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  1. #1
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    Default Working as an Independent Contractor for a Foreign Employer

    My question involves independent contractors in the state of: California.

    I live in California with a Canadian corporation as a client. We are renegotiating hourly fees and working hours and I am wondering which laws the corporation has to follow in terms of keeping my classification an IC and not an employee: Canadian or US? Thank you.

  2. #2
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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Where will you be working, the US or Canada?

  3. #3
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    Default Re: Working as an Independent Contractor for a Foreign Employer

    If you work for a foreign client as an independent contractor, you should make sure that you like the terms of your contract, as the jurisdictional issues make it unlikely that you're going to have much luck complaining to a department of labor in either nation about classification issues. You will pay taxes under U.S. and California law.

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    Default Re: Working as an Independent Contractor for a Foreign Employer

    Quote Quoting newbie101
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    My question involves independent contractors in the state of: California.

    I live in California with a Canadian corporation as a client. We are renegotiating hourly fees and working hours and I am wondering which laws the corporation has to follow in terms of keeping my classification an IC and not an employee: Canadian or US? Thank you.
    It matters very much for what purpose the classification as an independent contractor matters. If for example you are asking how classification would be done for income tax and employment tax purposes, the law that will be used will be the law of the nation/state in which the tax authority is located. In other words, the IRS will use U.S. law to determine your status for federal income tax and employment tax purposes. So in addition to knowing where the work will be done, it also is important to know the issue(s) you are looking at for which classification matters.

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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Quote Quoting jk
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    Where will you be working, the US or Canada?
    I am working in California.

  6. #6
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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Then the laws in place are US and California laws.

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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Not that it makes a difference to the OP's situation (the OP is covered by US and California laws, period), but the American and Canadian laws regarding ICs vs employees are very nearly identical. If OP's Canadian employer is telling him that the laws are different in Canada, the employer is blowing smoke.

  8. #8
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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Quote Quoting eerelations
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    Not that it makes a difference to the OP's situation (the OP is covered by US and California laws, period), but the American and Canadian laws regarding ICs vs employees are very nearly identical. If OP's Canadian employer is telling him that the laws are different in Canada, the employer is blowing smoke.
    More specifically, my Canadian client is asking me to work 40 hours a week and trying to dictate the hours I work and wanting to restrict who my clients are. He basically wants me to focus on him. What are the consequences to me if the IRS determines I'm an employee? What will I lose? What will my client lose?

    Can I be an employee of a Canadian organization while a US citizen living in the US?

    Thank you,

  9. #9
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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    Quote Quoting newbie101
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    More specifically, my Canadian client is asking me to work 40 hours a week and trying to dictate the hours I work and wanting to restrict who my clients are. He basically wants me to focus on him. What are the consequences to me if the IRS determines I'm an employee? What will I lose? What will my client lose?

    Can I be an employee of a Canadian organization while a US citizen living in the US?

    Thank you,
    You do not lose anything if the Canadian company is forced to treat you as an employee. They will have to pay US and CA employer taxes, workman's comp, pay into unemployment taxes etc.

    Realistically however, the Canadian company has choices. They can opt not to hire anyone in your area. They can opt not to do work in the US. They can opt to look for someone else who is willing to accept IC status even though its not appropriate/legal. They can restructure the work/position so that it does meet the law for a valid IC position. There isn't a whole lot that the IRS can do to enforce the law against a foreign employer...at least not without a lot more effort than they are likely to expend for a situation where there are not a lot of employees and/or a bricks and mortar operation.

  10. #10
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    Default Re: Which Ic Laws Does a Canadian Client Have to Follow with a Independent Contractor

    As I said previously, if your Canadian employer is telling you that Canadian laws govern this situation and that this is perfectly legal in Canada, the he/she is blowing smoke.

    US law dictates this situation. For your Canadian employer to comply with US law, he/she would have to establish an American entity in the US, and then have that American entity put you on an American payroll. And yes it would be perfectly legal for you to work in such a situation because you wouldn't be working for a Canadian employer, you would be working for an American employer that happens to be owned by a Canadian company.

    But as llworking has said, there's not much the IRS can do to force the Canadian employer to comply with US law. And the Canadian employer probably knows this, so you may well be shooting yourself in the foot if you demand to be reclassified as an employee.

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