department of Finance Canada: Canada–US tax convention (consolidated)
- US Treasury: Technical Explanation of the Fifth Protocol to the Canada–US convention
- IRS: Instructions for Form 1040-NR
- IRS: Instructions for Form 8233
- IRS: Instructions for Form W-7
- IRS: Publication 519, U.S. Tax Guide for Aliens
- IRS: Tax treaties
- IRS: Social Security tax, Medicare tax and self-employment
- 26 USC 6511, limitations on credit or refund
- 26 USC 6513, time return deemed filed and tax considered paid
- California FTB: Publication 1031, Guidelines for Determining Resident Status
- Virginia Tax: Residency status
- Texas Constitution, Article VIII, Section 24-a (Texas Property Tax Laws)
- CRA: Employment outside Canada (payroll)
- CRA: IC84-6, Canada–United States Social Security Agreement
- CRA: Form CPT56, Certificate of Coverage (Canada–US)
- Retraite Québec: Québec–United States social security agreement form
- CRA: Line 10100, Employment income
- CRA: Line 40500, Federal foreign tax credit
- CRA: Income Tax Folio S5-F2-C1, Foreign Tax Credit
- Income Tax Act, section 126
- CRA: Form T1213, Request to Reduce Tax Deductions at Source
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.