Hello Lily,

- quote -

The best way to explain the situation is like this:

The US and Canada has an agreement where you are only taxed
for Social Security tax in the country where you are a
resident. Since you are a Canadian PR, I presume that you
live there. As an employee, you have been paying into
Canada's CPP, their version of their Social Security.

As a self-employed person, the US would tax you for Social
Security payments through the Self Employment Tax using
Schedule SE. However, presuming you are paying your
Canadian taxes, you will still be paying into CPP on the
return. Therefore, you would be exempt from the US SE Tax.

(As a side note, you will need to make payments to the CRA
for the taxes you owe -- since there will be no employer to
withhold these.)

- quote -

You will file a form 1040. The business income will be on
Schedule C. You will NOT need Schedule SE, since you are
exempt from US Social Security Tax. You WILL need to attach
a statement to your return explaining that you are exempt,
and why. You MAY be asked by the IRA for a letter from the
CRA certifying that you are covered by the CPP. You will
still need Form 2555. Self-employed people cannot file a
2555-EZ, sorry.

Realize, too, that your Canadian return just got more
difficult, as you will need to show business income and
expenses on that form. Also, there are GST reporting
issues.

Bryan

--
-------- Bryan Kellar, EA
Oregon Tax Help Portland, Oregon
www.oregontaxhelp.com
www.canadatax.org

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- quote -

You can get all the forms at www.irs.gov but if you are at
all computer savvy, get a copy of TurboTax or Tax cut and
they will help you through it with an interview technique.
Check out IRS pub 583, Starting a Business and Keeping
Records, at the same place.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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lily wrote:

- quote -

Sole proprietors report their business income, cost of goods
sold and business expenses on IRS Form Schedule C or C-EZ.
If net earnings is at least $400 you will also be directed
to Schedule SE for the computation of self-employment taxes.
If you are using your home for your business and wish to
take home-office deductions, you will also need to file Form
8829.

--
Alan
http://taxtopics.net

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I've been a permanent resident in Canada for four years,
employed at a hair salon. I prepared my US taxes (form 1040
and 2555-EZ) for 2001 and 2002 myself. During 2003 I quit
the salon and became self employed in a sole proprietorship.
I am confused over which forms I need to use now to prepare
my 2003 tax return. Do I need 1040-SS and schedule SE? If
someone could help me by suggesting the proper forms, I
think I can figure the rest out myself.

Thanks much in advance....

Lily

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