Up until 2015, if your employer provided a signed T2200 form, and your vehicle, cellphone, meals and home office expenses fit within industry guidelines, the CRA likely accepted your expenses and gave you a nice tax refund.
All that changed with the new Liberal government and an aggressive directive to the CRA to review anything and everything possible. Many of you claimed your employment expenses as always for 2015 and 2016, got a nice refund, and then, a year or more later, received a nice letter from the CRA asking for detailed supporting documentation for every expense claimed.
If you didn’t have a detailed mileage log for every business trip, didn’t have a restaurant receipt for every meal that fit the criteria for a deductible meal expense, didn’t have all the monthly internet bills and cellphone bills with call details, didn’t have every gas receipt, every ETR toll bill, and every vehicle repair bill, the expense deduction was denied.
That meant your tax year was reassessed, and the nice refund had to be paid back, with interest.
If you weren’t reviewed for 2015 and 2016, you got lucky. This year, expect the review and be prepared.
Before you claim, or let your clever accountant claim, a host of employment expenses, make sure you have the support. You will need:
For vehicle expenses:
- detailed daily mileage log for all trips claimed
- original gas receipts (credit card statements or bank statements are not enough)
- maintenance/repair bills
- vehicle lease or vehicle purchase agreements
- receipts from tolls, including detailed ETR bill showing dates of all trips
For cellphone, internet and home office phone expenses:
- monthly bills from the service provider showing call dates and details
For meals and client entertainment:
- original restaurant receipts annotated with the name of the client/customer and the reason for the meal ( again, credit card or bank statements are not enough)
For all expenses, you will need a T2200 declaration of employment form signed by the appropriate person in your employer’s organization. And be aware that the CRA will call your employer to verify what you are claiming.
Best advice:
Don’t be too ambitious in your employment expenses deductions. Only claim what you know you can vouch. And don’t spend the refund right away. It’s typical for the reassessment review request to come 6 to 8 months after your first assessment.
If the CRA reviews your expenses and denies ones that you know are legitimate despite your receipts, you can file an objection. That will start another detailed review of all your receipts, but if the expense can be vouched, it mayto be allowed.
Forewarned is forearmed. Better to keep the refund safe and accessible in your TFSA or another savings account, instead of having to find thousands of dollars a couple of years later.
If you do receive a letter asking to review your employment expenses, or you are reassessed with the expenses denied, call DioGuardi to review how we can help.