Canada: Cross-border employee relief extended for 2021 (COVID-19)

Reporting relief extended for certain Canadian-resident cross-border workers

Reporting relief extended for certain Canadian-resident cross-border workers

The Canada Revenue Agency (CRA) extended reporting relief for certain Canadian-resident cross-border workers to 2021 (extended from 2020).

The CRA has updated its administrative guidance for individuals who performed their employment duties from their home in Canada instead of at the office of their U.S. employer because of travel restrictions. According to the CRA, these individuals may file their 2021 Canadian income tax returns as in prior years and claim a foreign tax credit for amounts paid in the United States, or alternatively file in accordance with the income sourcing rules in the Canada-United States income tax treaty (i.e., treat the income as sourced from Canada).

When these sourcing rules are relied on, the CRA will again consider interest and penalty relief for the individual's 2021 income tax payment (or instalment payments).

Previously, the CRA's reporting relief was only provided for the 2020 tax year.

KPMG observation

Individuals need to be aware of potential timing issues when filing a CRA relief request. For example, individuals must wait for the U.S. tax agency (IRS) to process their U.S. tax returns before they can request a U.S. account transcript, and it may be several more weeks before this transcript is received. As a result, individuals need to consider filing their U.S. tax returns on time.

Further, the CRA may take additional time to process RC4288 forms, since each employment arrangement must be examined on a case-by-case basis.

Read a January 2022 report prepared by the KPMG member firm in Canada

 

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