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Many people were affected as a result of the COVID-19 pandemic
forced to work from home. This has made the staff question whether
They can claim tax deductions for expenses they have incurred
the course of working from home. So were employers
struggling to determine how to comply with administrative
Reporting requirements so that employees can withdraw properly
Home office expenses.
background
The Income Tax Act (Canada) (the
""Tax law") restricts the
Ability of employees to deduct work-related expenses from arithmetic
their income for a specific tax year. The tax law in general
allows an employee to (i) deduct office rent to the extent that
Payment of this rent was prescribed in the employee's contract from
Employment and (ii) the cost of supplies used
directly in the fulfillment of the duties of the employee of
Employment and that the employee was required by his contract
to deliver and pay for employment. However, the tax law goes further
provides that the aforementioned amounts may not be deducted from one
Employee, unless a mandatory form signed by the employee
Employer who certifies that certain requirements were met
is submitted with the employee's tax return for the year. The
The mandatory form must be included in the employee's tax
The return is CRA Form T2200 (a "T2200").
In the past, an employer had to issue a signed T2200
to the employees so that the employees can withdraw
Expenses that they had to bear in the course of their time
Employment.
Consultation process
Many employers expressed concern that it was unclear whether
Due to existing employment contracts, the employees had to work from home
during a pandemic (i.e. most employment agreements do not
think about pandemics – at least before this year). in the
Given the large number of employees working from home
As a result of the COVID-19 pandemic, numerous stakeholders have been reached
Concerns about the administrative burden detailed by the exhibition
T2200 for a large number of workers would be imposed on employers.
First, the Canada Revenue Agency (the
""CRA") suggested a simplified version of
the T2200 to be used in 2020 will be referred to as the "T2200"
Brief "and involved in a consultation process to
Gather feedback. The CRA received feedback on the T2200 Short
between August 24, 2020 and September 18, 2020. One of the most important
Concerns reported by stakeholders during the
The consultation process was the administrative burden
Issue a T2200 Short to anyone who has worked from home. There
There were also concerns that there would be a high margin of error, though
Fill out the new form.
New approach for 2020
On December 15, 2020, the rating agency announced two new approvals
Approaches for employees to claim deductions related to home
Office costs in 2020: (i) a new temporary "apartment"
Tariff method "that does not require a special form
submitted by an employer and by employees (the "Just
method") and (ii) a new detailed claim method
Home office prints that require preparation and
Submission of the new T2200 Short (the "Detailed
method").
The new, temporary flat method
The rating agency introduced the new temporary flat method to simplify matters
the requirements for employees to withdraw
Limited amounts of home office expenses incurred in 2020.
To qualify for flat rate deductions, a
The employee must meet the following conditions.
First, the employee must have been working from home in 2020
The COVID-19 pandemic or the employer must do the
Employees work from home. The rating agency has made it clear that where one
The employee did not have to work from home, but the employer
gave the employee the choice to work from home because
The employee can still have the COVID-19 pandemic
worked from home due to COVID-19.
Second, the employee must have worked more than 50% from home
the time for a period of at least four consecutive weeks in
2020.
If an employee is qualified to use the flat method, the employee is
can claim a deduction of $ 2 per day for each employee's day
worked at home for the four consecutive weeks plus each
extra day he / she worked from home due to COVID-19. The CRA has
clarified that a work day includes both days on which you work full-time as
as well as part-time, from home. However, days off, vacation days,
Sick days or other days of absence do not count as
Working days for using the flat method.
For example, if an employee worked exclusively from home from March to March
June and then worked in the office two days a week from July
From this point on, the employee was able to use all the working days worked from home
Worked from home March through June and any additional days
from that point forward for the purposes of the flat method.
Employees cannot deduct other employment costs if they
Use the flat method. Employees who want to pull off other types of
Expenses (e.g. car costs) are still required
get a T2200 from your employer.
The maximum deduction that can be claimed using the flat rate method
is $ 400 per person. (Several people are working from the same side
At home, you are usually entitled to use the flat method.)
The ability to claim the full $ 400 flat rate deduction
requires an employee to have worked from home for 200 days
2020.
To apply for a flat rate deduction, the employee must
Complete the Option 1 section of the CRA Form T777S (a
""T777S") and submit the completed form
with his 2020 income tax return. A blank copy of the T777S
can be accessed
Here.
The advantage of the new temporary flat method is that
Employees do not have to determine the size of their work area
your home, calculate your home office expenses, or get one
completed T2200 signed by her employer.
The detailed method
The rating agency also provided the alternative detailed method:
that can be used by employees whose home office expenses are in 2020
Exceed $ 400.
The criteria for eligibility to use the flat method (as
described above) also apply to determining the right of use
the detailed method. In addition, you use the detailed
Method, (i) the costs claimed must be incurred in the
the employment of the individual and (ii) the employee must a
Completed T2200 or CRA form T2200S (also known as T2200)
Short) (the "T2200S") signed by him
Employer. The T2200S should be used where an employee has worked
at home due to COVID-19 and just want to claim deductions related to
of home office expenses. Where an employee intends to withdraw others
Types of expenses incurred in connection with his / her employment a more
The detailed T2200 must be obtained from the employee.
The T2200S is a simplified version of the T2200. The T2200S
effectively only requires one employer to respond to three simple ones
Questions relating to an employee. A finished T2200S is not
must be attached to an employee's income tax return for
2020; However, the completed form must be approved by the
Employee in the event that the employee is subsequently checked by
the CRA. A blank copy of the T2200S can be accessed
Here.
The rating agency has made it clear that it will accept electronic signatures
on the T2200 and T2200S to minimize the need for
Meet employers and employees in person.
If an employee wants to rely on the detailed method in
In addition to receiving a completed T2200S from its employer, the
The employee must also see the "Option 2" section of the
T777S, which must be tied to the employee's income tax
Return for 2020. The "Option 2" section of the T777S
requires from an employee a relatively detailed breakdown of
the home office expenses he / she would like to deduct if
Calculation of his taxable income for 2020.
The rating agency has also drawn up a detailed list of the expenses that
cannot and cannot be claimed by an employee who relies on the
Detailed method. The list of the rating agency can be accessed
Here. Deductions made in relation to home office expenses
must be based on the portion of the amounts actually spent that
were used by the employee as part of his employment in
2020. All expenses that are reimbursed by the employee
Employer cannot be claimed. The CRA has indicated that employees
may be entitled to deduct the applicable part of the expenses as
House electricity, heat and water costs, the ancillary costs share of
a condominium fee, home internet access fees, and home maintenance fees
insignificant repair costs and rent for the place where the employee lived
and carried out his / her employment in 2020. Mortgage payments, both
Capital and interest cannot be deducted in detail
Method. Likewise, the costs for capital goods such as a desk or chair,
cannot be deducted using the detailed method.
Home office expenses deducted according to the detailed method
must be divided on the basis of the employee's percentage
Residence occupied by his working area. For example, if a home
Office makes up 10% of the total area of one
Employee's house, then only 10% of each electricity bill and rent
Payment may be deductible according to the detailed method.
Employees may also be able to deduct costs as part of the
Detailed method for items that are consumed directly in the course
their employment like ink cartridges, pens or pencils and
Notepads.
Observations
The flat method is an efficient means for employees to make claims
Deductions related to the home office costs incurred in 2020 as
The employee does not need to fill out a CRA form
Employers and no detailed calculations are required
from the employee.
In contrast, the detailed method may be preferable if a
Employee home office spending will increase significantly in 2020
Exceed $ 400. However, employees must be aware of this
The fact that the detailed method requires staff to prepare
detailed calculations in support of the home office costs they incur
may be deducted in relation to 2020. Particularly noteworthy is the CRA
stated that employees are expected to calculate these carefully
Some of their houses were used to fulfill their employment obligations. in the
According to the rating agency, such calculations require detailed information
Measurements and allocation of the use of public areas by a
At home between use for employment and other purposes. (In this regard
The rating agency has indicated that it expects employees to
Number of hours worked in a week by 168 to determine the percentage
a common room of a house used for employment.) In addition
The rating agency has indicated that several people will be required
who have carried out their employment in the same house for sharing
eligible home office expenses among each other.
The CRA has prepared a calculator that can be accessed
Here to help staff determine the home office height
Costs that you may be able to deduct when calculating your costs
taxable income for 2020.
The above is only an overview and not
Represent legal advice. Readers are cautioned not to do any
Decisions based solely on this material. Rather specifically legal
Advice should be sought.
© McMillan LLP 2020