HOME OFFICE EXPENSE CLAIMS FOR 2020 TAX YEAR - COVID-19

February 23, 2021

With regards to the Home Office Expenses claim, the CRA has come up with a couple of options

concerning the deduction of home office expenses due to COVID. The first option is the

Simplified Method and involves a "Temporary Flat Rate", and this is what I am generally

recommending for individuals who do not normally work from home but who worked from

home in 2020 due to the pandemic. Under this option, you do not need a form T2200 nor the

T2200S, and you can claim $2 per day that you worked from home, up to a maximum of $400

(which covers 200 days or approximately 40 full weeks of working from home). Under this

method, essentially all you need to do is figure out the number of days you actually worked

from home. This method keeps things simple and avoids a lot of the "hassles" that come with

claiming under the detailed method, and in most cases, the $400 amount is reasonable even if

doing the detailed method. To be eligible, you must have worked from home due to COVID

and must have worked from home for at least 50% of the time for a period of at LEAST 4

CONSECUTIVE WEEKS during 2020. (Note: If your employer covered your expenses for working

from home, you don't qualify in any circumstances).

Under the Detailed Method, you need either the T2200S or the T2200 from your employer, and

in order to claim the expenses, you will need to take all your hydro bills, your heating, and water

and add them up for the period(s) that you worked from home, and you can claim a portion

of your internet bills so would need to add all of those up as well. To be eligible to claim under

the detailed method, you must have worked from home for at least 50% of the time for a

period of at LEAST 4 CONSECUTIVE WEEKS (as is the case to qualify for the simplified method)

or the office space you worked from must be used solely for employment purposes, and you

must have regularly met with customers, clients, etc. in this office space. The detailed method

obviously requires a bit more time and effort, and for the most part, I don't believe it will give a

far different results (although it depends on the circumstances).

So again, the choice is really yours but you should consider the Simplified Method if you do not

normally work from home but did so in 2020 due to the pandemic.

What You Need To Know About Small Business Income Tax Returns

Running a small business?

If you have business income, whether it is your full time income or just a small business you run “on the side” you do not have to file your 2015 Income Tax Return until JUNE 15, 2016 (excluding incorporated businesses)!  And if you have a spouse, even if your spouse does not have any income related to the business, they have until June 15, 2016 to file their return as well!

The catch, however, is that if you OWE the CRA then you are still expected to pay your 2015 tax balance owing by April 30th 2016.  So unless you are SURE that you will be getting a refund, you should have your 2015 Income Tax Return prepared before April 30, 2016.  If it is prepared by April 30th, then any Balance Owing can be paid on time and you will avoid paying interest on the Balance Owing.  Once prepared, we still have until June 15th to efile your return.  PLEASE NOTE: APRIL 30th falls on a Saturday this year, therefore the CRA will consider any Balance Owing to be paid on time if payment is made by Monday May 2nd, 2016.

Why have a professional accountant prepare your Income Tax Return?  An accountant is knowledgeable in the area of Tax Law and can ensure that every opportunity is taken to save you money!  This applies to even the most simple tax situations, but especially applies when Business Income is involved.  There are many things that a knowledgeable accountant can do to ensure you don’t pay any more money to the CRA than you have to.

If you are running a small business from your home, we can take a proportionate business deduction for the area of your home used for your business.  This helps to save you money!  There are consequences to doing this that many people overlook, but the benefits of taking these deductions outweigh the consequences.  The key is that you should be informed… Off-the-shelf tax software does not do this for you, and you are far better off to have a professional accountant looking after your interests.  Business Income can be tricky, and I have many clients who have come to me ONLY AFTER THEY ARE IN “hot water” with the CRA.  Please don’t make this mistake.  Come and see us and we can ensure we take advantage of all opportunities available AND keep you out of trouble with the CRA.

To ensure you are taken care of properly, please call us at 905-623-5244 to book an appointment today!