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Per
the Income Tax Act. By and large, an employee is not allowed
to make tax deductions from income unless it is a
related to the contract of employment and expenses are
not reimbursed by the employer. Generally the employment
is a contract between employer and employee, the
contract being termed as Master Servant relationship.
But
there are various categories laid out by the Income Tax
Act and it is for Individual to determine under which
category he or she falls.
Following
are the Categories
Employees
earning Commission
Employees
earning Salary
Employees
working with Forestry operations
Employed
Artists
The
Deductibility of Expenses may vary for each category and
will be based on meeting certain conditions as laid out
in the Tax Act. But
generally, following are the type of expenses, which may
be allowed as being deductible based on the individual
circumstances:
Accounting
& Legal Fees
Advertising
& promotion
-
Entertainment
- Travel & Parking
- Supplies
- Home
Office expenses
- Licenses
- Salaries
paid for sub contracts
- Musical
instruments cost
- Amortization on the Capital cost
- Leasing
Costs
If
you are in employment situation and are required to meet
expenses related to employment you have to obtain from
your employer a signed copy of “Declaration of
Conditions of employment Form T 2200” This is very
essential as it may be required by the CCRA during Audit.
You must maintain a proper record of all the expenses
but in particular for your auto usage such as mileage
logs. Maintenance of good records will add to the
legitimacy of your claim. When you file your tax return,
you will be required to fill in the form “T 777
Statement of Employment Expenses” and form “TL2 for
expenses related to Claim for meals & lodging
expenses”.
As
a general rule “Caution” would be more appropriate
for any deduction from Employment Income.
PLEASE
SAVE MY TAXES
Question:
I
have
a job in Middle East and I am also a Canadian Citizen / Landed
Immigrant. How can I get Canadian tax-exempt status?
Answer:
First
of all the term residency is applied and defined differently
in Immigration and in the Tax Laws. The definition of
residency is very subjective in the tax law and it is more
based on the meeting certain conditions. Which are either
initial or subsequent conditions.
The
subsequent conditions come in to play only when a decisive
decision cannot be applied based on the initial conditions.
The
initial conditions cover areas such as maintenance of a home
in Canada, is this available for occupancy, the residency of
the of the individual's immediate family, the
intent of the individual to return to Canada, and the number
of visits and duration of such visits to Canada.
The
subsequent conditions include the citizenship, where do the
rest of the family live, Has the individual maintained social
and economic ties in Canada, as well as the ties the
individual has maintained with the other country other than
Canada, as well the implication of laws of such other country.
To
conclusively determine the residence of the individual one
would need to examine the details of the each case and the of
the taxpayer's life in general.
A
study of the detailed provisions of the Revenue Canada’s
positions reveals that if the taxpayer were out of the country
for 1 or 2 years or such short term then it would be construed
that the individual has retained the Canadian residency for
the purpose of Income Tax.
Q:
What
records should I keep, so I can be ready to file tax return?
A:
Individual
should keep following records to avoid any problem of
supporting when the time of Tax filing comes.
a)
Invoices and receipts to support income and expense claims
must be kept in a logical fashion such as Jan-Dec for any year.
b)
File the records as they occur do not try to look for details
on the eve of filing a tax return, Keep your filing as simple
as you can, may be an envelop for each month is a good idea
for loose receipts or bills, Keep your credit card, bank
statements in a logical fashion again Jan-Dec.
keep the supporting in the same file. Better if you can
make an annual summary this will help you to summarize the
annual expense by category and fill in only one amount in the
tax return.
c)
If you use your car for business purpose or have company
provided car then you must maintain a travel log detailing
travel mileage and expenses.
d)
Finally remember, the organized you are you will be able to
file your tax return as fast as you can. This will facilitate
either a faster refund or will save on the penalty on late
filing as the case may be.
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