Taxation of Employment Income falls under Article XV of the Canada – US Tax Treaty.

If Canadian resident is employed in the United States his employment income is not taxable in the United States if:

1)      His salary does not exceed US $10,000

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2)      Canadian resident presents in the United States for a period not exceeding 183 days in that year and his salary is paid by a company which does not have a permanent establishment in the United States

 FILING REQUIREMENTS – INDIVIDUAL IS EXEMPT FROM US TAX

        In the United States:

1. Form 1040 NR – Nonresident alien income tax return. Filed as protective return.
2. Form 8833 filed with IRS to disclose tax treaty position.
3. Form 8840 – Closer connection. To prevent taxation of world income in the United States.
4. Form 8233 – Exemption from withholding of income tax in source.

Even there is no US tax liability - failure to file these returns will result in loosing tax treaty protection and penalties!

In Canada: 

1. T1 – Individual Income Tax return. Include world income.

FILING REQUIREMENTS – INDIVIDUAL IS NOT EXEMPT FROM US TAX

        In the United States:

1. Form 1040 NR – Nonresident alien income tax return. Includes employment income earned in the United States
2. Form 8833 filed with IRS to disclose tax treaty position.
3. Form 8840 – Closer connection. To prevent taxation of world income in the United States.

  In Canada:

1. T1 – Individual Income Tax return. Include world income. Foreign taxes paid in the United States will be claimed.
2.  Form CPT 56 – to prevent paying US Social Security and Medicare taxes.