What taxation guidelines does a Canadian freelancer have to follow when performing work (web developing from home) for a company in the United States? What taxation guidelines does the company in the United States have to follow?

What started as a hobby for a couple hundred dollars (via paypal) per month has begun to take on a more permenent and steady cashflow; enough for me to live on.

Note that I am not an employee of the company, and therefore, do not receive benefits of any sort. It might also be worth mentioning that there was never a signed contract put in place. As long as my services are required, I am confident in the company to keep paying me.

What federal documents should we be aware of? Are there any books that may help me understand this situation?

I want to ensure I'm staying inside the law, specifically in April when taxes must be filed.

  • On the Canadian side, at the very least you'll have to declare self-employment income for the money you're receiving. However, I have no idea how far and wide the IRS reach is with respect to US tax for your situation.
    – fideli
    Dec 6, 2011 at 20:25

1 Answer 1


I do NOT know the full answer but I know here are some important factors that you need to consider :

  1. Do you have a physical location in the United States? Are you working directly from Canada? With a office/business location in the United States your tax obligation to the US is much higher. Most likely you will owe some to the state in which your business is located in

  2. Payroll Tax : your employer will likely want to look into Payroll tax, because in most states the payroll tax threshold is very low, they will need to file payroll tax on their full-time, part-time employees, as well as contractor soon as the total amount in a fiscal year exceeds the threshold

  3. Related to No.1 do you have a social security number and are you legally entitled to working in the States as an individual. You will be receiving the appropriate forms and tax withholding info

  4. Related to No.3 if you don't have that already, you may want to look into how to obtain permissions to conduct business within the United States. Technically, you are a one person consulting service provider. You may need to register with a particular state to obtain the permit. The agency will also be able to provide you with ample tax documentations.

Chances are you will really need to piece together multiple information from various sources to resolve this one as the situation is specific. To start, look into consulting service / contractor work permit and tax info for the state your client is located in. Work from state level up to kick start your research then research federal level, which can be more complex as it is technically international business service for Canada-US

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