In response to COVID-19, many employers have adopted and/or extended their work-from-home policies to continue with "business as usual." In light of the renewed restrictions announced by the Government of Alberta on December 8, 2020 (as we reported on here), work-from-home arrangements will likely be a more common feature for many employees in the near future.
Work from home arrangements raise the question from employees as to what, if anything, they may deduct for tax purposes as a result of working remotely. They also raise corresponding tax questions from employers as to their responsibilities, if any.
The McLennan Ross Tax Group discussed employee expenses, allowances, and reimbursements in a detailed article here.
To summarize, employees who are required to work from home may be able to deduct certain expenses related to a "work space in home" and expenses related to doing their job, such as office stationary. To be eligible to claim "work space in home" expenses, the home office must be where the employee "principally performs the duties of the office or employment" (meaning the employee worked in the home office for more than 50% of his or her work) or the home office is used exclusively for work purposes and used to regularly meet with clients. These expenses are deducted by the employee on their tax returns.
Additionally, an employee may receive an allowance or reimbursement from their employer for work-related costs. The CRA has stated that in light of the COVID-19 pandemic, up to $500 of the cost of a computer or office furniture may be reimbursed by an employer to an employee as a non-taxable benefit. Employers are encouraged to retain the invoices provided by employees for these reimbursements.
In addition, the Federal Government announced that a "simplified method" will be introduced for employees to claim up to $400 in home office expenses without the necessity of tracking or reporting the details of those expenses. The Federal Government stated that, generally, employees will not be asked to provide a T2200 form from their employer, which is a Declaration of Employment Conditions where the employer confirms that the employee meets the eligibility criteria for claiming employee expenses (e.g. that the employee is required to work away from the office, etc.). The $400 represents the maximum claimable amount and is based on the amount of time that the employee actually works from home. Therefore, an employee who works less than full time from home is eligible for a pro-rated amount.
It is expected that the Federal Government will announce further details on this new simplified method. For now, while this is great news for employees overall, we are left with some questions:
- If the employee is generally not going to be asked to provide a T2200, will the employer still be required to prepare one?
- Will the CRA soon recognize meetings through video-conferencing technology as "meetings with clients"? As noted above, "meeting with clients" is one of the eligibility criteria to claim the "work space in home" expenses. The CRA's longstanding position is that virtual meetings do not qualify as "meeting with clients".
- How will the amount of time be calculated for the $400 maximum? Is it based on a week, a month, or the full tax year?
Lastly, the simplified method is intended for employees with "modest [home office] expenses". The normal process for claiming employee expenses is still available to employees who qualify. Particularly, employees who have worked fully from home for at least 50% of this year and have a dedicated work space in their home. Employees with significant employment expenses should consider using the normal process as their eligible expenses may exceed the $400 claimable under the simplified method.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
