The job is in Boston or Austin, the pay is in US dollars, and you work from your home office in Ottawa. Remote work has made this an ordinary arrangement, but the tax side catches people out, often in April, when there is a large balance owing because no Canadian tax was withheld all year. If you are working remotely for a US company from Canada, the key point is simple: as a Canadian resident, you pay Canadian tax on that income. The details depend on whether you are an employee or a contractor.
This guide explains how the income is taxed, what changes for employees and contractors, what to do if US tax was withheld, how to handle GST/HST, currency and instalments, and the mistakes to avoid.
Table of Contents
- Working remotely for a US company from Canada: the short answer
- Employee or contractor: why it matters
- If you are an employee of the US company
- If you are a contractor
- What about US tax?
- Currency conversion and instalments
- Common mistakes to avoid
- A year-end checklist for remote workers
- How BBA Tax helps remote workers
- Frequently Asked Questions
Key Takeaways
- Canadian residents are taxed in Canada on their worldwide income, including pay from a US company.
- If the US employer does not run Canadian payroll, no Canadian tax may be withheld, so plan for a balance owing and instalments.
- For someone who is not a US citizen, work physically done in Canada generally is not subject to US income tax.
- Contractors usually give the US client form W-8BEN, report business income in Canada, and may need to register for GST/HST.
- Report everything in Canadian dollars, and keep the exchange rates you used.
Working remotely for a US company from Canada: the short answer
Canada taxes its residents on their income from every source worldwide. If you live in Ottawa and work for a US company from here, that income goes on your Canadian return and is taxed at Canadian federal and Ontario rates, just like pay from a Canadian employer. Where the company is based does not change that; where you live and do the work does.
What changes is the mechanics: who withholds tax, which forms you need, and whether you have extra obligations such as GST/HST or instalments.
Employee or contractor: why it matters
| Question | Employee of a US company | Contractor to a US company |
|---|---|---|
| Canadian tax withheld? | Only if the employer runs Canadian payroll or uses an employer of record | No; you pay it yourself |
| How it is reported | Employment income on your T1 return | Business income on your T1, or corporate income if incorporated |
| CPP | Depends on the employer’s setup; check with payroll and an accountant | You pay both portions on self-employment income |
| US form usually requested | Depends on the payroll setup | Form W-8BEN |
| GST/HST | Not applicable | Registration may be required; services to non-residents are often zero-rated |
| Expenses | Limited; home office needs a signed T2200 from the employer | Reasonable business expenses are deductible |
Your status is decided by the real working relationship, not just what the offer letter says. Our guide to employee vs contractor status in Canada explains how the CRA decides.
If you are an employee of the US company
Many US companies hire Canadians through an employer of record, a third-party company that runs Canadian payroll for them. In that case, Canadian income tax and payroll deductions are handled for you and you receive a T4, much like any Canadian job.
If instead you are paid directly through the company’s US payroll, Canadian tax may not be withheld at all. You still owe it, so:
- set money aside from every paycheque for your Canadian tax;
- expect the CRA to ask for quarterly instalments once you have a large balance owing;
- ask the employer whether any US tax is being withheld, and why; and
- ask about CPP and EI, because deductions depend on how the employer is set up in Canada, and gaps can affect future benefits.
If you work from home, you can only claim home office expenses as an employee if your employer signs Form T2200. US employers are often unfamiliar with it, so ask early. Our guide to work-from-home write-offs explains what qualifies.
If you are a contractor
As a self-employed contractor, you report the fees as business income on your Canadian return, deduct reasonable business expenses, and pay both the employee and employer portions of CPP on your net self-employment income. Our guide to filing as a self-employed individual covers the return itself.
- Form W-8BEN. US clients usually ask Canadian contractors for IRS Form W-8BEN, which certifies that you are not a US person so the client does not withhold US tax.
- GST/HST. Once your worldwide taxable revenue passes the small supplier threshold, you must register. Services supplied to a non-resident business are often zero-rated, meaning GST/HST applies at 0%, but you can still claim input tax credits on your business costs. Our GST/HST registration guide explains the threshold.
- Incorporating. A corporation can lower the tax on income you leave in the business, but if you work for one US client in a way that looks like employment, the personal services business rules can wipe out the benefit.
Paid in US dollars and not sure what you owe? BBA Tax prepares returns for Ottawa residents with foreign income. Book a free intro call.
What about US tax?
For a Canadian resident who is not a US citizen or green card holder, pay for work physically performed in Canada is generally not US-source income and is not subject to US income tax, even when the employer or client is American. Problems usually come from paperwork: a US payroll system that withholds federal tax by default, or a client who never received a W-8BEN.
- If US tax was withheld in error, the usual fix is to have the payer correct it or to file a US non-resident return to recover it. Canada’s foreign tax credit is meant for foreign tax you genuinely owed, so it is not a reliable way to recover tax that should not have been taken.
- If you travel to the US to work, days worked there can create US-source income. Keep a log of any work days spent in the US.
- If you are a US citizen or green card holder living in Canada, you must file US returns regardless, and use foreign tax credits or exclusions to avoid double tax. That needs advice on both sides of the border.
Currency conversion and instalments
Everything on your Canadian return has to be in Canadian dollars. Convert US-dollar income using the Bank of Canada exchange rate on the day you were paid, or the Bank of Canada’s annual average rate for income received throughout the year, and use the same method consistently. Keep a record of the rates you used.
Because little or no Canadian tax is withheld on this income, many remote workers end up owing enough to be required to pay quarterly instalments. Our guide to CRA tax instalments explains who has to pay and how to avoid instalment interest.
Common mistakes to avoid
- Spending the whole paycheque and being surprised by the April tax bill.
- Assuming US withholding covers your Canadian tax.
- Reporting US-dollar amounts on the Canadian return without converting them.
- Ignoring GST/HST registration after passing the small supplier threshold as a contractor.
- Incorporating to save tax without checking the personal services business rules.
- Claiming home office expenses as an employee without a signed T2200.
A year-end checklist for remote workers
Before the year closes, work through this list so filing season holds no surprises.
- Confirm your status. Check your contract and how you are paid: employee through an employer of record, employee on US payroll, or contractor.
- Total your income in both currencies. List every payment with its date, US-dollar amount and the exchange rate you will use.
- Check withholding. Look at your pay statements for any US federal or state tax withheld, and ask the payer to correct it if it should not be there.
- Estimate your Canadian tax. Compare it with what has been withheld or set aside, and top up your savings before April.
- Request your T2200 if you are an employee working from home, so you can claim eligible home office expenses.
- Gather business expenses if you are a contractor: equipment, software, internet, professional fees and a share of home costs where they qualify.
- Review GST/HST if you are a contractor near or over the small supplier threshold.
- Log any US work days from trips during the year.
Our step-by-step guide to filing personal taxes in Canada covers the rest of the return.
How BBA Tax helps remote workers
BBA Tax is an Ottawa accounting firm led by Karim, preparing personal tax returns for residents with foreign income and helping self-employed professionals and contractors with bookkeeping, GST/HST and incorporation decisions. We deal with the CRA on your behalf when questions come up.
For remote workers, that means getting your status right, converting income correctly, planning for instalments, and making sure you are not paying tax twice.
Working for a US company from Ottawa? Get your Canadian taxes set up properly before the next filing season. Book a free intro call with BBA Tax.
Conclusion
Working remotely for a US company from Canada is taxed in Canada, because you live and work here. Employees should check whether Canadian tax and payroll deductions are being handled, set money aside if they are not, and get a T2200 for home office costs. Contractors should give their client a W-8BEN, report business income, watch the GST/HST threshold, and think carefully before incorporating. For everyone: convert to Canadian dollars, plan for instalments, and fix any US withholding at the source.
Frequently Asked Questions
Do I pay Canadian tax if I work remotely for a US company?
Yes. Canadian residents are taxed in Canada on their worldwide income, including pay from a US employer or client.
Do I have to pay US tax as well?
If you are not a US citizen or green card holder and do the work physically in Canada, the income is generally not subject to US income tax. US citizens living in Canada must still file US returns.
What is Form W-8BEN and do I need it?
It is an IRS form that certifies you are not a US person. US clients usually ask Canadian contractors to complete it so they do not withhold US tax on payments.
Why do I owe so much tax at the end of the year?
Usually because no Canadian tax was withheld from your pay. Setting money aside each pay period, or paying instalments, spreads the cost through the year.
Do I need to charge GST/HST to my US client?
Services supplied to a non-resident business are often zero-rated, so the rate is 0%, but you may still have to register once you pass the small supplier threshold. Registering also lets you claim input tax credits.
How do I convert US dollars for my Canadian return?
Use the Bank of Canada rate on the day you were paid, or the annual average rate for income received throughout the year, and apply the method consistently.
