Have you heard the news about the special opportunity for employees working from home to claim home office expenses this year? As an employer, it’s important you know about these updates. You may need to help your employees by issuing a T2200, if necessary.
A T2200, Declarations of Conditions of Employment, is a form that employers usually fill out so employees can claim certain out of pocket expenses. However, given the major move to work-from-home status due to the COVID-19 pandemic, the Canada Revenue Agency (CRA) is simplifying things for employers and employees for the 2020 taxation year.
T2200 Highlights for Employers
The main exception for employers for 2020 is that you may not be required to complete the T2200. The CRA has provided a temporary flat rate method that employees can use if certain conditions are met (see below). So far, this is only for the 2020 taxation year.
Another change specifically for 2020, is the relaxing of employment contract requirements. Prior to 2020, the employee’s contract had to state they were required to work from home. Cleary, the 2020 pandemic couldn’t have been predicted. The definition of what working from home has been updated for 2020.
Special Considerations for Employees for 2020
Your employees may ask you questions regarding how they claim home office expenses on their tax return. It’s good to be prepared for this. Understanding how employees claim this deduction will also help you know if you’ll need to prepare a T2200 for them.
Flat Rate Method
Employees can use the flat rate method to calculate their home office expense amount if they:
- Worked from home in 2020 due to the pandemic,
- Worked from home more than 50% of the time for at least four consecutive weeks in 2020,
- Are only claiming home office expenses and no other employment expenses, and
- Were not completely reimbursed by their employer for all of their home office expenses.
Note that all of the above conditions must be met for an employee to be eligible to use the flat rate method to claim home office expenses. The amount claimed is $2 for each day employees worked at home in 2020 due to COVID-19 to a maximum of $400.
Employees using the flat rate method do not require a T2200 completed by their employer. They do not need to provide a summary of their expenses or keep receipts either. This can be a big timesaver for both employers and employees.
The detailed method requires a signed T2200 or T2200S from the employer and employees are required to calculate the employment portion of the eligible home office expenses (listed in the next section). The T2200S is a shorter version of the T2200, especially for conditions of employment due to COVID-19.
The CRA has relaxed the employment contract in that the work from home agreement may be written or verbal. Normally, a written agreement (as part of the employee’s employment contract) is required.
The home office portion of expenses is calculated based on the portion of the employee’s home used for work. Floor space is a generally accepted calculation for rooms that are dedicated office space. However, if the work space is a common area, such as a kitchen table, then the calculation must be prorated for work versus personal time spent in these areas as well.
So, what can your employees deduct as part of their home office expenses?
For 2020, the CRA has expanded the definition of eligible expenses to include fees paid to internet service providers. The following are considered eligible home office expenses:
- Internet fees.
As in the past, commissioned employees may be eligible to claim additional expenses. You can find many sample calculations on the CRA’s website, completely updated to reflect the events of 2020.
If you’re still unsure whether you are required to prepare a T2200 for your employees, or you need help completing the form, get in touch. We’re always happy to help.