COVID-19 – Canadian Tax and Business News, release #29
Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.
Our goal is to monitor the news and release relevant information as it becomes available.
The summary below is based on our understanding and interpretation of the announcements made by the government. The information below is in summary form and subject to change until the proposals are passed as legislation. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.
COVID Home Office Expenses
On December 15, 2020, the Canada Revenue Agency (CRA) released details on the methods available to employees to claim home office expenses while they worked from home during the pandemic. The methods available include a flat rate method and a detailed reporting method.
New Temporary Flat Rate Method
Under the Flat Rate Method, eligible employees can claim a flat rate of $2 per day up to a maximum of $400 (200 days). This is a simplified method as employees will not have to keep supporting documents, calculate the size of their workspace or obtain a completed and signed form by their employer.
Eligible employees must have worked more than 50% of the time from home for at least four consecutive weeks in 2020 as a result of the COVID-19 pandemic. Eligible days that can be counted include days working full or part time hours from home. This method is only available for the 2020 tax year.
To claim this amount, employees must complete Form T777S – Statement of Employment Expenses for Working at Home Due to COVID-19 and select Option 1 – Temporary flat rate method.
Employees that use this method cannot deduct any other employment expenses (such as vehicle expenses).
Detailed Reporting Method
The alternative method is a detailed reporting method that allows employees to deduct the actual amounts paid for expenses during the period they worked from home. The amounts claimed have to be supported by documents. As a result, employees will have to keep receipts and calculate the portion of their home office eligible for deduction. The CRA has provided guidance on this – see Determine Your Work Space Use. To claim a deduction under this method, employees must complete Form T777S – Statement of Employment Expenses for Working at Home Due to COVID-19 under Option 2 – Detailed method with the required detailed information.
To be eligible for the Detailed Reporting Method, an employee must meet all of the following criteria:
- They worked from home in 2020 due to the COVID-19 pandemic or their employer required them to work from home
- The employee worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
- The employee obtains a completed and signed Form T2200S or Form T2200 from their employer
- The expenses are used directly in your work during the period
Note the Form T2200S is a short from version of the T2200 that an employer can complete for an employee who is looking to utilize the detailed reporting method. The employer will complete the T2200S to certify the employee was required to work from home and pay for some or all of the home office expenses used directly by the employee to carry out their duties of employment. The CRA will accept e-signatures by employers on both the T2200S and T2200 form.
The CRA has created a calculator to help employees calculate the home office expense deduction they are entitled to. Furthermore, a list of eligible expenses is provided which outlines the different expenses a salary or commissioned employee can deduct.
As we all try to stay safe, we need to remind ourselves business will get back to normal but in the meantime lets all do our part to get to normal as soon as we can. If you have any questions or require further information, don’t hesitate to reach out to us.