Guide to T2200 & T2200s: Work from Home Employment Expenses

Many Canadians during 2020 and 2021 were forced to alter their normal routines and move their office space to their home.

As you may remember, or are probably still experiencing, it was hard at first for many people, but with every major change in life we adapt and move forward. Many Canadians had to go out in the first half of 2020 and purchase stationery, laptops, hard drives, desks, chairs and much more, some on their own dime. Now, some Canadians have embraced this change in its entirety and are actively seeking jobs which facilitate a work from home mix.

Fortunately, there are many items employees can claim as deductions to reduce their taxable income. However, employment expenses are an area that the Canada Revenue Agency (CRA) regularly reviews for discrepancies so you need to make sure that you know exactly who can claim them, who cannot claim them, what you can claim and what you cannot claim.

What Employees Cannot Claim as a Deduction:

When examining employment expenses, there are certain items, whether you need them or not for work, are not deductible:

• Travel to and from work (however there are other instances in which travel is so hang on!)

• Personal expenses such as work suits and clothing, dry cleaning, haircuts and grooming, shoes, etc.

These expenses are not deductible by everyone, this includes corporations, small business owners (sole proprietors), partnerships, rental property owners, and individuals. Sometimes there are exceptions for specific industries that require specific clothing items, such as a construction worker and steel toed boots, but it is always best to seek advice from a professional before attempting to claim anything you are not sure of.

Can I Deduct Employment Expenses (T2200)?:

To be eligible to claim employment expenses, you, the employee, must meet the following:

1. You are required to pay your own expenses under the contract of employment (this does not need to be a written contract).

If you have a formal contract from your employer to you this is great, however it only needs to be an implied contract. For example, pretend that you are a carpenter for a construction company and you are required to use your own personal vehicle to perform your employment duties. Further, your salary takes into account that you will have additional expenses but your employer states that they will not be reimbursing you directly for these expenses. This is an implied contract and therefore you should collect your vehicle related expenses in order to claim these as a deduction against your income.

2. You do not receive allowances for the expenses or that the allowance was included within your income.

Using the example above, if your employer was to give you a vehicle allowance of $500 per month that compensates you for using your personal vehicle to perform employment duties. In this case you are being reimbursed so you would need to include this as income to be able to deduct vehicle related expenses against it. There are taxable allowances and non-taxable allowances, so if you are unsure of your situation it is always best to seek advice from a professional.

What About Working From Home in 2020 and 2021 (T2200s)?

As many Canadians have had to work from home through 2020 and part of 2021, the Federal Government and CRA have tried to alleviate some of the difficulty with filing a T2200 and T777. This does not mean you cannot go through the full process of completing a T2200 and T777 if you want to. It just means that if you find it difficult to have your employer fill out a long form and would like to simplify the entire process you can use the one page form of the T2200s Declaration of Conditions of Employment for Working from Home Due to COVID-19.

The Detailed Method (but simplified)

So for this method, the same eligibility rules above apply, however you will only need to have the 1 page T2200s and a 2 page T777s Statement of Employment Expenses for Working at Home Due to COVID-19.

This will mainly be for people that have home office expenses as you will see on the form but the qualifying period for these expenses has been shortened so to qualify you will need to have worked from home for more than 50% for at least 4 consecutive weeks.

Remember, you must keep your receipts.

So if you are eligible to deduct employment expenses, your employer must issue a T2200 Declaration of Conditions of Employment form. Tax preparers cannot complete this form for you, and it is not a form that the employee (you) can prepare. This form will outline:

• Employee expenses they were required to pay on their own;

• Employer disclosures on what the employee was reimbursed for; and

• Some additional rules about expenses related to commission sales people (expenses most other types of employees may not deduct).
  

Once you have the T2200 form filled out and signed, you will need to keep this in case the CRA reviews your T1 tax return. The next stage would require completing a T777 Statement of Employment Expenses which will be submitted with your T1 tax return and is best completed with the help of a professional to avoid claiming non-eligible items and incorrect prorating.

Can We Simplify This?

YES! As we all know many people forget to keep receipts for certain items which prevents them from being able to claim deductions later on. Thankfully the CRA has simplified the above further through the following:

The Simplified Method (really really simple)

For the Simplified Method, this is essentially a temporary flat rate method to prevent having to fill out a T2200 or T2200s and also for those individuals that have forgotten to keep their receipts.

Essentially you take the number of days you worked from home and multiply that by $2 a day for a maximum deduction of $400. So if you worked from home for 200 days in the year, you will be able to claim the $400 deduction maximum.

It would be wise to obtain a letter from your employer specifying when you were required to work from home however this is not required either.

If you need further help or assistance. Always feel free to contact Fix My Books as we are here to help!