Can I Deduct Expenses Related to My Employment?

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.

* Mohan Damle is a Chartered Accountant from India with over 25 years of experience spread over 3 continents. Mohan comes from a family of well-known Chartered Accountant from Bombay. Before moving to Canada Mohan gained vast experience while working in India and Middle East.