Some employers require employees to go above and beyond with regard to incurring personal expenses in order to carry out their role. This sounds harsh, but is the reality for a lot of workers. There is however a silver lining for some, you may be entitled to claim some of the expenses on your tax return, and hopefully pump up your tax refund.
What expenses can be claimed
There is a vast amount of expenses which can be claimed, the most common ones being:
- Motor vehicle expenses (Gas, insurance)
- Cell phone expenses
- Use of home expenses (rent, mortgage interest)
- Meals and entertainment
How do I qualify to claim the expenses?
Depending on which type of expenses you are looking to claim, there are difference criteria that need to be met. The main criteria are that the employee was required to use their own funds in order to carry out their job, and that they were not reimbursed by their employer for those costs. For example, if you receive a large monthly car allowance from your employer, you are not able to claim vehicle expenses incurred on your tax return, as you have been reimbursed.
It can be quite confusing to understand what criteria need to be met to claim each of the expense types. If you have any questions, please feel free to contact the Jackstaxback team.
How do I claim the expenses?
If you qualify to claim the expenses, you can ask your employer to fill out a form ‘T2200 Declaration of conditions of employment’. It is a form that outlines the employer’s authorization for you to claim the expenses on your tax return. The T2200 allows CRA to understand why the individual was required to incur the expenses, and that they were incurred in order to do their role. The information will then be entered onto a form T777 on your tax return, in order to submit the expense claim to CRA when filing your taxes.
Please note, CRA can overturn your claim for the expenses, even if your employer has signed a T2200, if they deem the expenses were not allowable.
Do I need to keep receipts?
If audited by CRA, you may be required to provide them with receipts to prove that you had in fact incurred those expenses. In some case CRA will accept credit card or debit card statements as proof of purchase, however they usually require receipts. CRA may also request a copy of your T2200 which must have been signed by your employer. You should keep a copy of your T2200 in your records along with your receipts for the tax year.
What are the chances of being audited?
CRA carry out audits every year on a percentage of tax returns. The more items that are being claimed on a tax return, the more probable that it will be audited by CRA. There have been an increasing number of tax returns being audited with regard to T2200 expense claims. CRA are strict on the requirements to claim T2200 expenses, and as such they carry out a lot of audits, ultimately overturning a lot of the T2200 claims which have been filed.
Questions
If you have any further questions regarding any expense claims, and your potential eligibility to claim them, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.