I have a client that was a non-resident of Canada throughout 2022, and earned employment income for services they rendered outside of Canada. Their Canadian based employer incorrectly withheld Canadian tax and issued a T4 slip. My practice deals with a lot of non-residents, and I have seen this kind of error before, but much more frequently so since Covid and the increase in remote work. Generally, I file a non-resident T1 showing the income as reported on the T4, and then claim an offsetting deduction for the employment income earned outside of Canada while a non-resident (in this case it is also treaty exempt), resulting in a full refund of the tax withheld (CPP & EI are a separate problem).
The twist with this particular client is that the employer was based in Quebec, and also withheld Quebec tax and issued a Relevé 1. When I enter the T4 showing the employer’s permanent establishment as Quebec, TaxCycle wants to prepare a Quebec return unless the taxpayer is resident in another province or territory. The client has never lived or worked in Quebec, and does not have a Quebec filing obligation. I do not really want to file a Quebec return if I do not have to. Is there a way to get TaxCycle to move the Quebec withholding on to the federal non-resident return as it does for residents of other provinces and territories? Alternatively, any other suggestion of how best to proceed?
Getting the employer to amend or cancel the slips is likely not possible as they are no longer in business.
Thanks.