As 2020 continues to push forward with more questions being generated each day than there often appears to be answers for, it is easy to become lost in the uncertainty of the moment. With each new initiative that has been announced to help your business pull through, there is an equal dose of ambiguity created with additional eligibility requirements and moving expenditure thresholds to meet. In addition, your business will need to know what is taxable in the current period, and what may be deferred or exempt from taxation, all the while you have a business to run within new norms for health and safety for the ultimate protection of your employees, customers and community. Strata-G has identified 4 topics to provide clarity to your business as it moves towards the latter half of 2020
PART1: T2200 – What is it and why do we need to know about it?
4 Things Your Business Expects You to Know About Tax & Incentives – Fall 2020.
PART I: T2200
What is a T2200 and why do we need to know about it?
The T2200 is a form provided by the employer to various forms of employees (salaried, commissioned, transportation) to deduct employment expenses from their income (on form T777 of their personal tax returns). The expenses must be paid by the employee to earn employment income. This means that expenses that are reimbursed, or where allowances are provided, the resulting expenses associated with these reimbursements are not eligible to be claimed by your employees. Most likely if you have commission or transportation employees you have provided T2200’s in the past. However, it is less common to provide T2200 forms to salaried employees.
Beyond the requirement for the expenses to be paid by the employee, to be eligible to deduct employment expenses from their income, employees must be required to work from home, and CRA guidance dictates that working from home should be required at least 50% of the time. This should be documented clearly in writing. For example, an email to employees clearly laying out the terms of working from home, including the eligibility for receiving a T2200, should be considered sufficient.
- Uncertainty: Most businesses were in a position to close their doors for parts of 2020. The question remains, did their employees effectively work from home for at least 6 months/50% of the year, or does the time they were forced to work from home 100% count for T2200 purposes? If my business is eligible to provide T2200 Forms to my employees, what expenses are deductible?
- Clarity: Where businesses have required salaried employees to work from home, as a result of COVID-19, and the employees will have worked from home for at least 6 months out of 12, then as an employer you can provide a T2200 to your employees for certain expenditures borne by the employee. Where the shutdown was less than 6 months and employees worked from home 100% of the time the business was closed, but not necessarily at least 50% of 2020, there is still uncertainty as to whether the CRA will allow a T2200 for these employees.
Retain the appropriate records
Strata-G recommends that in either case, your employees retain appropriate records for the expenses that have been paid for as the result of their employment.
The records must include the following:
- A daily record of expenses, with the receipts
- Invoices
- Monthly Credit Card Statements,
- A record of motor vehicle usage for employment, tracking total kilometres driven, as well as business only.
When the CRA discloses the eligibility regarding whether employees who were forced to work from home due to COVID-19, but for less than 6 months of 2020, Strata-G will update this document, and provide social media announcements.
Eligible Expenses
With regards to eligible expenses, big ticket items such as mortgage interest and property tax cannot be deducted. However, the list below covers common deductible expenditures:
- Accounting fees
- Allowable motor vehicle expenses (including Capital cost allowance)
- Travelling expenses if required for work
- Food & Beverage
- Lodging
- Transportation
- Parking
- Office supplies but not equipment, not even capital cost allowance
- Expenses may include ink, stationery, stamps, toner
- You cannot deduct monthly access fees for internet
- Cell phones: You can deduct airtime expenses that relate for employment, as well as a reasonable cell plan. The employee should track what is personal data and what is business
- Office rent
- Work Space in home if work completed there more than 50% of the time
- Can Deduct: allocation of electricity, heating, and maintenance
- Cannot Deduct: mortgage interest, property taxes, insurance, or capital cost allowance
- If rented, deduct the portion of rent that comprised your work space
Part 1:
T2200 – What is it and why do we need to know about it?
Part 2:
Cash Flow: we need it where can we find it?
Part 3:
Key Tax Implications arising from COVID-19 relief
Part 4:
Treaty Benefits arising from COVID-19 relief
