Taking advantage of working from home expenses on your 2020 tax return
How many times have you heard/read the word ‘unprecedented’ throughout the COVID-19 pandemic? Well get ready to read it a load more times.
With COVID forcing an unprecedented number of employees being forced to work remotely from home, there will be an unprecedented number of people eligible to claim working from home expenses on their 2020 tax returns. You can bet an unprecedented number of individuals will also fail to claim the full amount of allowable expenses available to them on their tax returns, resulting in an unprecedented amount of refund dollars missed by tax payers.
Unprecedented aside, it will pay to file your 2020 tax return correctly. This year CRA has launched a more simplified method for those wanting to claim working from home expenses on their returns, the original detailed method to claim is also available. Those who worked from home for 4 weeks consecutively or longer will be able to claim via the simplified or detailed method on their 2020 tax return. Please review the two scenarios below to see which option works best for you!
I was forced to work from home for more than 50% of the time for 4 consecutive weeks or longer in 2020, if I use the simplified method, how does it affect my tax return?
Individuals will be able to claim a $2 deduction on their tax return for every day they were required to work from home. This does not include vacation days, and the individual will be required to have worked for more than 4 weeks consecutively to make the claim on their tax return. If you worked from home for 100 days during 2020, you can claim $2 x 100 = $200 deduction on your tax return.
You are NOT required to keep receipts when making the simplified claim on your tax return. This is the main benefit of making the simplified claim, as opposed to the detailed claim as you will not be audited by CRA.
I was forced to work from home for more than 50% of the time for 4 consecutive weeks or longer in 2020, I want to use the detailed claim method on my tax return?
If you were forced to set up a home office during the pandemic and carry out 50% or more of your work duties from home more than 4 consecutive weeks, and wish to use the detailed method, you will be able to claim certain expenses on your 2020 tax return, such as:
- Office supplies
- Employment use of basic cell phone service plan
- Long distance calls for employment purposes
You will be able to claim a percentage of the work from home expenses on your tax return in relation to the area of your home which is your designated ‘work space’. For example, if 10% of your home is your work space, you can claim 10% of your rent as a deduction on your tax return for the period of the year you were working from home.
You WILL be required to keep receipts for claims being made via the detailed option.
What will I need to claim the work from home expenses (simplified method) on my tax return?
You do not require any documentation. You will just need to record the number of days for which you wish to claim on your T777S on your 2020 tax return.
What will I need to claim the work from home expenses (detailed method) on my tax return?
In order to claim working from home expenses on your tax return, you will be required to have a T2200 or T2200S form signed by your employer, in which they state that you incurred expenses in order to carry out your role from a home office for 50% or more of the time for at least 4 consecutive weeks. It would be worth enquiring with the HR department to see if they can fill out a T2200/T2200S tax form for you. Without a signed T2200/T2200S, you will not be allowed to claim the work from home expenses on your tax return.
You should keep a copy of your signed T2200/T2200S from your employer, as well as any receipts related to expenses being claimed on your tax return, just in case you are audited by CRA. CRA can request copies of your receipts and T2200/T2200S. Failure to provide either the receipts or T2200/T2200S to CRA may result in your expense claims being rejected.
Why you should be truthful with your claims?
It is illegal to make false claims on your tax return. When following the detailed method, CRA can request copies of receipts in order to confirm that an individual’s expense claims are correct. If CRA deem that you have made fictitious claims on your tax return, they can issue financial penalties. A false claim on your return may encourage CRA to carry out more audits on future tax returns.
If you are unsure of what expenses you are able to claim, or how to ensure you are claiming the maximum amount of allowable expenses possible on your 2020 tax return, why not seek help from a professional.
For many people, 2020 will be the first tax year where they are making working from home expense claims. If you are not 100% sure you are making your claim correctly and wish to remain tax compliant there is no harm in asking a professional for assistance with your 2020 tax filing. The jackstaxback team is always happy to take the weight off your shoulders and ensure that you are claiming the best refund possible, within the tax rules. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.