Hmm... this could be complicated. I may have some advice, but it depends on how the consulting business is structured and how you get paid. I have some questions.
Are you essentially free-lancing, or are you employed by a consulting business?
Assuming that you are employed by a consulting business, is the consulting business a business resident in Canada, or are you employed by a US-based consulting business?
How is it structured? A sole proprietorship, partnership or corporation?
How is business conducted with the US? If the consulting business is resident in Canada, is business conducted in the US through a US-resident subsidiary?
If the consulting business is resident in Canada and does not have a US subsidiary, how much time in 2010 is it expected that the business will operate in the US?
I may not have hit on all the necessary questions. Essentially, if you have foreign employment income, you have to report it on a gross basis in your taxes, but you should get a credit for any foreign tax paid. You also have to file a US tax return. If however the consulting work is done through a business resident in Canada and you are simply paid a salary, the issue gets more complicated. Depending on how business is conducted, the Canadian-resident company may have a permanent establishment in the US, which would likely require the filing of US tax returns. There could also be transfer pricing issues.
If this is as complicated as I have set out, you should probably get professional tax advice. You're welcome to PM me if you don't want to post the information.
as of right now, it would just be freelance work but let's say i get $30,000 US over the year how do i mark that on the tax return? the dollar could be par on the 1st of March and worth 80 cents on the 1st of September. would i post the Canadian amount as of the day i submit my tax return?
It certainly wouldn't be on the date you file your return. Suggest you call CRA. You might have choice of using an average for the year, or a conversion rate on date of each payment. But it also may depend on how you are doing accounting for your "business" income, about which I know little.
I believe you have two options for exchange rate. You can use the spot rates that applied at the time that you got paid, or you can use an annual average (which you can probably get from the bank of Canada).
Incidentally, it sounds like you may be liable for paying income tax in the US (income tax is generally paid in the jurisdiction in which the income is earned, not where you are resident). You should get an opinion on this from a tax accountant who is versed in these sorts of issues.
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