Understanding U.S. payroll obligations for Canadian employers

Many companies face foreign obligations for reporting, withholding tax
By By Marni Halpern and Jennifer Santos
|Canadian HR Reporter|Last Updated: 10/03/2018

Many Canadian companies may be faced with foreign obligations for reporting and withholding tax on wages paid to employees performing employment duties outside of the country. Cross-border travel continues to be a common trend to meet business essential needs. Whether the business needs are for employment services directly connected to a establishment in the United States or for servicing clients, Canadian employers should be aware of the U.S. payroll reporting and withholding requirements for employees working in the U.S.

Withholding and reporting

Canadian employers that have employees working in the United States are required to withhold U.S. income and other payroll taxes from the wages of these employees, if the wages are not exempt from U.S. taxation by the Internal Revenue Code (IRC) or the Convention Between Canada and the United States of America (the treaty). Generally, these taxes include federal and state income taxes, social security (FICA), Medicare hospital insurance tax and any state unemployment or disability obligations.