Avoid a Tax Audit Toronto for Employee Expenses
The Canada Revenue Agency (CRA) checks employee compliance by asking for information and conducting a Tax Audit Toronto. Often employees get hit with reassessments for additional taxes, penalties, and interest after a Tax Audit Toronto that a Professional Accountant Toronto could have helped avoid. This article will help you figure out whether you have met the procedural and substantive requirements to deduct employment expenses, or whether a Professional Accountant Toronto will need to file a Voluntary Disclosure to avoid the negative effects of a Tax Audit Toronto.
The Income Tax Act prohibits an employee from deducting any expenses at all from their employment income unless the expense is specifically allowed by the Act. For some expenses, there is a record keeping requirement and for others you need a certified form from your employer. All of the employee deductions are found in section 8 of the Act. The most common permissible deductions an employee encounters are those for legal expenses, sales expenses, travel expenses, motor vehicle expenses, and various dues. There are other deductions that a Professional Accountant Toronto can help you discover.
Legal expenses are deductible, but only for legal work required to collect or establish a right to employment income or taxable benefits. Legal expenses to keep a job, a common Tax Audit Toronto target, are usually not deductible. An employee who sells property or negotiates contracts as part of employment can deduct certain related expenses. Some of the requirements is that the contract of employment has to require the sales employee to pay own expenses, that the duties are ordinarily carried out away from the employer’s place of business, the pay is based in part on the number of sales or contracts, and the employee didn’t get an allowance or reimbursement for the expenses. If eligible, expenses to the extent of the commission-like pay can be deducted (with some other limitations). Travel and motor vehicle expenses are also a common source of Tax Audit Toronto. They have requirements and restrictions that a Professional Accountant Toronto can explain.
Employees are often targeted by the CRA for information requests and a Tax Audit for expense claims. If you get a letter from the CRA, get a Professional Accountant Toronto to help you avoid the negative outcomes of a potential Tax Audit Toronto. Even better, before claiming employee expenses speak to a Professional Accountant so you won’t sweat a potential Tax Audit.
Disclaimer: Articles are general info only and do not constitute tax advice & cannot be relied upon.
Sam Faris is a Toronto-based Chartered Professional Accountant who practices as an independent consultant on high-level Canadian tax matters and handling disputes with CRA.He also published an article recently in the business magazine: HERE.