U.S. client income is common for Canadian IT contractors. The filing problem is not usually whether the income exists. The problem is whether the records explain it clearly enough for your tax return, GST/HST return, bookkeeping, and any future CRA review.
This guide covers what to organize before filing or handing the file to a CPA.
The income still belongs on your Canadian return
Canadian residents report worldwide income. If a U.S. client pays you directly, through a platform, or into a USD account, the amount still needs to be reported in Canadian dollars.
Keep the invoice, payment record, deposit record, and exchange-rate support together. If the client does not issue a Canadian T4A slip, your invoice and bank records become the main support for the income.
Track the Canadian-dollar amount
For each payment, keep:
- invoice date
- client name
- invoice amount and currency
- payment date
- amount received
- exchange rate used
- Canadian-dollar amount recorded in your books
The Bank of Canada publishes annual average exchange rates commonly used for tax reporting. If you only reconcile at year-end, use a consistent exchange-rate method and document which one. If you reconcile transaction by transaction, the rate on the payment date is typically used.
Reconcile invoices to bank deposits
Foreign income often creates matching issues because the invoice amount, platform payout, and bank deposit may all be different.
Common reasons:
- bank conversion spread
- platform processing fees
- wire fees
- payment received in a different month than invoiced
- partial payments
- client withholding or offsets
Do not force the numbers to match without explaining the difference. The better approach is to show the full chain from invoice to payment to deposit. The tax document checklist covers the income records to collect for each payment.
If the U.S. client withheld tax before remitting payment, keep the withholding record. A foreign tax credit (T2209) may reduce Canadian tax owing on income already taxed at source. The credit calculation depends on treaty provisions and your overall tax position, which is a CPA determination.
GST/HST facts matter
Services supplied to non-resident clients may be zero-rated for GST/HST in many common contractor situations. Zero-rated does not mean ignored. It means the supply is taxable at 0%, and the facts supporting that treatment should be kept.
Relevant facts may include:
- where the client is resident
- where the client receives or uses the service
- whether the client has a Canadian presence
- the service contract or statement of work
- invoices showing the client name and address
The GST/HST treatment depends on the facts. Keep the support with the file instead of relying on memory at filing time. For a full overview of registration obligations and how zero-rated supplies interact with your filing requirements, see GST/HST registration for IT contractors.
Incorporated contractors need coordination
If your corporation earns the U.S. client income, the bookkeeping, GST/HST return, T2 corporate return, and your personal T1 return need to connect.
That means owner withdrawals, salary, dividends, shareholder loan balances, and retained earnings should not be cleaned up after the corporate return is already prepared.
If you are not yet incorporated and are considering it, the decision to incorporate depends on factors beyond the tax rate on active income.
What to send your CPA
A useful CPA handoff includes:
- all U.S. client invoices
- bank statements showing deposits
- payment processor statements where applicable
- exchange-rate method or accounting software reports
- GST/HST registration status and filed returns
- contracts or statements of work for non-resident client facts
- notes on any amounts withheld, refunded, or offset
If you held more than CAD $100,000 in foreign property at any point during the year, the T1135 Foreign Income Verification Statement may be required. A U.S. client receivable or account balance that exceeded that threshold at year-end is worth flagging before filing.
The goal is not to decide every tax treatment yourself. The goal is to provide a clear file so the CPA can review the actual facts. See the full tax document checklist for a complete list of what to gather.
For IT contractors with U.S. client income, the records required to support the return cover more ground than domestic income: exchange rates, GST/HST zero-rating facts, possible withholding credits, and T1135 obligations. Working with a CPA who handles cross-border contractor files ensures these elements are reviewed together rather than each treated as an isolated filing question.