So, you are an employee and receive a T4 at year-end.
During the course of the year, you incur costs directly related to doing your job.
Can you claim these as an expense against your T4 income?
Maybe, maybe not.
There are items an employer may require an employee to supply or pay for that Canada Revenue Agency (CRA) may consider a necessity to earn income and therefore allow the employee to make a deduction against T4 earnings.
First though, an employment expense claim made by an employee must be supported by a Declaration of Conditions of Employment Schedule T2200 completed and signed by the employer that details what must be provided by the employee at the employee’s expense.
The T2200 does not have to be filed with the tax return but must be available to CRA at CRA’s request.
It’s wise to point out that just because an employer has provided a T2200 to an employee, does not mean CRA will allow the expense claim if it’s reviewed.
Examples of expenses include business travel, meals and entertainment, office supplies, cell phone and even wages for an assistant.
Trades people, including apprentices, who are required to supply their own tools at their own cost are eligible to claim this expense against their income earned from their trade.
This includes forestry workers.
Sometimes an employer’s place of business is not located reasonably close for the employee to use as a regular base location.
In this case, the employee may be eligible to claim business use of home, often referred to as home office expenses.
If the employer reimburses any amount to you for any of these expenses, the allowable claim is reduced by that amount.
The use of a personal vehicle can also be an eligible expense if an employee is required to use their own vehicle for business.
This does not include travel to and from work.
If an employer reimburses an employee for all or part of their actual expenses or by the CRA prescribed flat mileage rate, the vehicle expenses are not deductible.
Can you claim employment expenses if you are the shareholder of a small corporation, in other words “the owner”, and you are on payroll as an employee?
The short answer is yes, but two conditions must be met.
The expenses must be reasonably similar to what any other employee experiences within your company and also within the industry itself.
In recognition of people having to work from home in 2020 due to COVID-19, CRA has designed a special claim this year for home office expenses.
It is a flat rate of $2/day for each day worked at home, up to a $400 claim conditional on having worked from home for a period of at least four continuous weeks and having spent a minimum of 50 per cent of your normal work hours doing work related tasks during that four-week period.
Once this qualifier is satisfied, any and all days count toward the $2/day expense, up to the 200 day limit.
To make this flat rate claim, nothing is needed from your employer and you don’t have to have saved the paid receipts for the expenses.
And in fact, even if your employer reimbursed you for some, not all, of your expenses, you can still make the claim.
If you wish to make a higher value home office expense claim, or include costs incurred outside of your home such as vehicle expenses or meals and entertainment, the normal routine previously outlined must be followed.
Ron Clarke has his MBA and is owner of JBS Business Services in Trail, providing accounting and tax services.