Canadian Resident with U S Self Employment Income What You Need to Know
- Olivier Tessier
- 20 hours ago
- 2 min read
If you are a Canadian resident earning self employment income from clients or companies in the United States, your tax situation involves both countries. Many freelancers, consultants, and remote workers in Canada earn US income and wonder how to report it correctly and avoid double taxation.
Here is what you need to know.
Do You Need to File a U S Tax Return?
Yes. If you earn self employment income from US sources, you are generally required to file Form 1040 NR and Schedule C with the IRS, unless the Canada US tax treaty exempts your income.
Whether your income is taxable in the United States depends on:
Where the services are performed
Whether you have a fixed base or permanent establishment in the U S
How long you are physically present in the United States
Do You Pay U S Self Employment Tax?
In most cases, Canadian residents are exempt from US self employment tax (Social Security and Medicare) under the Canada US Totalization Agreement. However, you must prove that you are paying into the Canada Pension Plan and are not a US resident.
To support this, you may need:
Form CPT56 or RC381 to confirm CPP contributions
A Certificate of Coverage from the CRA
What About Canadian Tax?
You must also report your worldwide income on your Canadian tax return, including all U S self employment income. You may be able to claim a foreign tax credit for any U S federal or state tax paid.
Key Forms You May Need
Form 1040 NR and Schedule C
Form 8833 to claim treaty exemption
T1 General in Canada with T2125 for business income
Foreign tax credit form in Canada (Schedule T2209 or equivalent)
Common Mistakes to Avoid
Failing to file with the IRS when required
Paying self employment tax in both countries
Not coordinating treaty benefits properly
Missing deadlines for either country
Final Thoughts
If you are self employed in Canada and earn income from the United States, your tax obligations can be complex. But with proper planning, you can stay compliant and avoid double taxation.
At Nordfiscus, we specialize in cross border tax matters for freelancers and business owners. Contact us to get clarity on your unique situation.
