Video - Tis The Season For Income Tax Filing

Last year was obviously not “normal,” as the COVID-19 pandemic turned things upside down for so many people here in the Okanagan.

Now is the time of year when most start completely their income tax returns for the previous year. Families and individuals are in the process of collecting their T4 forms, receipts for benefits and any other tax information they need to file.

This year has the extra piece if someone received the Canada Emergency Response Benefit (CERB) or any extended Employment Insurance (EI) during the pandemic. The forms should have already been mailed out, but now what? Can you claim anything in your home if you have been working from a home office? What are the next steps to make sure you can claim everything that you are eligible for?

Associate Kevin Cheung explains how 2020 tax returns will be different, like everything else that has been affected by last year.

Transcript:

Last year (2020) was a difficult year for everyone. COVID-19 forced many Canadians to work from home and people working from home inevitability incurred expenses they otherwise wouldn't have, if they had been working at their regular place of employment.

The Canadian government has acknowledged this by allowing taxpayers to claim a deduction for taxable income for certain types of expenses, some of which include electricity, heat, water, utilities, internet fees, cell phone bills, rent. Unfortunately for employees, mortgage payments and the interest on mortgage payments are not claimable.

There two ways that employees can go about claiming these expenses; there is the temporary flat rate method and there is the detailed method. The temporary flat rate method is the simpler of the two and it just requires that you work more than 50% of the time at home for four consecutive weeks in 2020. If you meet this requirement then you are allowed to deduct two dollars for each day you worked at home, up to a maximum of $400. The advantage to this method is that receipts do not need to be submitted and you do not need to calculate the size of your workspace at home or the percentage of expenses related to work. For many people, this is going to be the way to go.

If however, you know you spent more than $400 in office-related expenses the detailed method might be the way to go. In particular, if you are a renter living in a high-rent area or an expensive rent area, this is certainly the method to consider. It does require more tracking on the part of the employee. You have to keep track of your expenses and have proof of them. You need to calculate what percentage of your home expenses are related to employment purposes. To be eligible to claim under the detailed method, you again need to have worked at home for more than 50% of the time for at least four consecutive weeks in 2020, you worked from home because of the covid-19 pandemic or your employer required you to work from home. Importantly your employer must sign a form called the T-2200S and this is a form that the employer signs certifying that you did in fact work from home in 2020 due to the pandemic and you were required to pay for some expenses used in your work.

That said, you cannot claim the entire amount of an expense if not all of it was used for work, you can only claim the portion that was used for work. For example, you cannot claim your entire rent or 100% of your rent because presumably the only a portion of your house or apartment was used for work. There are methods for calculating the percentages you can claim. I would encourage anyone preparing their taxes to speak to a tax professional to make sure that they are taking advantage of all of the deductions and credits available to them. If you are doing some estate or tax planning or you are involved in a disagreement with Canada Revenue Agency about a position they have taken with respect to your taxes, speaking to a lawyer could provide some clarity and guidance. We have a number of lawyers here at the firm that would be happy to assist in these types of matters.