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The T2200 form is a document for those who work from home and wish to claim home office expenses on their taxes. This form, also known as the “Declaration of Conditions of Employment”, allows employees to detail their work-from-home situation and claim expenses such as utilities, internet, office supplies, and home office furniture.

Breaking down Tax Form T2200

With the rise of remote work and the increasing number of employees working from home, the T2200 form has become more relevant than ever. It is important for individuals to accurately fill out this form to ensure that they are claiming the appropriate expenses and complying with government regulations.

Richardson Miller LLC is here to share the specifics of the T2200 form for the 2023 tax season, what expenses can be claimed, and how to properly fill it out to maximize your tax return Understanding this form is vital for anyone who works from home and wants to make the most of their tax deductions.

What is the T2200 tax form used for?

Employees use the T2200 tax form to claim deductions for expenses that their employer did not reimburse. This form is required for individuals who incur expenses related to conditions of employment for working, such as vehicle expenses, supplies, and home office expenses.

By completing the T2200 form for the 2023 tax year, employees can deduct these expenses from their taxable income, ultimately reducing the amount of income tax they owe to the government.

One important thing to note is that not all employees are eligible to claim deductions using the T2200 form. Only employees who are required to work from home or use their own vehicle for work-related purposes can claim these deductions. Employees must keep detailed records of their expenses in order to accurately complete the T2200 form and support their deductions if requested by the Canada Revenue Agency (CRA).

Employers are also required to complete certain sections of the T2200 form, confirming that the expenses claimed by the employee are valid and were not reimbursed. This form helps to ensure that employees are claiming legitimate expenses and prevents any potential abuse of the tax system.

Content of Form T2200

In order to complete T2200s accurately, there are several pieces of information are needed to complete it:

  1. The form requires the name and address of the employee for whom the form is being completed. This information helps to identify the individual to whom the form pertains.
  2. The employer’s business number must be provided on the form. This number is used to link the form to the specific employer.
  3. Details about the employment arrangement are also included, such as whether the employee was required to work from home or incur expenses related to their job, Which are necessary for the completion of the form.
  4. A breakdown of the expenses incurred by the employee, including details about the nature of the expenses and the amounts that were paid out of pocket are required.

Here’s an example of how expenses can be claimed:

Andrew works for a company that sells video equipment and meets the employment conditions. During 2023, he recorded the following information:

Income

Salary received: $45,000
Commissions received: $5,000
Total employment income: $50,000

Expenses

Advertising and promotion: $1,000
Travelling expenses: $6,000
Capital cost allowance: $1,500
Interest on car loan: $5000
Total expenses: $9,000

Andrew’s total expenses of $9,000 are more than his commissions of $5,000. Therefore, his claim for expenses is limited to $5,000 plus the CCA of $1,500 and interest of $500, for a total claim of $7,000. However, he could choose to claim expenses as a salaried employee, in which case he could claim the travelling expenses of $6,000, but not the advertising and promotion expenses. Using this method, Andrew also claims the CCA of $1,500 and interest of $500, for a total claim of $8,000.

source: canada.ca

‍What Can I Deduct with the T2200 Form?

With the T2200s, individuals can deduct expenses such as office supplies, cell phone bills, internet expenses, and home office expenses. To be eligible for these deductions, employees must have incurred these expenses as a requirement of their employment for working at home and have a completed and signed T2200 document from their employer.

  • Office supplies such as pens, paper, and folders can be deducted if they are purchased for work purposes.
  • Cell phone bills can be partially deductible if the phone is used for work-related calls.
  • Internet expenses can also be deducted if the internet is used for work purposes.
  • Home expenses such as utilities, rent, and home office furniture can be deducted if a portion of the home is used exclusively for work.

What’s the difference between T2200 and T777?

When it comes to tax forms in Canada, it’s important to understand the differences between T2200 and T777. The T2200 form is a Declaration of Conditions of Employment, which is completed by employees who need to claim employment expenses.

On the other hand, the T777 form is used by individuals who need to claim deductions for work space-in-the-home expenses. Both forms play are important in determining the amount of tax deductions an individual is eligible for, but they serve different purposes and require different information to be filled out accurately.

The T2200 form, usually given by employers, verifies that an employee must work from home or cover other job-related costs. The T777 form is completed by the employee to outline the expenses incurred while working from home.

Individuals must distinguish between these forms to claim deductions accurately and prevent any complications with the Canada Revenue Agency.

Resources for employers in completing Form T2200

To help employers with this process, there are several resources available. These resources may include online guides provided by the government, tax preparation software that can assist with filling out the form, or even consulting with a tax professional for guidance. Employers need to familiarize themselves with the requirements of Form T2200 and gather all the necessary information before completing the form.

Employers should ensure that all the information provided on the form is accurate and up to date. Any mistakes or incorrect information could result in delays in processing the employee’s claim or even potential audits by the Canada Revenue Agency. By utilizing available resources and taking the time to properly complete Form T2200, employers can help their employees take advantage of available deductions and avoid any issues with their tax filings.

It happens every year; Tax Season!

People always hope that they get a tax return as opposed to a tax bill. But what happens when you get a tax bill? How do you pay it? There are a number of ways to pay when it comes time to pay your personal or business taxes. Whether you decide to pay in person or utilize the CRA My Payment online option (which allows individuals and businesses to pay taxes via the Canada Revenue Agency (CRA) website), the choice is yours. Below we’ve done a brief walkthrough of the different payment methods when it comes time to pay your CRA tax bill.

This a quick reminder of some of the important due dates including:

  • filing and payment due dates
  • and dates for receiving credits and benefit payments from the CRA.

Filing dates for 2022 taxes

Mar 1, 2023: Deadline to contribute to an RRSP, a PRPP, or an SPP
Apr 30, 2023 (May 1, 2022 since April 30 is a Sunday): Deadline to file your taxes
Jun 15, 2023: Deadline to file your taxes if you or your spouse or common-law partner are self-employed

Payment date for 2022 taxes

Apr 30, 2023 (May 1, 2022 since April 30 is a Sunday): Deadline to pay your taxes

How to pay taxes to the CRA

Pay In-Person

Did you know that you can pay your taxes in person at any Canada Post outlet? It’s true, head to your local Canada Post outlet and you can pay your taxes with cash or debit card. You can also go to your local bank branch and pay taxes to the CRA there.

How to pay taxes owing to CRA online via debit card?

In order to pay taxes to the CRA online, you can access it via CRA sign-in services or with CRA My Payment. This is to pay with a debit card only aka Interac Debit, Visa Debit or Debit Mastercard, you cannot pay using credit cards with My Payment. To make a payment:

  1. Go to CRA my payment and click pay now
  2. Select payment type
  3. Select payment allocation
  4. Enter your account number, period date, and amount]
  5. Keep your transaction receipt with a payment confirmation number

Please note that payment usually takes 1 to 3 business days to be processed by the CRA. To avoid further fees and interest charges, make sure to pay on time.

Taxes that can be paid online – Individuals

  • Individual Income tax
  • Balance Owing/ Arrear payments, Installment and Payments on Filing
  • Child and Family Benefits Payment

How to pay taxes owing to CRA via online banking?

You can set up an online payment to electronically transfer the funds to the CRA. This can be done via your Canadian financial institution’s website or online banking app. In order to set up this type of payment:

  1. Sign in to your online banking
  2. If you are an individual, under “Add a payee” look for a relevant payee depending on the type of your payment.
    • CRA (revenue) – current-year tax return
      • Use this option to make a payment for your current tax return. You can use this option only once per return.
    • CRA (revenue) – tax amount owing
      • Use this option to pay any amount owing.
    • CRA (revenue) – tax instalment
      • Use this option to make payments toward the future tax year.
    • CRA (revenue) – Canada emergency benefit repayment
      • Use this option to repay a Canada emergency response benefit, Canada emergency student benefit, Canada recovery benefit, Canada recovery sickness benefit, or a Canada recovery caregiving benefit.
  3. If you are a business, under “Add a payee” look for a relevant payee depending on the type of your payment.
    • Federal – Corporation Tax Payments – TXINS
    • Federal – GST/HST Payment – GST-P (GST-P)
    • Federal Payroll Deductions – Regular/Quarterly – EMPTX – (PD7A)
    • Federal Payroll Deductions – Threshold 1 – EMPTX – (PD7A)
    • Federal Payroll Deductions – Threshold 2 – EMPTX – (PD7A)
    • Federal – Canada emergency wage subsidy repayment
  4. Enter your social insurance number (SIN) or business number as your CRA account number.

Payments are typically received by the CRA within 5 business days. In order to avoid fees and interest, Richardson Miller LLP recommends setting up a payment in advance.

How to pay taxes owing to CRA in instalment payments?

You can pay tax in instalments to the CRA but did you know that sometimes, the CRA will request that you pay the current tax year’s taxes in instalments during the current year? What this means is the CRA may ask you to pay in instalments towards your expected 2021 taxes owning in 4 quarterly payments throughout 2021.

Here are some examples of situations where this will be requested:

Personal Income Tax: If you had a balance owing of over $3,000 in any year, you may be required to pay in quarterly instalments towards the following year’s tax bill. Usually, the dates are March 15, June 15, September 15, and December 15.

Corporate Income Tax: Usually, if your last corporate income tax owing is higher than $3,000, you may need to pay in instalments (monthly or quarterly) towards your next year’s tax bill. There are a few options to calculate your monthly and quarterly instalment payments:

Monthly Payments

  1. One-twelfth (1/12) of the estimated tax payable for the current tax year is due each month of the tax year.
  2. One-twelfth (1/12) of the tax payable from the previous tax year is due each month of the current tax year.
  3. One-twelfth (1/12) of the tax payable from the year before the previous tax year is due in each of the first two months of the current tax year. One-tenth (1/10) of the difference between the tax for the previous tax year and the total of the first 2 payments is due in each of the remaining 10 months of the current tax year.

source: canada.ca

Quarterly Payments

  1. One-quarter (1/4) of the estimated tax payable for the current tax year is due each quarter of the tax year.
  2. One-quarter (1/4) of the tax payable from the previous tax year is due each quarter of the current tax year.
  3. One-quarter (1/4) of the tax payable from the year before the previous tax year is due in the first quarter of the current tax year. One-third (1/3) of the difference between the tax for the previous tax year and the first payment is due in each of the remaining three quarters of the current tax year.

source: canada.ca

If you are currently trying to make a payment arrangement with the CRA, the accountants at Richardson Miller LLP are happy to help you navigate through this tax situation. Reach out to the team today!

GST/HST Payments: In Canada, you are able to pay GST / HST owing either annually or quarterly. If your tax owing is more than $3,000 in a year, you could be told to pay quarterly payments in the following year just like personal or corporate tax income. The quarterly payments are equal to one-quarter (1/4) of your tax from the previous year.

Learn more about GST / HST and your business.

Late/ Unpaid Instalments: It can happen to any of us. Sometimes a payment is late or forgotten about. When this happens you may have to pay interest and possible penalty charges that will be applied if you do not pay your required tax instalments or paid insufficient amounts. More information about this can be found here.

We’re happy to answer your questions, clear up any confusion and get you on the right path with your personal or business taxes. Having clean, up-to-date books will make tax time so much easier for you!

Are you looking for a qualified, experienced Chartered Professional Accountant? Give us a call. We’re happy to help.

Last updated on March 15, 2023

What is that saying? The only two things certain in life are death and taxes. I cannot say for sure if these are the only two things certain in life but they definitely are certainties.

How to navigate death and taxes

When a taxpayer dies, there is work to be on the personal tax side of things and depending on the situation, there could be a lot of work to be done. It can be quite daunting for the Executor of the estate to deal with these final taxes as often this is not their area of expertise. So where to start?

Communicate with the government and other authorities

In my experience, most funeral homes are very helpful with this step of the process. But, just in case, it is important for the Executor to communicate with the government as soon as possible. You will need to let Canada Revenue Agency (CRA) know that the taxpayer has passed away. CRA has some handy information on their website about What to do following a death.

You may also have to communicate the death with other government departments if the taxpayer was receiving benefits such as: CPP, OAS, GIS, AISH, etc. Now is also the time to communicate with the bank, investment advisors, life insurance companies and pension providers.

And don’t forget to apply for the CPP Death Benefit now.

Retain professional assistance

There are two professionals that can be imperative when dealing with wills and estates: a lawyer and a Chartered Professional Accountant (CPA). These professionals can provide great assistance to you through the process.

Since I am a CPA, not a lawyer, I will only focus on the tax side of things and will leave the legal side to the lawyers. A CPA well versed in dealing with estate files can guide you through the process and alleviate some of the stress and confusion for you.

It is ideal to talk to a CPA in advance of the infamous April 30th personal income tax deadline. (The filing deadline for a deceased taxpayer may not even be April 30th as it depends on when in the year they pass away.) Getting authorization with CRA on a deceased taxpayer’s account takes a bit of time so this is something that you would want to have done in advance. Also, now is a good time for a CPA to get to know the file and can start to guide you on what sort of paperwork they will need.

Be patient

Some final personal income tax returns can be very simple while others can be very complex so patience may often be required. The Executor may have to do a lot of digging to find past income tax returns and to determine where all the assets are even held.

So… what is simple and what is complex?

Simple

The level of complexity will depend on what they owned, their marital status and what is detailed in their will. When a taxpayer dies, they are deemed to have disposed of all capital property they owned on the date of death and some of these dispositions may have tax implications. If the deceased has a surviving spouse that is the sole beneficiary of their estate, then that personal income tax return will be less complex. The Income Tax Act has a spousal roll-over provision which allows for all the deceased taxpayer’s assets to roll-over tax free to their spouse on their death. In cases like these, there is often only a need to file that final personal income tax return.

Not so simple

When a taxpayer has no surviving spouse, this can get more complex and can take a lot longer to settle the estate. There is still the need for that final personal income tax return that may report some taxable income on certain deemed dispositions. Some of the more common items are: RRSPs, pension payouts, real estate holdings and non-registered investments, to list just a few.

Often these assets can take some time after death to be sold or converted into cash. When this happens, there is now an Estate created. An Estate essentially is the mechanism for holding those assets from the time of death until the time they can be paid out to the beneficiaries. Once this happens, there is now an annual filing obligation of a T3 Trust Return with CRA. The year-end for these returns will be the anniversary of the date of death.

Once you have received all Notices of Assessments from CRA for all the returns filed then you can apply for a Clearance Certificate. This Certificate is CRA’s stamp of approval that there are no outstanding tax issues for the taxpayer. This one little piece of paper is very important for an Executor to have before they fully distribute the estate assets to the beneficiaries.

If you do not get a clearance certificate and distribute the assets of the estate, you may be personally liable for any tax owed by the deceased, to the extent of the value of the assets distributed. An Executor may not even be a beneficiary of an estate and could still have potential liability for the deceased taxpayer’s taxes if they do not get this Clearance Certificate.

Even more complex

Sometimes terminal income tax returns can have even more levels of complexity. Here are a few other items that add extra layers to these final tax returns:

  • Taxpayer is behind on filing personal tax returns
  • Taxpayer owned farmland or fishing property
  • Taxpayer owned shares of a small business
  • Potential for optional returns
  • Capital losses incurred
  • Estate donations – those donations made by will or designated donations
  • Foreign property owned

As you can see, there can be a lot more involved in the preparation of these final income taxes. At Richardson Miller LLP, we have seen a very wide array of estate files and we would be happy to help you through this process.

You are officially caught on CRA’s radar…

  • CRA is auditing or reviewing your information
  • Your filings have been arbitrarily re-assessed
  • The collections department is harassing you

No matter what the reason, dealing with the Canada Revenue Agency (CRA) can be extremely stressful.

Here are some tips to help ease that CRA audit pain.

What are your responsibilities?

By law, you have to keep adequate books and records to determine your tax obligations and your entitlements. Generally, books and records must be kept for a minimum of six years.

If you use a computer for your accounting records, you must keep your books and records in an electronically readable format, even if you also keep them on paper. Using the services of a tax professional does not relieve you of your responsibilities.

For an audit, you must make available to the auditor all of your relevant records (both paper and electronic) and supporting documents, and provide complete and timely explanations to the auditor’s questions. Failure to provide required books and records is an offence under the law.

Source: canada.ca

1. Do NOT Ignore them.

The problem will not go away. Keep the lines of communication open. Return phone calls even if the only thing you have to say is “I’m working on it”.

2. Deal with any requests or incorrect assessments ASAP as they are often very time-sensitive.

If you ignore requests and CRA re-assesses you, it can take several months to correct AND if you ignore them long enough, the problem may become unfixable.

CRA Audit Client Examples

a. I had a trucking company referred to me. He was behind on GST filings and CRA Factually assessed him. The client had opted to bury his head in the sand. The returns became statute-barred and CRA refused to reassess them. I luckily found a reasonable auditor to re-open the files and managed to save my (very happy) client $80,000.

CRA Factually assessed – If you don’t file your GST file on time, the CRA can arbitrarily access you and send you a bill.

b. In another case, (again, before he was my client) an automotive mechanic shop company underwent a payroll audit. The business owner and (non-CPA) accountant at the time didn’t respond properly to queries. CRA incorrectly assessed over $100,000 owing in source deductions. They were referred to me. It took over a year of fighting with CRA to have them amend their assessment to the correct balance owing of only $4,000. In the meantime, their corporate bank accounts were seized. Again, if it would have been dealt with properly in the first place, it would have never been an issue.

3. Enlist your Chartered Professional Accountant in dealing with CRA.

Generally, I’m the one who responds to my client’s CRA queries. If the client is preparing the response, I review it before it is sent in. In the case of an on-site audit, I prefer to gather the records and host the auditor in my own boardroom. This eliminates any intimidation factor.

Quite often, the accountant will know exactly what the auditor is looking for and be able to provide the facts and only the facts to get the issue resolved as efficiently as possible. The last thing you want is a simple review request for payroll to turn into a GST audit, personal benefit assessments, disallowed expenses… the list goes on.

Sometimes just a slight change in terminology can drastically change the audit outcome.

I had a trucking company client go through a review to determine whether a subcontracted driver was an employee. If the contractor was determined to be an employee, my client would have been liable for over $20K in payroll taxes. My client kept referring to the contractor in employee terms even though the nature of the arrangement was leaning toward the contractor. Had I not been able to pre-screen and rephrase his responses to the appropriate terminology, the client would have ended up with a nasty bill.

4. CRA isn’t always right.

I know…it’s shocking indeed. You want someone in your corner who understands taxes to be able to argue on your behalf.

I had a client undergo a GST audit. The auditor (who appeared somewhat inexperienced) proposed an assessment of over $20,000 owing. Upon review of his supporting paperwork, I successfully argued the GST owing down to less than $2,000.

Do you need help in dealing with a CRA issue? We’re happy to help!

 

I have often heard from entrepreneurs that it is difficult to obtain a mortgage to buy a home. Business owners can be viewed as a higher risk than the typical employee. As a result, obtaining financing at a preferred mortgage rate is challenging.

Here is a list of my favourite mistakes to avoid:

1. Failing to Plan Ahead

There are many factors to consider when you’re buying a house. You’ll need to coordinate your corporate tax plan, your personal income levels to qualify for a mortgage as well as your personal tax situation. Failing to plan can lead to painful tax bills and less than ideal mortgage arrangements.

2. Not Paying Yourself Enough

Let’s be honest. A huge benefit of being incorporated is having the ability to keep your personal income low and defer that personal tax bill. Many entrepreneurs pay themselves only what they need to live on. If you’re planning a significant purchase of a new home, that previous personal income may not be high enough to qualify for a mortgage on the home that you want. Consider what your income needs to be in order to afford that home you’re hoping to purchase.

3. Paying Yourself Too Much

Perhaps you’ve opted to inflate your personal income because you wanted it to be high enough to qualify for a mortgage. You report a giant dividend from your company that resulted in a large deficit in the equity section of your balance sheet. Sadly, your mortgage broker is going to see that you’ve declared income that you actually didn’t have and you aren’t going to get that mortgage.

4. Giant Spikes in Draws from Your Corporation

You’ve paid yourself a minimal salary and all of a sudden, you need to draw substantially more to be able to pay the down payment for your house. You’ve typically paid yourself $60,000 annually but suddenly need $250,000. This giant spike may put you in the most unfavorable personal tax brackets when you were barely utilizing the pleasant brackets in previous years. For tax purposes, you’re far better off smoothing out the personal draws over a number of years. In this example, take $155,000 each year instead of $60,000 then $250,000.

5. Failing to Pay Yourself Consistently

Dividends or a salary doesn’t really make a huge difference in the mortgage realm as long as you’re relatively consistent about your compensation plan.

6. Not Participating in the Home Buyers Plan

If neither you nor your spouse have lived in a home that you’ve owned in the last four years, you may qualify to use your RRSPs under the Homes Buyers Plan (HBP) as part of your down payment. After March 2019, CRA allows you to withdraw up to $35,000 for your down payment. Be sure to check out the CRA website for the latest criteria and rules around this program. Don’t have $35,000 in your RRSP yet? Bump up your wage from your corporation and make a contribution to your RRSPs. Have this money sit in your RRSP account for at least 90 days before you withdraw it under the HBP in order to get the deduction on your personal tax return.

7. Not Filing your Personal Taxes

Your mortgage broker will need a copy of your personal tax return along with your Notice of Assessment. Not having this paperwork readily available can delay approval of your financing and potentially cost you your dream home.

8. Not Paying Your Personal Taxes

Your mortgage broker will require proof that your personal taxes have been paid as part of your mortgage application. If you’ve paid yourself a giant dividend from your corporation in order to get that income high enough to get the mortgage but now can’t afford the personal taxes on the dividend—you’re still not getting your mortgage.

9. Not Hiring a Qualified and Experienced Mortgage broker

Not all lenders are the same. As an entrepreneur, you have unique circumstances that take a specific skill set to fully understand. Example: My client is an owner of a successful trucking operation. He wanted to buy a vacation property and the mortgage representative at his bank was not cooperating. I supplied my client with a list of my top mortgage brokers and he had his financing arranged within the week.

Do you need help creating a corporate plan with homeownership in mind? We’re happy to help!

GST QUICK METHOD

If your business is operating at revenue of $400,000 or less, you need to stop what you are doing and read this!

Canada Revenue Agency (CRA) offers an elective GST filing method for small businesses who have less than $400,000 in annual revenues. It is called the Quick Method and, in my opinion, it is a highly under-utilized election.

Who should use the Quick Method?

  • Other than a few industry specific exceptions, most businesses with less than $400,000 can use this election
  • Businesses with the majority of their expenses not being subject to GST would want to utilize this method. For example, if your largest expense is payroll you would definitely want to consider this.

How does the Quick Method work?

Under this method you would still charge the applicable rate of GST/HST on your sales, but this is not the same as the amount of GST you end up remitting up to CRA. What you end up remitting is based on the quick method remittance rates which are less than the applicable rates of GST/HST you charged.

Yes, that is correct, you collect more GST from your clients than you send to CRA. You do not get to claim any GST paid under this method though because the part of the GST you collected but got to keep accounts for the ITCs you would have otherwise claimed. The intention behind this election is to streamline the GST process for small businesses, but it can end up saving your business money! Who doesn’t want to save some money?

If the majority of your expenses are not subject to GST anyways, you are going to end up ahead under the Quick Method. You can find all the specifics on CRA’s website but I’ll go through a quick example below.

A practical example

It may seem a little confusing and it does require a little bit of number crunching so I will just sum it up a little.

Let’s look at Joe’s Contracting Ltd. Joe owns this business and he provides handyman services to his customers. He has very little costs associated with supplies as the majority of the jobs require only labour so he has one employee that helps him out. His business is based in Alberta and he earns exactly $400,000 in revenue a year.

Under the regular method of GST, Joe would collect GST of $20,000 from his clients and send the whole $20,000 up to CRA.

Under the quick method, Joe would still collect GST of $20,000 from his clients, but the cheque he sends off to CRA is only $15,120.

If you can choose to send CRA $20,000 or $15,120 which one are you choosing? I would think Joe would prefer sending the smaller cheque as well.

And has an additional bonus – this savings will continue to happen every single year when he files his GST return as long as he continues to meet the criteria.

The bottom line

If you think you qualify for the Quick method but have never heard of it before, you may very well be sending too much money to CRA. Reach out to us to discuss.

  1. Jazz Hands.

    That’s right. No auto-correct here—I meant it. With many cities implementing mandatory masks in public, we are missing out on a significant portion of our non-verbal communication options. Many of us can admit to over exaggerating our squinty eyes in attempts to convey that we are in fact smiling. Since Covid-19 is apparently here for the long haul, perhaps we need to consider implementing a universal sign that we are smiling without purposefully deepening our crows-feet (which, going forward, will likely be known as smiling mask wrinkles).

  2. Extended Deadlines.

    I recently visited my dental hygienist for the first time since lock down hit. After my teeth cleaning, I re-booked the appointment for six months later. In six months, it’ll be the end of March 2021! This realization was a bit of a smack in the face. In six short months, we’ll be doing our personal taxes all over again! This point is specifically for the procrastinators out there. Be aware that it’s almost time to do your 2020 personal taxes… even though you JUST finished your 2019 taxes. Perhaps you completed them earlier but JUST paid them. That next tax bill isn’t very far away. For many individuals (corporate filers included), the deadline extension has skewed the sense of urgency/timing/responsibility. Don’t procrastinate. Get ‘er done. Be on time. Missing deadlines may result in penalties, interest, missed incentive opportunities and delayed family tax credits.

  3. Covid-19 Incentives.

    Back in March and April, many folks got caught up in the government incentives and handouts. I’d encourage everyone to re-visit the CRA website to double check those programs. Over the last few months, the criteria has evolved and the website has been updated continuously. Did you actually qualify for that incentive? Perhaps you first thought you didn’t qualify but now you do. If you didn’t actually qualify but have received money, there are options to repay that money (via My Account and My Business Account on CRA online). Rest assured that CRA will be reviewing all who have received incentives to ensure eligibility.

  4. Creativity

    I’m impressed with the resiliency of entrepreneurs in Alberta. So many businesses have taken this setback and have quickly revised processes/systems and products/services to survive and or thrive. Thankfully this pandemic has hit when we have the technology to work from home. Could you imagine if this happened in 1985? Check out my article on how home offices impact your tax return. On the other hand, there are many businesses that have become victims of the lockdowns. This is truly heartbreaking. If you fall into this category, do continue to talk to your professional accountant to determine your filing responsibilities and opportunities to claim any losses.

If you need advice on COVID-19 issues with your business, please reach out! We’re happy to help. Contact us today.

The COVID-19 pandemic and resulting lockdowns have brought on a huge shift for people to work from home. Several business leaders have determined that having employees work from home is entirely possible and a great way to reduce overhead costs. Why would you force your employees to drive across town and sit in an office when they are just as productive (if not more) in their own homes? This trend has impacted our household. My husband’s automotive expenses are a fraction of what they were a year ago. On the other hand, our utilities, unlimited highest speed internet requirements, toilet paper and coffee costs have increased substantially. How does this trend impact your tax filing obligations?

Information for Employers:

If you have required your employees to work from home at least 50% of the time, they can claim some of their home office expenses on their personal tax returns. When you hand out your employees T4s, provide a completed T2200 Declaration of Conditions of Employment form. Indicate on the appropriate sections that the employee was required to work from home.

Based on the size of their home office, your employees will be able to claim a percentage of their expenses. This percentage is calculated by dividing the workspace area by the total finished area of the home. Expenses to track include: Utilities (heat, electrical, water), and maintenance (cleaning supplies, paint, plumbing, etc.) and rents. If your employee is paid commissions, they may also claim their insurance and property taxes. If home office specific expenses are incurred (fax line, increased internet capacities, office space only maintenance), the entire expense may be deductible. For example, if your household normally spent $50 per month on internet and now you spend $150 so that your ZOOM calls don’t freeze, one could argue that the $100 extra should be deductible. Similarly, if you revamped a spare room to create an office oasis (paint, shelves) you may (within reason) claim 100% of these costs.

Ensure that your employees are aware that employment expenses are often reviewed by Canada Revenue Agency. Encourage your team to keep their receipts/invoices/statements to be able to prove their claims.

Information for Business Owners:

Whether you are incorporated or a proprietor, you may also claim some home office expenses. The portion claimable is calculated in the same manner as for employees (office space divided by total finished area of your home). In calculating this percentage, it’s tempting to say that a significant portion of the home is used for business purposes. As a general rule, it’s best to keep the percentage around 10%. Any more than that and Canada Revenue Agency can argue that your home was a revenue generating property and you put your Principal Residence Exemption at risk… meaning tax implications on any gains when you sell your house. Also note that if you rent a secure commercial space, you likely cannot claim your office as well.

Keep track of your rents, heat, electricity, insurance, mortgage interest, property taxes, security monitoring fees, and maintenance costs. You can claim the calculated portion of those expenses. Consider office specific costs: the portion of internet required for the smooth running of your business, a fax line, office décor, desk, shelves, chair, chair mat, WIFI booster, etc. These office specific costs may be considered 100% for business purposes and expensed accordingly. Larger items such as furniture, computer, printers, and other office equipment would be expensed over a period of time via Capital Cost Allowance.

Ensure that your claims are reasonable and justifiable. Would it pass the sniff test for Canada Revenue Agency? Was it an expense incurred to earn business income? I think my favorite COVID-19 home office question so far has got to be: With the shortage of toilet paper, do you think I can justify expensing the entire cost of the bidet seat for my toilet? This client won tons of points for creativity and making me laugh out loud during a particularly stressful time in the accounting world. My advice: I would stick to the 10% household repairs and maintenance write off on this one.

If you have any specific questions or concerns about home office expenses for either your employees or yourself as a business owner, I’m always happy to chat. Send me a message at angela@rmllp.ca.

We’re still open and here to help.  We are just not taking face to face meetings.  We can do a lot via email and our secure online portal.

With the extended tax deadline, we’d encourage people NOT to wait to get their personal taxes done.  Most families are getting refunds due to the Climate Action Incentive rebate.  That money is worth a lot more in YOUR pocket.  ***I seriously got to call a client (who has been hit hard as of late) to inform them of a $10K family tax refund… I’m pretty certain they are happy to have filed sooner rather than later***

Stay up to date

The latest information from Canada Revenue Agency is available at www.canada.ca

If you haven’t already signed up for My Account with CRA, do so as soon as possible.  This will be the best avenue to apply for EI benefits and notifying CRA of any changes to your situation.  It will not be easy to get through to a CRA agent by phone any time soon.

Available to businesses

 

What does CRA require of an employer?

If you are a business owner and have employees, you know the challenges that can come with managing people. Hiring the right people, maintaining schedules, workloads, employment standards, and conflict resolution can be challenging and unpredictable. But making sure you are onside with Canada Revenue Agency’s (CRA) employer responsibilities doesn’t have to be.

Let’s break this down into three sections: Set up, process and report:

1. Set up:

You must have a payroll account registered with CRA and you can do this online using CRA online account registration.

Once you have the right candidate for your business you must get them to complete and sign a current TD1 form, both a federal and a provincial form. The TD1 tells you, as an employer, how much tax you are required to deduct from their payroll. It will also provide you with their Social Insurance Number which an employer is required to have before paying an employee.

2. Process:

As part of the employee hiring process, you will have determined what their pay will be.

  • Are they paid hourly, paid salary, paid by commissions?
  • Do they have any taxable benefits that you need to include in their gross income?

In order to process the payroll, you will have to determine what amount needs to be recorded as gross income per pay period for the employee.

How do you determine gross income?

Using the gross income from above, you must now calculate and withhold the CPP, EI and income tax from your employee’s cheque and hold in trust for the government until you make your source deduction remittance. You can use the payroll features of accounting software if you are using that or you can use the Payroll Deductions Online Calculator found online at CRA.

Once you have calculated the deductions, you are ready to pay your employee and provide them with a paystub so they can see how their payroll was calculated.

Remit your source deductions according to the dates prescribed for your company by CRA. Most small businesses have to remit by the 15th of the following month but as your payroll gets larger, you may have different remittance dates.

Don’t forget to include your employer portion as part of the money you remit to CRA!

3. Report:

All of your Company’s payroll from January 1st to December 31st needs to be reported annually on a T4 Statement of Remuneration slip. You must provide a copy to the employee and file a copy with Canada Revenue Agency by February 28th each year.

Another reporting requirement you have as an employer is when an employee is no longer with your company, for whatever reason. Whenever this happens you must file a Record of Employment (ROE) with Service Canada. Your ROE could be due within 5 calendar days of the interruption of employment so make sure you check out the government website for more Information on ROE.

Feel free to call me if you need assistance on ensuring you are meeting your employer responsibilities with Canada Revenue Agency.