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Memo to workers: How to claim work-from-home costs on your taxes

By Leah Goleb

Since many Canadians continued to hunker down at home during 2021, the federal government has extended the temporary flat rate method for claiming expenses and increased the maximum amount employees can claim.

The flat claim was designed to be a simpler alternative to the detailed method for claiming home expenses, which requires tracking expenses and receipts on top of a signed T2200 form from an employer.

Changes to this and other work-from-home claims means that Canadians may keep more money in their pocket this year, but experts say good documentation is needed as more audits and reviews may be on the horizon.

When the flat rate method was introduced last year, eligible employees could claim a deduction of up to $2 a day up to a maximum $400 if they worked more than 50 per cent of the time from home for a period of at least four consecutive weeks during the year, excluding days off, vacation days, sick days or other leaves of absence.

This year, the same rules apply except remote employees can claim a deduction of $2 per day up to $500, said Amanda Doucette, partner at Stevenson Hood Thornton Beaubier in Saskatoon.

When it comes to the detailed method, typically used for tax filers who think their claims would be higher than the maximum flat rate, there’s also a new addition this year.

Internet fees can be claimed

On top of being able to claim electricity, heat, water, utilities, maintenance and minor repairs and a portion of rent, tax filers can now claim home internet fees, which wasn’t an option last year, Doucette said.

Employer reimbursements

The CRA also recently announced that employees can be reimbursed by their employers for up to $500 in cumulative costs related to office chairs and other supplies related to working from home without the CRA regarding this money as a taxable benefit, Doucette said. Receipts would need to be provided to the employer.

Although the flat rate method doesn’t require the same expense and receipt tracking as the detailed method, it’s still important to keep some form of documentation, Doucette said.

“For myself, I sat down and looked at my calendar and I found four weeks that were consecutive where I could say that, and I documented that for myself so if I got audited, I could pull it out instead of trying to recreate it years later,” Doucette said.

This could be as simple as a handwritten note or something you’ve typed up in Google Docs, she added.

As a tax lawyer, Doucette sees first-hand how difficult it can be to face penalties for not having the right documentation.

“It can really impact your financial security because a lot of people don’t have 10 grand sitting around a bank account somewhere and you can’t really hire someone to help fight it because it costs more to hire someone than it does to pay the CRA bill,” she said.

Audits common

She advises that if you think you fit squarely in the rule, then document why exactly you do so you can show that if asked.

“I think that applies to any of these COVID-19 benefits because what we’ve heard coming down the pipes is that 2022 is going to be the year of the audit,” she said.

“We’ve already started to see audits, particularly of employers who claimed the wage subsidy. It’s going to move its way down to anybody who is claiming COVID-19 benefits. And if you don’t have proof why you claimed it and why you qualified, you’re going to run into a problem.

Dot the i’s, cross the t’s

Laura Wilson, a Canadian tax professional at Wilson Tax Solutions in Edmonton, has also been telling clients to dot their i’s and cross their t’s when claiming any credits, deductions and expenses.

“In my opinion, the government has paid a lot of money during the pandemic. It only makes sense that they are going to try to recoup some of that. What I predict is tighter requirements for reviews and audits this year,” she said.

“For the 2020 tax season, I found that I had far less reviews from CRA for my clients due to the pandemic and CRA employees working from home. It would make sense as things return to normal for the CRA to catch up on missed reviews from 2020 or to issue a higher volume of reviews in 2021 to compensate.”

Tax filers should remember that the CRA has seven years to go back and review or audit returns, she added.