“I’ll Just Expense it!” 5 Tips to Getting Work Expenses Right on Your Return
When you’re grinding away at your 9-5, it’s not unusual for some work expenses to pop up here and there. Lots of Canadians pay out-of-pocket for things they need to get the job done, but be careful when claiming those items. Not everything you buy for work qualifies as an employment expense.
Some of these are more obvious than others… Claiming notebooks & pens? Probably OK. The designer bag to carry all your new pens? Not so much. Wondering where to draw the line?
Here’s what you should know about how to claim expenses properly on your return:
1.Your work contract needs to include expenses
While there’s a line item for employment expenses on all tax returns, your employment contract needs to outline which expenses you’re required to pay. This could be things like travel, meals, home office or cell phone calls. Only specific items are allowed, and only if they’re included in your employment contract.
2.You need to have the right documents to make a claim
Your employment contract lists the expenses you might pay up front to get the job done, but you also need a T2200 form to claim these costs on your tax return. The T2200 Form (a.k.a. the Declaration of conditions of employment) needs to be completed and signed by your employer before the Canada Revenue Agency (CRA) gives your expenses the OK.
Quick Tip: You can’t have one without the other. Even if your boss completed the T2200, if your contract doesn’t list any expenses, you won’t be able to submit a claim.
3.You need to be a paperwork rockstar
The best way to avoid any issues with work-related expenses? Keep your records in shipshape. Hang onto all of your receipts, and if you’re reporting mileage, you’ll need a logbook for your car that details all of the KMs you drove on the job.
4.Dust off your calculator & remember your ratios
The CRA understands that it doesn’t make sense to have two of everything, so a lot of what’s allowed to be expensed is calculated using percentages. For example, let’s say you use your car for work. To figure out what you can claim, you’d refer to that handy car logbook we mentioned back at #3. You’d use these records to calculate the percentage of work vs. personal KMs driven, then claim the work portion of your gas, maintenance, insurance and registration as expenses. If work trips represent 20% of your total mileage, you’d claim 20% of your auto expenses for that year.
The same thing goes for your cell phone. Keep track of the time used for personal calls vs. work calls to figure out what percentage of charges you can claim. If you only have one cell phone, it’s unlikely that there wouldn’t be any personal use, so you can’t claim 100% of the charges.
Quick Tip: The cost of most supplies can’t be claimed completely, unless they’re used up directly at your job. This would include things like stationery and bandages, but not uniforms or safety boots.
5.Keep your records handy, even after you file
Whether you’re submitting a paper return or filing online, you do not have to send in your receipts or T22200 until the CRA asks to review your claim. They usually do not do this until the late summer or fall (although they can do so at any time during the three-years after your return was originally assessed), so keep your uber-organized folder of receipts close by. Employment expenses are commonly reviewed by the CRA.
Think you’re out-of-pocket on a few things for work, but don’t have a T2200 or contract that outlines expenses? Chat with your employer about your costs, and see what work-related expenses they could review before claiming them on your return.