Even if the world’s current situation requires you to work from home due to the COVID-19 pandemic, you are still eligible for specific employee benefits. It includes potential deductions being available to taxpayers that previously they may not have been eligible to deduct on their personal tax return! Do I have your attention now?
While your remote work setup is only temporary (for some), you are still allowed to claim certain home office costs that you incurred while you continued working from home. But to become a candidate for these deductions, you must be able to prove that you worked from home in 2020 for more than 50% of the year.
The big catch, you need to have your employer provide you with a signed T2200 for the tax year in question that states you were required to work from home as a condition of your employment.
A Form T2200S is a legal document involving a Declaration of Conditions of Employment for Working at Home Due to COVID-19. It’s an abbreviated version of the Form T2200 that your employer can also provide if you were tasked to work from home last year because of the COVID-19 pandemic.
This document will prove that you worked from home because of the crisis. It will also certify that you accumulated home office expenses applicable during your work hours or while completing your responsibilities within a certainly given timeframe.
Meanwhile, a Form T2200 is also under the Declaration of Conditions of Employment. It is a form that your employer completes to prove the valid claims regarding your employment situation and the requirement for you to work from home and incur expenses related to your employment.
This form is a much more detailed way of estimating your home office expenses compared to a Form T2200S. If you need help organizing your records or sorting through the complexities of what is and what is not deductible, you should hire an accounting firm to help you ensure you include the correct expenses and that you also don’t miss out on any other potential deductions.
The Canada Revenue Agency (CRA) modified the procedure to make it easier for employees working from home, particularly those who were impacted by the COVID-19 pandemic. They developed simpler versions of Form T2200 (T2200S) and Form T777 (T777S).
Before you submit the Form T2200S or Form T2200, you must make sure to review your individual situation and ensure that you meet all eligibility requirements. If you are unsure or need assistance in determining your eligibility reach out to an accounting professional. The part where taxpayers typically make mistakes is in completing the T777 (or T777S) when calculating business use of home or other related expenses. There is a great deal of information that will need to be collected in order to properly prepare your business use of home calculation, be sure to do your due diligence prior to preparing your return and the related calculations.
On the plus side, the CRA has extended their list for eligible expenses to be deducted from your costs as work from home expenses, including your internet access fees.
Employment expenses are one of the most highly reviewed personal tax items! You need to be confident that you are in fact eligible to claim the expenses you are including on your return or the CRA will reverse these upon review. Should this happen and the deduction claimed is reversed, there will be interest charges you as a taxpayer will be responsible for; make sure you are confident in the claims you are making or seek out a tax professional who can guide you through the process.
If you expect to receive reimbursements from your employer for working from home and incurring work expenses during the COVID-19 pandemic, be sure you factor this into the amounts claimed as this must be deducted from any amounts deducted on your personal income tax return, more specifically your T777 (or T777S). If you worked from home and incurred expenses that pertain to you performing your job, make sure to reach out to your employer and see if they will be providing you with a T2200 for the 2020 tax year.
Many clients have come to us this year for the first time faced with the challenge of navigating new tax legislation, determining what deductible employment expenses they might be eligible to claim, and trying to navigate working from home, along with having children at home with them. Balancing all of these can be a real challenge and perhaps seeking out a tax professional can help remove some of the stress Canadians are currently experiencing.
Are you looking for accounting and bookkeeping services in Canada to help manage your work from home expenses? Blueprint Accounting is a cloud accounting firm that offers small and medium business bookkeeping, accounting, and tax solutions to our clients. Get in touch with us today to request a quote!
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