Employers will be extra busy this tax-filing season providing eligible employees with completed tax forms they’ll need to deduct home office expenses on their 2023 returns.
The temporary “flat rate” method, which allowed Canadians working from home due to Covid to claim up to $400 in employment expenses in 2020 and up to $500 in 2021 and 2022, is not available for 2023. That method did not require the employee to get a form from their employer.
Employees who worked from home in 2023 and who are eligible to claim home office expenses will have only one option — the “detailed” method, which will require a completed Form T2200: Declaration of Conditions of Employment from their employer.
More employees are going to need T2200s this year, said Edward Rajaratnam, a tax partner at EY Canada in Toronto, during a Jan. 10 webinar presented by the firm on the topic of home office expenses.
On its website, the Canada Revenue Agency (CRA) says it’s updating the T2200 for 2023 to make it easier to complete in cases where an employee is only claiming a deduction for home office expenses (as opposed to other employment expenses such as vehicle expenses). The CRA will release the updated T2200 and updated guidance in late January, the agency says.
A shorter, simpler version of the T2200 — the T2200S: Declaration of Conditions of Employment for Working at Home Due to COVID-19 — that the CRA made available for 2020, 2021 and 2022 isn’t available for 2023.
“There’s going to be a lot more burden administratively [for employers] to complete a form that is not as efficient or not as simple as the short form of the T2200,” Rajaratnam said.
Before 2020, generally two types of employees required their employer to provide a T2200: those in a commissioned sales role and those who had a permanent arrangement with their employer to work from a home office. Far fewer employees needed completed T2200s prior to the pandemic, Rajaratnam said.
In 2020, when many employees began working from home because of Covid, the CRA allowed employees to choose between the temporary flat-rate method and the detailed method depending on how big a deduction for expenses they expected to receive. Both methods were available in 2021 and 2022 as well.
Under the detailed method, the only one available for 2023, an employee who works from a home office more than half the time for a period of at least four consecutive weeks in a year can claim eligible expenses. Employees can’t claim expenses for which the employer has already paid. Employees claiming home office expenses do not need to file the T2200 with their return but must have one if the CRA asks.
In 2023, with pandemic-era measures largely over, many Canadians continued to work from home either exclusively or through a hybrid work arrangement with their employer, raising a key question: If an employee is working from home voluntarily, are they eligible to claim home office expenses and do they require a T2200?
At the webinar, Lawrence Levin, a tax partner at EY Canada in Toronto, said the CRA has yet to provide definitive guidance for 2023.
However, recent CRA technical interpretations and Guide T4044: Employment Expenses for 2023, published in December, suggest the CRA may take the approach that an employee who has either a written or oral arrangement to work from home is, in effect, required to work from home as part of their contract of employment and would be responsible for paying expenses associated with working from home, Levin said.
The CRA said Friday that it could not immediately provide more information on eligibility requirements for claiming employment expenses.
Levin said employers should keep in mind that providing a T2200 to an employee who works from a home office and an employee’s eligibility to claim home office expenses are separate matters.
“The employer’s responsibility is limited to [providing] the form T2200,” Levin said. “Whether the employee claims a deduction and how much they claim, that’s on the employee.”
A bit of good news for employers is that for 2023, employers will no longer be required to provide a handwritten signature for the T2200. The CRA will accept an electronic one.
While there is no statutory deadline for employers to provide T2200s, employees will be expecting to receive the forms in a timely fashion so they can claim their expenses and complete their tax returns, Rajaratnam said.
Employers should begin putting procedures and policies in place now, and communicating with employees about when they might receive T2200s in order to manage expectations should there be delays.
“It’ll stop the questions coming back from employees,” Rajaratnam said.