Why should you file your return as soon as possible

What are the benefits of filing your tax return as soon as possible?

With CRA expected to authorize online filings of 2020 tax returns on February 26, 2021, it means tax season is right around the corner. A lot of us are slow to file our tax returns, quoting ‘There’s still months before it needs to be filed’, however it can certainly pay to file your taxes as soon as possible. Here are some reasons why.

You will receive your refund quicker

Probably the most obvious reason to file your taxes earlier, is the thought of receiving your tax refund as soon as possible. Why wait to receive a refund when you can use those tax dollars however you see fit. 

Dealing with unwanted surprises sooner, the dreaded ‘balance owing’

Unfortunately, a few of us will receive the dreaded news that we actually owe additional taxes to CRA, rather than being due a tax refund. Even as an employee with taxes being deducted through payroll, there will be some who will owe additional taxes to CRA, as their employer will have failed to deduct a sufficient amount of tax from their pay cheques. The additional taxes will need to be paid to CRA by April 30th (This could be pushed back due to COVID relief by the Government), it will be easier to budget for any tax amount owing if receiving the news earlier rather than later. 

GST/HST credit calculations

For those who qualify to receive the quarterly GST/HST credit, you are required to file your taxes in a timely manner to ensure that the credit payment can be made to you on time. Delays in filing your taxes can result in delays in receiving your credit. We have seen cases where credit payments have been missed, and clients have been required to chase up to receive their missing payments.

Applications for CRB

For workers who are new to Canada, and have recently lost their work position due to COVID, having a tax return filed with CRA will help speed up the CRB application process. It means Services Canada will have access to all of your income information on their system, to allow them to authorize your approval to receive CRB payments as quickly as possible. 

Mortgage / Loans / Credit applications

With 2021 being forecasted to break real estate sales records, there will be an increased number of individuals seeking mortgage approvals. Mortgage brokers will be keen to see your 2020 Notice of Assessment as proof of income, the Notice will only be issued to you by CRA if you have filed your 2020 tax return. Filing your taxes and having your 2020 Notice of Assessment will help speed up your mortgage approval process.

If you are looking to file your taxes as soon as possible, and require assistance, why not contact a professional.

The Jackstaxback team is always happy to help those who require assistance with filing their tax returns. We are able to prepare tax returns before the tax season if officially open, and have them ready for submission to CRA upon the February 26, 2021 opening date. 

How does working from home during COVID affect my 2020 tax return

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:

  • Rent
  • Internet
  • Electricity
  • Heating
  • 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.

Short term residency in Canada due to COVID – Do I file as a Non-resident on my tax return?

For some individuals holding working holiday visas the dream year in Canada was cut short due to the COVID-19 pandemic. We have received tax related questions from individuals who arrived in Canada in the first couple of months of 2020, and who ultimately had to return home after only a few months in order to return to their families. Not only was their working holiday shortened, it will also have an effect on their tax residency, and how their tax returns will be filed at year end. 

To file as a tax resident or a non-resident? That is the question

The benchmark for attaining tax residency, and filing your tax return is by residing in Canada for 183 days or longer during the tax year. For those arriving at the end of the year, you can still file as a tax resident with less than 183 days, as long as you are planning on residing for 183 days or longer split between two tax years (ie arriving November 1, 2020 and planning to leave June 1, 2021).

If you arrived in Canada the beginning of 2020 and had to return home less than 183 days later, and did not return to Canada later in 2020, you will be required to file your 2020 tax return as a non-resident. 

How does filing as a non-resident affect your return?

When filing as a non-resident, you are required to report all Canadian income on your tax return. It is most likely that your income will be reported on T4s received from any Canadian employer you had during the tax year. You will also be required to make a declaration about the amount of foreign income you earned during the tax year. If your Canadian income represented 10% or less of your total world income for the tax year, you will not be required to pay tax on your Canadian income, this would result in a tax refund when filing your return. 

If your Canadian income made up more than 10% of your world income for the tax year, you will be required to pay a 25% tax rate on that Canadian income. Most employers will have deducted income tax from your pay at a rate which is less than 25%, meaning you will be required to pay more tax to CRA when filing your return, in order to cover the shortfall in tax owed.

When filing as a non-resident it is not possible to file your tax return online, you will be required to print, sign and mail your tax return to CRA.

If I have a tax balance owing can I simply not file my tax return?

If you find yourself with a tax balance owing to CRA, you are obligated to file the tax return and pay the balance to CRA. If you wish to return to Canada and work in the future, the outstanding tax balance could impede future immigration/work permit applications.

Not too sure on your tax residency? Ask a tax professional for help.

If you are unsure of your tax obligations and want to be 100% sure of your tax residency status it may be wise to ask a professional for assistance with your tax return filing. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.

How does leaving Canada in 2020 due to COVID-19 affect your 2020 tax return

A large number of individuals departed Canada during 2020 to be closer to family members living abroad, and ride out the Pandemic with those closest to them. Time spent outside of Canada may result in filing requirements on your tax return which are outside of the norm. It is important to make sure that you are being fully tax compliant with regard to filing requirements due to time spent outside of the country.

Common scenarios for those leaving Canada during 2020 due COVID:

I kept my job in Canada whilst I worked remotely for a few months in another country, I later returned to Canada, will this affect my return?

By maintaining your employment with a Canadian employer you will be considered as a Canadian tax resident throughout your time outside of the country. This means you will file your 2020 tax return in the same manner as if you had been residing in Canada for the entirety of 2020. As you had not taken up employment abroad, you had not taken up tax ties with another country, helping maintain your tax residency to Canada. 

I left Canada for a few months due to COVID, I did not work while abroad, I returned before the end of 2020, how does this affect my return?

You are typically required to be residing in Canada for 183 days or more a year to maintain your Canadian tax residency, other actions can also support your maintenance of Canadian tax residency, such as not starting tax residency in another country. If you were outside of Canada for less than 183 days, you have not problem in proving you maintained Canadian tax residency. If you were outside of Canada for longer than 183 days, but did not take up employment abroad, you can also claim that you maintained Canadian tax residency. Other things such as keeping physical property in Canada, showing your intent to return can also support your maintenance of Canadian tax residency.

By maintaining Canadian tax residency you will file your 2020 tax return like normal, in the same manner as if you resided in Canada for the entire year. 

I left Canada for a few months due to COVID, I worked for a foreign company while abroad, I returned before the end of 2020, how does this affect my return?

If you left Canada for a few months, and took up employment while outside of the country, you can also maintain your Canadian tax residency for the entire year if you were residing in Canada for at least 183 days during 2020. 

As you earned foreign income during your time abroad, you will be required to make a foreign income declaration on your Canadian tax return. You will be required to declare the total foreign income earned, as well as the total foreign tax paid on that income. If CRA deems that you paid sufficient foreign tax on that foreign income, you will not be required to pay Canadian tax on that income. Worst case scenario, if CRA does not deem you have paid sufficient foreign tax, you will also be hit with Canadian tax on that foreign income. 

I left Canada during 2020 for over 6 months and have been working abroad, I am planning on returning in 2021 at some point, how should I file my tax return?

If you left Canada for over 6 months, took up employment abroad and have not returned to Canada before the end of 2020, you will be considered as a Canadian tax emigrant for 2020. This means that you will have ceased to be a Canadian tax resident on the date you left Canada in 2020 and will be required to file an emigrant tax return. 

If you return to Canada in 2021 you will file as a newcomer tax resident when filing your 2021 tax return.

Does tax residency and maintaining tax compliancy seem like too much of a pain for 2020? Why not ask a professional for help?

2020 will be a particularly unique year for tax filing with regard to tax residency. If you are unsure of your obligations and want 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 your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.

How will my 2020 tax return be affected by COVID-19 relief payments?

There are important things to be aware of before filing your 2020 tax return. Rather than letting 2020 deal you one final blow by being left in that dark over your tax filing, it is best to be prepared. CRA are not the most forgiving government agency, and will not turn a blind eye to penalizing individuals who repeatedly fail to correctly declare all income, even by an honest mistake.

I received CERB/CRB payments; how will this affect my return?

The CERB was introduced as a form of EI payment for those who had lost their employment due to COVID-19, which was subsequently replaced by the CRB payment. Like with other forms of EI, the payments are treated like income, meaning that the payments are taxable. Services Canada are supposed to deduct tax off the payments (sometimes they forget), however the tax deducted is usually a very low percentage. 

If you were working in a high paying role, where you were paying a fairly high percentage in tax, you can be sure that the amount of tax being deducted off your CERB or CRB payment was too low. This means that you will owe a fair bit of tax to CRA at year end. 

If you received CERB/CRB payments during 2020, there is a strong possibility that you will owe some tax to CRA when filing your 2020 tax return. Therefore, it would be advised to save a portion of those payments (if possible), to cover a potential tax balance owing when filing your tax return.

The same applies for those who are considered to be self-employed rather than employed.

If I have a balance owing to CRA, what does this mean?

If you have a balance owing to CRA, this will eventually need to be settled. The payment deadline is typically April 30th of the following year (April 30, 2021 for 2020 tax returns). There is the possibility that it could be extended, however it is best to prepare for the worst-case scenario, which is April 30, 2021. Any tax balances owing which remain after the deadline can be subject to interest penalties from CRA

I was overpaid CERB, what should I do?

If you were accidentally overpaid CERB, it is advisable that the overpaid funds are returned. The funds should be returned as soon as possible, so that any tax forms issued to you by Service Canada show the correct amounts to be declared on your tax return. Errors when filing your tax return are notoriously difficult/slow to be rectified with CRA.

How do I declare the CERB/CRB payments on my tax return?

As with all EI payments, a T4E will be issued by Services Canada to individuals who received the CERB or CRB benefit payment. You should receive a copy in the mail, however you will also be able to access a copy of the T4E through your online Services Canada account. This T4E must be reported when filing your tax return. CRA can apply failure to declare penalties on individuals who repeatedly fail to declare all income on their tax returns. It is unlikely if you are a first time offender, however it is best to declare all income slips on your tax return.

I received large payments for the GST/HST credit, does this affect my return?

The larger payments received by individuals for the GST/HST credit are non-taxable payments, they will have no affect on your 2020 tax return filing. So, it’s not all bad news.

The 2019 tax filing deadline was delayed last year, should I wait this year?

There is a strong possibility that the 2020 tax filing deadline, as well as the tax balance owing payment deadline will be pushed back again this year. However, if you wish to continue to receive GST/HST credit payments on time, you will be required to file your tax return as soon as possible. The 2020 tax filing opening date should be in late February 2021. It is advised to file your return as soon as possible, just in case you have a balance owing, it is better to know where you stand, sooner rather than later.

If you are unsure of filing your 2020 tax return, ask a professional for help

If you are feeling unsure of your 2020 tax filing obligations, you can always ask a professional for assistance. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.

2019 Tax Year: COVID-19 Updates

Canada Emergency Response Benefit (CERB) payments, how do they affect your tax return?

The Canadian Government has approved the issuance of an unprecedented amount of benefit payments to individuals, in response the large number of individuals who have unfortunately lost their jobs, as part of the COVID-19 response lockdown. It is important to note, the CERB payments are considered as taxable income, and does not have any income tax deducted at source like regular EI payments. This means that when you file your 2020 tax return, you will be required to pay income tax on the CERB payments received. This could come as a shock, and would be a very unwelcome surprise when filing 2020 tax returns.

It is advised that individuals receiving the CERB payments do their best to try to save some of the funds, as a portion will need to be repaid to CRA when filing the 2020 tax return. The amount that will need to be repaid as tax will depend on the individual’s total income for the tax year. Individuals in a higher tax bracket will be required to repay a larger amount than others in a lower tax bracket. We know it will be difficult to try to save some of the CERB payment, especially with the cost of living and rent, however any amount saved would help in bring down the balance owing at year end.

The due date on balances owing to CRA for the 2020 tax year is April 30, 2021.

First time tax return filers who have mailed their returns to CRA

We have been contacted by first time tax return filers who have mailed their 2019 tax returns to CRA. We have been informed by CRA representatives that they are no longer processing paper returns, in response to departmental closures forced by COVID-19. Unfortunately, this means for many first time tax filers who independently submitted paper tax returns to CRA will be waiting a lot longer than the usual 16-18 week to receive their refund.

However, CRA have not authorized EFILE registered tax return companies to be able to file tax returns online for individuals who have already submitted their returns via mail to CRA. When a tax return is filed online, the refund is usually issued in 2-3 weeks. For individuals who have been laid off due to a shortage of work, a tax refund being issued in a more timely manner could come in handy.

Have you returned home prematurely due to COVID-19 and have still received quarterly GST/HST credit payments?

In the last month, there are people who have unfortunately been forced to return to their home country prematurely due to COVID-19. If you have not updated CRA to let them know that you have moved back home, you will continue to receive the GST/HST credit payments as normal. Unfortunately, if you have exited Canada, you no longer qualify to receive the credit payments, as they are reserved for individuals who are currently tax residents of Canada. If you have been receiving the quarterly payments, CRA will request that the funds be returned to them after they have processed your 2020 tax return, and realize that you ceased to be a Canadian tax resident in early 2020.

It is advised that if you have left Canada, or are planning on leaving Canada soon, that you update CRA once you cease to be a Canadian tax resident.

Get in contact with us today for a free quote.

CRA updates and changes to tax filing deadlines due to COVID-19

There have been many changes made by CRA to the current 2019 tax filing schedule, and increases to benefit entitlements. It is advised to keep track of the changes, as you may be entitled to a payment deferral, or increased benefit payments.

2019 tax filing deadlines changes for regular individual tax returns

CRA have extended the tax filing deadline for 2019 regular individual tax returns (T1 returns) to June 1, 2020, which has changed from the usual date of April 30. This means that if you have a balance owing to CRA for a shortfall in tax being deducted from your 2019 pay cheques, you will not be hit with a late filing penalty unless you file after June 1. If you are employed, and have a balance owing when filing your taxes, you will not need to pay the balance to CRA until the end of August 31, 2020, after this date your tax balance owing will start incurring interest.

2019 tax filing deadlines changes for self-employed tax returns and GST remittances

For self-employed, contractor, sole-proprietor and partnerships, the tax filing deadline remains as June 15, 2020. Good news though, you will not be required to settle any balances owing on your 2019 tax return until the end of the day August 31, 2020.

More good news, if you are required to file and remit GST for the 2019 period, the filing deadline for annual GST filing is still June 15, however the payment deadline for net GST amounts owing has been moved from April 30 to June 30.

Changes to GST/HST credit benefit payments

CRA has increased the GST/HST credit amount in order to further assist those who qualify to receive the credit, during these financially testing times.

If you normally receive the quarterly credit and have filed a 2018 tax return, then you will automatically receive up to $443 if you are single and $580 to $1,160 if you are married. You are not required to have filed your 2019 tax return in order to receive the increased GST/HST credit amount

Why you should still file your return as soon as possible, especially if you are a newcomer to Canada

There are many benefits to filing your return on time, rather than using the filing extensions. If you qualify to receive the quarterly GST/HST credit for the upcoming 2020 year, then filing your 2019 tax return on time will ensure that there are no delays with receiving the credit payments on time.

If you are new to Canada in 2019 and are looking to apply for the Canada Emergency Care Benefit (CERB) payment, you will need to have access to an online CRA account. The easiest way to become authorized to set up an online CRA account is to file a tax return. The quicker you file your 2019 return, the quicker it will be processed by CRA, and then you can set up an online account with CRA.

Questions

If you have any questions about changes made to CRA’s 2019 tax filing and payment deadlines, please do not hesitate to ask one of our team via email.

Why CRA have changed my refund amount?

Have you received a reduced tax refund amount which is different to the amount you were expecting to receive? Try not to panic, there is a strong possibility that CRA have made a mistake when processing your tax return. What should you do?

Review your Notice of Assessment

When CRA process a tax return they issue a Notice of Assessment to you. This will be received either by mail or online to your online CRA account. You will receive your Notice of Assessment via mail at the same time as receiving your tax refund cheque. If you are set up with direct deposit tax refunds, there may be a delay between receiving the mailed Notice of Assessment or electronic copy. Your Notice of assessment will hold the key to understanding why your tax refund has been changed.

Tax return changes – Some common causes

Calculation error

We all make mistakes, including CRA. Sometimes CRA’s automated processing system will incorrectly adjust your tax return, resulting in a different tax refund amount being issued

Missing Relevant (T4) information

When you file your tax return, it is important that all relevant information (including T4 information) is included in your calculations before the tax return is submitted to CRA. Failure to include all T4 information will result in CRA making an adjustment to your tax refund amount, when they include all relevant information.

Immigrant/emigrant tax returns

If you have a date of entry (immigrant) or a date of exit (emigrant) on your tax return, it is very possible that CRA may have made an error with processing your tax return. We see more clerical errors made on average with immigrant and emigrant tax returns.

Non resident tax return

CRA will sometimes made adjustments to individuals tax residency status. Sometimes in error, CRA will change your status from tax resident to non-resident if their automated system incorrectly identifies dates of entry and exit, this usually happens when individuals do not file a tax return for the year they first arrive in Canada. Depending on your situation, CRA may be correcting your tax residency status

What should I do?

Depending on the change made to your tax return, you can either accept the changes made by CRA, or you can dispute them. There is typically an explanation portion on your Notice of Assessment giving a brief description of the changes which have been made to the original filing of your tax return. If you believe CRA have incorrectly adjusted your tax return, you will be able to dispute the changes made.

If you review your Notice of Assessment there will be a contact number that can be used to call CRA and speak with a representative. The CRA representative will be able to provide instruction on disputing the changes.

If in doubt contact your tax accountant

If you are unsure as to why CRA have made changes to your tax return, and your possibility of a successful dispute, it would be wise to contact your tax accountant (if you have one). They will be able to review your Notice of Assessment and advise the best course of action for a dispute. At jackstaxback we offer complimentary post tax filing advice to all clients, ensuring that any CRA clerical errors resulting in a reduced tax refund are reversed, and the correct refund amount being issued.

Airbnb Hosts – being tax compliant

We often here our clients say ‘What are my tax obligations for being an Airbnb host, and what must I am required to declare to be tax compliant’

Many of us have enjoyed the supplemental income of being an Airbnb hosts over the past few years, unfortunately it does bring the added responsibility of reporting rental income when filing a tax return, and in some cases is may even be considered as ‘business income’. There are steps you can take to ensure that you are being ‘tax compliant’.

Rental income or business income?

The majority of Airbnb hosts receive payment for short-term rental services provided to their guests. This income is to be recorded as rental income when filing a Canadian tax return at year end. However, there are some people who provide other services such as meals, laundry (other than towels and linen), in which case this income can be viewed as business income (self-employed income). Neither rental income, or business income has tax deducted at source, and therefore needs to be paid to CRA at year end when filing a tax return. If you are unsure of the type of income you need to declare on your tax return, please feel free to contact the Jackstaxback team.

How does rental income affect my tax return?

If your Airbnb income is treated as rental income on your tax return, you will be required to fill out a T776 as part of your federal T1 tax return. If the income is to be treated as business /self-employed income you will be required to complete a T2125 as part of your T1 tax return. Both forms can be complicated to figure out at first glance if filing your taxes yourself, and we do advise people to seek advice from a tax return specialist or accountant. Failure to report the income correctly could result in future warnings or penalties from CRA.

GST responsibilities

Currently, charging GST is the responsibility of the host. If you expect to earn over $30k in self-employed/business income from Airbnb you are required to apply for a GST number, and incorporate GST as part of your fee to guests. As with all services and goods provided within BC, you are legally required to charge GST on those goods or services should your revenue surpass $30k within any 12-month period. You will also be required to file a GST return alongside your tax return at year end, a service which is offered by Jackstaxback.

Why you should be tax compliant

Failing to be tax compliant can result in hefty fines/penalties from CRA if your tax return is not correctly filed. Any omissions of information, or misfiling of information with your tax returns are frowned upon by CRA, and their audits can mount if you are unable to provide them with the information they require.

It is always advised that tax returns should reflect the financial transactions that occurred in the year, in order to stay on the ‘good’ side of CRA. It is also advised that organized logs of receipts and expenses are kept in order, to ensure that potential audits are easily resolved.

Questions

If you have any further questions regarding your rental income or all other tax matters, 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.

I pay personal expenses in order to do my job. Can I claim?

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.