Expert: Shirley McAllister, CPP, PHR - 10/27/2011

Question
Dear Ms. McAllister:

We are a Michigan company thinking of hiring two Canadian residents. They will only be working for us only in Canada and obviously will continue to live there.  I know that we do not need to pay MI Unemployment Insurance on them, but I am unsure about Michigan withholding and Federal withholding. I am not sure if the tax treaty applies to Federal or State taxes, or both?  
Thank you for your time.

Answer
If they are canadian's working in Canada you need to hold out CPP, EI and Canadian Federal withholding and perhaps local provincial withholdings depending on the province they are working in.

You do not hold out U.S. Taxes if they are Canadian residents working in Canada even if they are working for a U.S. Company.

You can have ADP Canada do your payroll and file all your taxes for about 85.00 a payroll. Not too expensive and they get the job done. That is who does our two Canadian offices in Albera and British Columbia.

Shirley