12,000 Earned/Year From Canada - Made from the Internet | Taxes and US Citizen?

Question

Hello.

I made around 12,000 dollars this year from the internet, from a Canadian Based Internet Company. About 9000 of that is net profit. Just something small I do on the side.

And I was wondering, what am I going to do about taxes? They just send my wire with my earnings, and I did not need to sign any tax forms or anything.

Do I need to pay taxes on this?

It's made from Canada and I am US Citizen.

Thanks!

Answer 1

Part I of Canada's Income Tax Act allows Canada to collect taxes on any income that originates in the country. Take a look at the following link:

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndv...

In your case, the thing is I can't determine whether you actually conducted the business in Canada or not. Contact Canada's International tax Services Office for details (1-800-267-5177).

If you owe money for Canadian income tax, the CRA will sometimes make up a tax return based on the information they have on file. If they do this, they can garnish your Canadian source income, and then ask the IRS for help with collecting the remaining debt.

Answer 2

The US taxes you on worldwide income, so of course, you must report this income.  If the work was physically done in the US, you won't owe Canadian taxes.

For your US tax return, you will use a 1040 and schedule C and SE.  Your $9000 in net profit will cost you not only income tax, but $1272 in self-employment tax as well.  Since you will owe more than $1000, you may need to make quarterly estimated tax payments.

Do not get the bright idea that you can just ignore this income.  The US government will track the wires and regularly shares your tax data with other countries.