- 6 - taxes. Therefore, under section 1401(c), the United States may not tax self-employment income to the extent that Canada has the right to tax such income under the totalization agreement. See id. art. II(1)(a)(ii). Under article V of the totalization agreement, an employed person working in either the United States or Canada is subject to the employment taxes of only the country in which the person works. By contrast, if a person is self-employed and would otherwise be subject to self-employment taxes in both countries, the person is subject to the self-employment taxes of only the United States unless the person is a resident of Canada. If a person would be subject to employment taxes of both countries because he is considered by the United States to be self-employed and by Canada to be an employee, the tie-breaker rule is that the person will be treated as self-employed. Mr. Rusten falls within this tie-breaker rule. The Internal Revenue Service has the exclusive right to tax him as a self- employed person residing in the United States, but without the tie-breaker rule the Canada Revenue Agency would have the right to tax him as an employee working in Canada. Unfortunately, the Canada Revenue Agency did not apply the tie-breaker rule, and any attempts that Mr. Rusten made to recover the Canadian taxes that CLN withheld from him were unsuccessful. Section 1401(c) offers no protection to Mr. Rusten because since Canada did not have thePage: Previous 1 2 3 4 5 6 7 8 9 10 NextLast modified: March 27, 2008