If a Canadian self employed graphic artist receives USA income for work done in Canada for a USA firm, aside from reporting this income on line 10400 as foreign income of their tax return how does the individual report this income as part of their overall Canadian self employed business. is this money taxable by the CRA or does this individual have to declare this income on a USA tax return or is this addressed in the Canada/USA reciprocal tax treaty and taxes are paid to the CRA for the foreign income amount?
No, you do not need to complete a US return when working remotely from Canada.
As per Canada Revenue Agency (CRA): you would fill out the form T2125 Statement of Business activities or professional activities if you're self-employed. US business income is considered foreign business income thus, you have to report your foreign business income into Canadian dollars in T2125. Please refer to this TurboTax discussion for more information.
*Please note that line 10400 is used when foreign employment income is earned outside Canada from a foreign employer not if you're self-employed.
I also strongly recommend you to check this TurboTax blog: United States-Canada Tax Treaty to Reduce Double Taxation for more information.
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Thank you @Lvsingh_2692 for explaining simply and for pointing out the difference when to use T2125 vs Line10400.
Very helpful.