A common misconception is that if a person works for an employer and receives a T4 at year-end, there is no opportunity to expense anything against that T4 income.
There are many things an employer may require “employees” to supply or pay for themselves that Canada Revenue Agency (CRA) considers a necessity to earn income and therefore allows as a deduction against T4 earnings.
In my last column, I discussed home office expenses. This is not just an expense available to the self-employed.
If an employer requires an employee to carry on business away from the corporate office, a regional sales rep for example, that person is eligible to claim home office expenses or rental fees for an off-site office.
Other legitimate claims include business travel, office and other supplies, cellphone and even wages for an assistant.
Tradespeople, including apprentices, who are required to supply their own tools at their own cost are eligible to claim this expense against their income earned from their trade. This is also available to forestry workers.
As an aside, another nugget of info, if you are an apprentice, upon completion of various levels there may be up to $9,000 of tax credits available under the B.C. Training Tax Credit program (T1014).
And this is a “refundable tax credit,” meaning it’s as good as cash, or at least reduces your taxes payable dollar for dollar.
And employers of apprentices may have up to $12,500 of tax credits available to them.
Don’t go claiming expenses just yet. A claim by an employee must be supported by a Declaration of Conditions of Employment (T2200) completed and signed by the employer that details what is to be provided by the employee (see Guide T4044).
The T2200 does not have to be filed with the return but must be available to Canada Revenue Agency at its request.
Of course threshold limits have been set by CRA, and if the employer reimburses any amount to the employee, this reduces the claim, and may even eliminate it, remembering that CRA is guided by the principle of “reasonableness” … a paradoxical term from time to time.
Regarding vehicle expenses. If an employee is required to use his own vehicle for business, the costs associated are deductible. However, sometimes an employer reimburses an employee for mileage driven and in that case, vehicle expenses are not deductible.
For employees and employers, it is important to know that an employee can receive a tax-free allowance for mileage if paid no more than 52 cents/km for the first 5,000 km and 46 cents/km thereafter. Of course the employer can use the vehicle allowance paid as a business expense.
With tax season well underway, if you have any particular topics that you would like to read about, please contact me.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Tax Tips & Pits runs the first and third Mondays until April. Email him at ron.clarke@JBSbiz.ca