Update to International Guidance

In late December, the following paragraphs were added to CRA’s international guidance in respect of VII. Supplemental guidance, C. Cross-border employment income, (ii) Canadian Resident Employees:

2021 tax year

The CRA is extending to the 2021 tax year the same administrative relief applicable for affected individuals’ 2020 tax year. In other words, for affected individuals whose employers have continued to impose withholdings in 2021 as if the income was earned in the United States, the CRA will again provide an administrative concession and will consider the employment income from the United States employer to be sourced from the United States for 2021.

Additionally, for affected individuals who file their 2021 Canadian income tax return in accordance with the income sourcing rules in the Canada-United States income tax treaty, the same relief that was made available in respect of their 2020 tax year (e.g. treatment of FICA taxes and contributions to United States retirement plans) will be available for 2021. For affected individuals who file in accordance with the Canada-United States income tax treaty, the CRA will again consider granting relief of any interest and penalties imposed in respect of the payment of the individual’s 2021 income tax or in respect of instalment payments imposed on the individual.

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