Canadian Taxation

2013 Personal Income Tax Questionnaire – Employment Expenses

Published On January 20, 2014 | By Joseph (Ken) | 2013 Tax Time Questionaire, Personal tax

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Today’s article relates to question #6 on the 2013 Personal Income Tax Questionnaire sent to clients.

ARE YOU CLAIMING EXPENSES RELATED TO EARNING EMPLOYMENT INCOME?

Guide T4044 looks at the issue of employers requiring employees to incur costs to earn employment income.

For those employees, the CRA requires you fill out Form T777 (Statement of Employment Expenses), detailing those costs, and submit it with a Form T2200 (Declaration of Conditions of Employment), signed by the employer confirming that incurring those costs were a condition of employment.

There is no financial consequence to your employer signing a Form T2200 and therefore, you should consider discussing the issue with your employer, as the tax savings can be significant. 

The type of expenses that are deductible are:

  • Accounting and legal fees – you can deduct reasonable accounting fees you paid for help to prepare and file your income tax and benefit return.
  • Advertising and promotion – you can deduct amounts you paid for business cards and/or promotional gifts.
  • Allowable motor vehicle expenses (including capital cost allowance) – although you cannot deduct the cost of a property, such as a vehicle or musical instrument that you use to earn your income, you can deduct a percentage of the property’s cost each year as wear and tear.
  • Food, beverages, and entertainment expenses – you can deduct part of the cost of entertaining clients or meal related costs when travelling away from your municipality if more than 12 consecutive hours.
  • Travel and lodging – if you did not receive a non-taxable allowance for travelling expenses and were required as part of your employment to travel away from your municipality.
  • Supplies – such supplies are only those materials you use directly in your work, and for no other purpose.
  • Other expenses – includes such costs as licences, computers, cell phones, and other equipment, salaries, office rent, and training costs to name a few.
  • Motor vehicle expenses – you can deduct expenses you paid to run a motor vehicle you use to earn employment income.
  • Work-space-in-the-home expenses – you must use the work space only to earn your employment income.

In addition, it may be possible for you to receive a refund of the GST portion of those costs you’ve incurred by filing a Form GST370, Employee and Partner GST/HST Rebate Application. The form is not difficult to fill out and is based on the taxable portion of employment expenses claimed. It’s important to note that your employer MUST BE a GST/HST registrant.

Other more specialized types of employment involving employees incurring expenses personally are:

  • Employed artists – you may be able to deduct expenses you paid in 2013 to earn employment income from an artistic activity
  • Employed tradespersons – you may be able to deduct the cost of eligible tools you bought in 2013 to earn employment income as a tradesperson
  • Transportation employees – you work for an airline, railway, bus, or trucking company, or for any other employer whose main business is transporting goods, passengers, or both.

Motor vehicle expenses and Automobile allowances

Automobile allowances are an attempt by the employer to offset the costs an employee incurs as to business related motor vehicle expenses.

If the automobile allowance is a per km rate and tax free, the employee cannot deduct actual expenses UNLESS the rate is unreasonably low (see CRA per km rates). In such a case, the employee can choose to include the allowance in their employment income and deduct actual business related motor vehicle expenses.

This can result in significant tax savings depending on the allowance received and the age/type of the vehicle.

If you have any questions about anything, please feel free to email me at info@josephlea.com or post a comment below.

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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