T2200 Guidelines and Help
The source of income for the vast majority of Canadians is employment income. Given the importance of this source of income to the government as a source of tax revenue, there are special rules in place to ensure its integrity. All employees are familiar with some of these special rules, particularly those that require employers to withhold and remit tax to the government on behalf of employees. This pre-payment of tax is based on an estimate of the tax payable by the employee for the year and is adjusted, up or down, when the employee files his or her tax return in April. The other major rule that ensures the integrity of this source of income is the rule that denies any deduction other than those specifically allowed. This approach to deductions is very different than for business income or property income.
Form T2200 “Declaration of Conditions of Employment” is a form that has to be filled out by employers for employees that then permits employees to deduct some of the permitted expenses. If this form is not filled out, the employee will not be able to deduct the related expenses, resulting in more tax payable than there should be. The T2200 form is a two-page document that asks the employer a number of questions to test the eligibility of an employee for deductions. The matters affected by this form are:
- Deductions for expenses incurred by the employee while carrying out the duties of that employee’s employment
- Deductions related to travel away from the employer’s place of business so that the employee could perform his or her duties
- Deductions dealing with the cost of employment related travel
- Deductions related to motor vehicle expenses of the employee
- Reimbursements by the employer for expenses incurred by the employee
- Allowances by the employee for expenses to be incurred by the employee
- Deductions for expenses of commissioned employees
- Deductions related to home office expense
- Deductions related to the rent or lease payment for an office away from the employer’s place of business
- Deductions related to expenses for substitutes or assistants
- Deductions related to expenses for supplies needed by the employee to perform the duties of employment
- Deductions related to the use of a cell phone by the employee
- Deductions specific to trade persons’ tools for use in their employment
- Deductions specific to employees that work in forest operations
This form, once completed by the employer has to be certified. This allows the government to know that the employee meets (some) of the conditions for claiming the deductions affected. Some specific expenses, such as the home office deduction, have additional conditions that have to be met.
Note that it is the employee’s responsibility to hold on to all receipt pertaining to employment related expenses, and must produce them to an auditor if required.NOTE: Articles are for general information only and do not constitute tax advice nor can they be relied upon. Call Faris CPA for assistance.