Canadian pilot required to file and pay US taxes while flying in US?
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Canadian pilot required to file and pay US taxes while flying in US?
I have just been advised that I and all my fellow company pilots are required to record all flying done for a private Canadian CAR 604 company while point to point within the US, and then file a US tax return and then, based on time spent doing such, and as a percentage of my total time flown, and salary therefore having to pay taxes to the US government. This just was brought to our attention, and my first reaction was that ICAO explicitly has stated, as aircrew flying Internationally, we are exempt from reporting tax returns, as the worldwide implications would be absurd. This is coming from our tax advisors( a very well known reputable International organization).
Has anyone heard of this, and/or complying with such? I really do not want to set a precedent with the IRS, and have my file at their disposable to cause me a lifetime of grief!
Sure appreciate any valued feedback!
Cheers
Has anyone heard of this, and/or complying with such? I really do not want to set a precedent with the IRS, and have my file at their disposable to cause me a lifetime of grief!
Sure appreciate any valued feedback!
Cheers
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Can't really help you on that but I think that it would be completely absurd to file with the IRS.
If it helps any, I have a couple of friends that won green cards in the lottery, but continued to work in Canada, flew to the US regularly, and were never told, or never did, file US taxes.
I would be VERY surprised that the IRS would even pursue such a thing.
If it helps any, I have a couple of friends that won green cards in the lottery, but continued to work in Canada, flew to the US regularly, and were never told, or never did, file US taxes.
I would be VERY surprised that the IRS would even pursue such a thing.
I don't know about any ICAO rules on aircrew tax filing.
The IRS rules for non resident aliens can be found here: https://www.irs.gov/individuals/inte...ien-tax-status
Basically you likely do not have to file a US tax return as long as you are outside of the US more than half the year, but you may have to file a form to show you are more in Canada than the US.
The IRS rules for non resident aliens can be found here: https://www.irs.gov/individuals/inte...ien-tax-status
Basically you likely do not have to file a US tax return as long as you are outside of the US more than half the year, but you may have to file a form to show you are more in Canada than the US.
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Thanks for the replies. What we are being told is that, because we occasionally fly point to,point within the US, even as a private flight, the crew earned a portion of their salary while in the US. Uncle Sam thinks he has a right to a portion of it, and due to a reciprocal tax treaty between our two countries, the interpretation is we need to record those legs, file the returns, and subsequently pay tax if applicable. They are also suggesting that time spent within the US while on training and attending relative courses or conventions is also countable.
I am really curious if anyone else has been advised to comply. Guess the next question arises, what happens if I ignore it!
I am really curious if anyone else has been advised to comply. Guess the next question arises, what happens if I ignore it!
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I don't think they're right on this.
None of the Air Canada and it's regional employees pay US taxes when they go to the US for SIM or have a diversion within the US resulting in a US point to point flight.
None of the Air Canada and it's regional employees pay US taxes when they go to the US for SIM or have a diversion within the US resulting in a US point to point flight.
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So if I did a ferry flight through the USA. So I have to file taxes in the USA....Ridiculous!
Would a USA pilot flying his boss to a couple of meetings in various Canadaian cities neeed to pay CDN taxes.
If true would not his Boss and his entourage also need to file a CDN tax return?
Would a USA pilot flying his boss to a couple of meetings in various Canadaian cities neeed to pay CDN taxes.
If true would not his Boss and his entourage also need to file a CDN tax return?
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California tries to tax airline crews that are based on California. They have to submit a form that show that over 1/2 of their flying is outside of the State of California. If they can't then they have to pay taxes to California on all of their income, even if they live in another state.
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This is the written explanation from the tax company that our company references to. (it is a very well known international tax management company);
I apologize for the delay in sending this over to you. The information I was referencing over the phone included the following (please note that I have paraphrased the items below):
- International flights would be exempt from reporting income in the U.S. However, per Article III(1)(h) of the Canada-U.S. Income Tax Convention, a trip that is entirely within one country is not an international trip.
- Article XV(3) of the same convention states that earnings by a resident of one country in respect to employment on an aircraft is only taxable in their country. That is why the income you would be considered to earn in the U.S. isn’t taxable there.
- However, to claim a treaty position, a return would need to be filed to report said treaty based position (per Sec. 6114 of the Internal Revenue Code).
I apologize for the delay in sending this over to you. The information I was referencing over the phone included the following (please note that I have paraphrased the items below):
- International flights would be exempt from reporting income in the U.S. However, per Article III(1)(h) of the Canada-U.S. Income Tax Convention, a trip that is entirely within one country is not an international trip.
- Article XV(3) of the same convention states that earnings by a resident of one country in respect to employment on an aircraft is only taxable in their country. That is why the income you would be considered to earn in the U.S. isn’t taxable there.
- However, to claim a treaty position, a return would need to be filed to report said treaty based position (per Sec. 6114 of the Internal Revenue Code).
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Maybe this is where this is coming from?
I re-call this case, where an Air Canada pilot that was resident in Bermuda (and another on a US border town) had to calculate flying time in Canada to figure out their Canadian taxes. Even on domestic flights (YVR-YYZ), less than half of the income was attributable to Canada. No idea if they had to file US tax returns for the time over US airspace.
There's a tax case with the code: 2011tcc449
There's a globe and mail article with the code article4255708/
I re-call this case, where an Air Canada pilot that was resident in Bermuda (and another on a US border town) had to calculate flying time in Canada to figure out their Canadian taxes. Even on domestic flights (YVR-YYZ), less than half of the income was attributable to Canada. No idea if they had to file US tax returns for the time over US airspace.
There's a tax case with the code: 2011tcc449
There's a globe and mail article with the code article4255708/
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I do not possess the knowledge to even be considered an income tax amateur, never mind professional, however, it seems to me that Article XV, Dependent Personal Services, Subparagraph (3) is where you need to direct your tax professionals attention.
It states, in full:
The emphasis is mine.
My interpretation is because you are employed (not self-employed or the owner) to operate the aircraft and your receive remuneration for those services, you are not required to pay taxes in the United States as you are operating an aircraft from a Canadian based employer and will have already paid taxes on that income in Canada.
The whole purpose of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital is for "...the avoidance of double taxation...with respect to income..."
So, if you've already paid taxes on your income in Canada, then the Convention is what protects you from having to pay taxes in the United States (so long as you are the employee).
It states, in full:
Article XV
Dependent Personal Services
1. Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government Service), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in a calendar year in the other Contracting State shall be taxable only in the first-mentioned State if:
(a) such remuneration does not exceed ten thousand dollars ($10,000) in the currency of that other State; or
(b) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in that year and the remuneration is not borne by an employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State.
3. Notwithstanding the provisions of paragraphs 1 and 2, remuneration derived by a resident of a Contracting State in respect of an employment regularly exercised in more than one State on a ship, aircraft, motor vehicle or train operated by a resident of that Contracting State shall be taxable only in that State.
Dependent Personal Services
1. Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government Service), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in a calendar year in the other Contracting State shall be taxable only in the first-mentioned State if:
(a) such remuneration does not exceed ten thousand dollars ($10,000) in the currency of that other State; or
(b) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in that year and the remuneration is not borne by an employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State.
3. Notwithstanding the provisions of paragraphs 1 and 2, remuneration derived by a resident of a Contracting State in respect of an employment regularly exercised in more than one State on a ship, aircraft, motor vehicle or train operated by a resident of that Contracting State shall be taxable only in that State.
My interpretation is because you are employed (not self-employed or the owner) to operate the aircraft and your receive remuneration for those services, you are not required to pay taxes in the United States as you are operating an aircraft from a Canadian based employer and will have already paid taxes on that income in Canada.
The whole purpose of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital is for "...the avoidance of double taxation...with respect to income..."
So, if you've already paid taxes on your income in Canada, then the Convention is what protects you from having to pay taxes in the United States (so long as you are the employee).
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Clearly you don't have to file a US return.
If you could though, you may be better off claiming as much income as possible for US taxes and since you can't be double taxed by Canada you would likely pay less tax.
If you could though, you may be better off claiming as much income as possible for US taxes and since you can't be double taxed by Canada you would likely pay less tax.
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If you file in the US you would still need to report all income sources in Canada as well. Double taxation avoidance only entitles you to deduct whatever you already paid in the US, not cherry pick what you file in what country.
I am only flying for fun but I do a lot of consulting work in the US and Canada for the past 20 years, so here is my data point:
- When I work on a temporary basis in the US and I am paid by a Canadian company for that work, I file in Canada only.
- When I work in the US and I am paid directly by a US company, I must file a tax report in the US. I claim the NAFTA treaty position so I do not have to pay any taxes in the US, but I am still under the obligation to file a tax report. It is a lot of complicated paperwork for the first year, but after that it is easy and I do it myself.
It looks to me that in the case of the OP, he is paid by a Canadian company and is not based in the US - only doing temporary stuff - so he should not bother with the IRS.
I am only flying for fun but I do a lot of consulting work in the US and Canada for the past 20 years, so here is my data point:
- When I work on a temporary basis in the US and I am paid by a Canadian company for that work, I file in Canada only.
- When I work in the US and I am paid directly by a US company, I must file a tax report in the US. I claim the NAFTA treaty position so I do not have to pay any taxes in the US, but I am still under the obligation to file a tax report. It is a lot of complicated paperwork for the first year, but after that it is easy and I do it myself.
It looks to me that in the case of the OP, he is paid by a Canadian company and is not based in the US - only doing temporary stuff - so he should not bother with the IRS.
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where is home and where are your ties
I have just been advised that I and all my fellow company pilots are required to record all flying done for a private Canadian CAR 604 company while point to point within the US, and then file a US tax return and then, based on time spent doing such, and as a percentage of my total time flown, and salary therefore having to pay taxes to the US government. This just was brought to our attention, and my first reaction was that ICAO explicitly has stated, as aircrew flying Internationally, we are exempt from reporting tax returns, as the worldwide implications would be absurd. This is coming from our tax advisors( a very well known reputable International organization).
Has anyone heard of this, and/or complying with such? I really do not want to set a precedent with the IRS, and have my file at their disposable to cause me a lifetime of grief!
Sure appreciate any valued feedback!
Cheers
Has anyone heard of this, and/or complying with such? I really do not want to set a precedent with the IRS, and have my file at their disposable to cause me a lifetime of grief!
Sure appreciate any valued feedback!
Cheers