Mobility via Podcast


Episode 18: Border crossing commuters and the tax implications

John Denworth and Kyle Christensen discuss the new reality of work for border crossing commuters and the tax considerations for U.S. companies whose employees are working from home.

John Denworth

John Denworth

Principal, Tax, Global Mobility Services, KPMG LLP (US)

+1 313-230-3187

Kyle Christensen

Kyle Christensen

Senior Manager, Tax, Global Mobility services, KPMG LLP (US)

+ 1 313-230-3159

Podcast transcript

John: Hello and welcome to our next episode of Mobility via Podcast.  I’m John Denworth, I’m a partner in our global mobility services practice at KPMG.  Along with me is Kyle Christensen.  On some of our prior podcasts we’ve covered a lot of the key topics surrounding work from anywhere, and what companies are thinking about in terms of future structure and policies as their offices begin to reopen and assignees start traveling again.  Whatever way we look at it, remote working and flexibility is here to stay, and reasonably so. 

On previous episodes of this podcast, and in the market undoubtedly, you’ve heard about all of the state to state, international flexibility, all of those various topics.  Kyle and I are here today to talk about a wrinkle to this.  It’s particularly something that hits companies along our border.  And one here, for local Detroit, for Kyle and I, that we’re seeing more and more these days.  When you have a population of folks that commute daily across a border, for instance, we’ll talk about Windsor, Canada to Detroit, here in Michigan.  When you have this population of folks that go from Canada to the United States every day, or vice versa, for that matter, there are intricacies associated with that in terms of how they should be reporting their compensation.  And when they don’t travel, when the border is closed, there’s a lot more to consider of that. 

If you’ve been following this closely in the news at all, you’ve seen recently that the CRA, the Canadian Revenue Authority, they’ve come out recently with some guidance on relief associated with the 2020 tax return.  We won’t get into that in a lot of detail, we’ll cover it just briefly, but that is a retroactive relief that’s available.  And if you’d like to talk a little bit about it, and what it means to your population, please feel free to reach out to Kyle or I or any other KPMG professional that you’d like to talk with.  In terms of looking prospectively, we’re going to keep this podcast to that level. 

So like I said, with me is Kyle Christensen.  He is a senior manager in our GMS practice here in Detroit with me.  And he’s helping a lot of companies address this complex issue.  Kyle, thanks for joining today.

Kyle: Yes, thanks for having me John. 

John: So Kyle, can you provide a summary of the main areas that companies need to consider when they have a commuting population?

Kyle: Yes, sure. And I think with any company having level of flexibility, there’s a number of key areas that need to be considered, especially for a lot of organizations as we start to look at reopening offices here.  And the one interesting thing, and John mentioned this, is prior to the pandemic, and the borders being closed, US companies have always had a technical compliance requirement in Canada to report income for resident of Canada.  So if you think, for most commuters, they commute here to the United States or vice versa on a daily basis, but live in the other location, so with this obligation for US companies and the commuter population, in practice what we saw in the past prior to the pandemic was potentially companies not following this technical obligation that they have.   

What companies are starting to have to think about is, as workplace flexibility starts becoming the norm, and the borders begin to reopen in the future, if you allow this population to work remotely, there’s a number of considerations that need to be accounted for.  Historically prior to the pandemic, this group was likely crossing the borders on a daily basis, which largely mitigated a lot of the complexity associated with a commuter population for a company.  But as we were talking about kind of going forward, as hopefully the borders start to reopen in the near term, when companies look at flexible work arrangements going forward, there’s a lot of areas to consider.  And it’s one where it’s super important for organizations, from the get-go, to make sure they have the relevant stakeholders involved to support these decisions that need to be made. 

So from a quick overview, the areas that a lot of companies are looking to address, especially for companies that have large commuter population, is first off, who are commuters?  So getting a baseline understanding of how commuters a company may have is very important to start to work through the relevant changes that may need to happen for a company.  The second big consideration is around corporate tax and permanent establishment.  So if you think at a high level you have US employees currently sitting and working remotely in Canada, and if you have a company that has hundreds of daily border crossers, that’s a large number of US employees working in Canada which creates a number of corporate tax issues.  That company, they just need to review.  In addition to that, just being able to properly put the systems in place to properly withhold and remit taxes to both countries for an individual when they’re working, and employed in different countries.  And then in addition to that, there are social tax considerations.  So if an individual continues to pay into US social taxes or the Canadian scheme, further do US benefits continue to apply for these individuals?  So if they’re working remotely in Canada, and they have the ability to do so going forward, does the company’s benefit plans allow for similar structure for these types of cases? 

And then there’s obviously the tracking of these employees, so understanding work patterns and so on and so forth, becomes very critical for a company to consider.  And then lastly, for a lot of organizations that haven’t historically done the reporting in Canada for this group, it’s a lot of change management.  So communication obviously being key, aligning the stakeholders, making the proper decisions, but having the population of commuters thoroughly understand kind of all the changes that are taking place, is super critical for this group.  So as you can imagine there’s a number of steps that need to be considered, but it’s one where companies are focusing in and really looking to understand the impact of this population and what it may mean going forward, especially with workplace flexibility being … you know, it seems like the norm for a lot of organizations as we start to reopen.

John:  I hundred percent agree, and I’m so glad that you mentioned all the potential stakeholders.  There are just so many stakeholders involved in this, and it’s important that they all come to the table.  And you mentioned change management and communication around that.  That’s really key to this isn’t it? 

Kyle: Yes, exactly.  I think the change management is pivotal.  And the reason being is a lot of these folks may have been commuting for the past 20 years, and they’re used to the normal process of how they’ve been doing things.  And now that they have a level of flexibility it’s a big change for a lot of folks.  And a lot of companies need to make sure that they’re taking the right steps to keep all the stakeholders informed, because it can be a pretty big change for a population. 

John:  Absolutely.  So you mentioned a bunch of areas there that we really should be focused on.  What do you think are the most challenging that you’ve seen companies work through.

Kyle: So John, really good question.  So the one that’s very difficult and there’s not enough time in this podcast, we probably could spend hours on it.  But it’s just the level of complexity around the compliance that goes into this process.  So if you think about it, for these individuals, if they’ve been remote for the last 14 months, they’ve been earning wages based on Canadian workdays.  So that alone creates a number of complexities, where what country has the right to tax income from wages?  But also how does a company even go about structuring the proper employment tax responsibilities that they may have.  So the compliance piece is really large, and we continue to reiterate this.  But having the right stakeholders engaged from the start as companies are looking at their commuter population is critical.  Because of all the areas that compliance is super important, but you know the corporate tax analysis between how we go about setting things up and so on and so forth is really important.

So having the stakeholders engaged is paramount to being successful on this.  But the compliance is, to be quite honest, can be very complex.  Especially for organizations that are looking to allow their US work force a level of flexibility going forward.  And if they extend that same flexibility to their commuter population, it does increase the compliance that a lot of companies need to address.

John: So do you think this is going to be something that’s a short term issue that will be addressed by companies?  Or do you see this something that needs to be much more long term and planned for?

Kyle: Yes.  I think for all companies irrespective of how they approach kind of workplace flexibility going forward, this is super important.  And I think what we see quite often is, now is the time to take the opportunity to find long term solutions.  So I would look at it kind of in two categories.  One being companies that will allow their employees flexibility going forward, and extend a similar level of flexibility to their commuter population.  Now is the time to put in the structures and systems to have a long term solutions for this.  I think a lot of companies with the pandemic and the border being closed, it really kind of shined a spotlight on their commuters, because they’d been likely displaced in another country for a long period of time.  So finding the right long term solution for each organization will be critical to properly manage this. 

And I think one thing that we’re starting to see quite a bit from a trend perspective is as companies look at providing level flexibility and building out work-anywhere policies going forward, it might be an opportunity for companies to kind of have a separate policy for individuals that are crossing the border to work on a daily basis.  And the reason being is allowing full level flexibility of you can work wherever you’d like, just kind of ramps up the level of complexity it takes to manage this population and just administrative time would be incredibly burdensome for companies to do the right thing. 

 So what we’re starting to really see is from a long term perspective is companies thinking about maybe we do have a separate policy that puts more rigid guidelines around how much border crossers can work remotely, which then allows for a level of efficiencies in managing this population going forward. So level flexibility is super important to look at, to land on, kind of long term solutions and putting processes in place.  But even for companies that say as the border reopens and you're safely able to travel across, we expect you to be in the office here in the US on a daily basis.  Even for those companies there’s always been the technical requirement to report in Canada for those Canadian tax residents.  And it’s one that a lot of companies are looking at now to put the process in place to mitigate that risk going forward.  So I think it’s one for any company that has commuters, be it hundreds or less than ten, it’s definitely worthwhile to look at this as a long term opportunity to mitigate risk.  But also more importantly, be in compliance for years to come.

John: Absolutely.  We alluded to that at the top, that there’s lots to consider from a going forward perspective.  And the compliance, making sure that the companies are following the rules that have always been on the books.  That’s really important.

You’ve done a lot of really cool things that I’ve seen in terms of leveraging data, and what companies should be thinking about from next steps.  Can you share a little bit?  Can you tell us a little bit more about that?

Kyle: Yes.  Absolutely.  So I think one thing that’s really interesting for us is I think a lot of companies, as the pandemic has been … you know, the border has been closed for 14 months, and unfortunately as of right now there’s not an end date to that.  So I think a lot of companies have gotten their arms around who their commuter workforce is.  But for companies that maybe haven’t, it’s usually a couple of steps to identify, do we even have this issue that we need to look into?  And what a lot of companies have done as a starting point to identify their commuters is looking at HR data to understand where do our folks have permanent mailing addresses, for instances.  So in these cases where these folks have been primarily commuting to the US prior to the pandemic, and they live in Canada, likely the mailing address that they have on record with their employer is in Canada.

So it’s a great starting point to review what companies have from an HR perspective to quantify the level of potential commuters that they may have if they’re kind of starting from scratch. 

Additionally, HR data, some companies struggle with the level of consistency that they may have.  You know, looking at immigration documentation is also a good starting point as well, since a lot of companies are sponsoring these employees to work here in the United States.  So once you kind of have your arms around at least the magnitude of US employees that are commuters, you can start to look at how, what do we think they’ve been doing for the last 14 months or so. 

And I think with a lot of companies, if offices have been primarily closed, and the normal US workforce has been working remotely, it’s likely safe to assume that that’s probably the same case for the border crossers, and they’re not coming to offices since they’re closed.  So getting an idea of who they are, but also the level of impact of what these folks have been doing for the last 14 months is really a good starting point to kind of work through all of the areas that we outlined before to gauge what do we need to look to do going forward to mitigate risk for the company, but also do the right things for the employees. 

So there’s a couple of easy kind of foundational steps and then working through those areas.  But it’s really important I think for companies as fingers(?) cross the border, do you start to reopen, do you have a sense of magnitude and the risk of having this population going forward.  But then interlaying that with what is our company’s plans around re-opening offices and flexibility going forward.  And as we mentioned, continuing that level of flexibility for this population of folks makes things very not difficult, but more administratively time consuming if you will, to manage this population in the future.

So a lot of easy steps to start and then as we keep going back to having the relevant stakeholders, to be engaged, to support those areas to consider is really important.  But it’s one we’ve seen a lot of companies look to do, to quantify that, and then start having those conversations of how we approach this population going forward.

John: So well said Kyle.  As always an enlightening conversation with Kyle Christensen.  And if you're listening to this podcast and you are currently a client of Kyle’s, you know exactly what I mean.  If you too want further conversations with Kyle or with me, we welcome that on this topic.  And it doesn’t have to be a Windsor, Detroit based conversation.  Everything that he and I just spoke about, he very eloquently, has to do with any kind of border crossing population here impacting the United States, be it Canada or Mexico.  There’s lots to consider from the nuances. 

So wrap it up here. There will be more episodes of this podcast.  We’ll always continue to bring top of mind issues from what we’re hearing in the market to you, the listener.  In the meantime if you have any recommendations or questions, we’d love to hear from you.  Please send a note to, with your thoughts.  Thank you so much for your time and thanks for listening to us.