Temporary flat rate method-Simply your claim for home office expenses

On December 15, 2020 Canada Revenue Agency (CRA) announced a temporary flat rate method to work from home expenses, in light of the impact of the COVID-19 pandemic. Under this temporary method, eligible employees can claim $2 for each day you worked from home due to the pandemic, to a maximum of $400. You are not required to keep documents to support your claim and are not required to obtain your Employer’s sign off on a T2200/T2200S form.

However, the regular T2200 process will still be available to those who wish to file a claim for greater expenses. Under this option, eligible employees will require supporting documentation and a signed T2200 or T2200S form.

CRA releases details on T2200, home office deductions and employment benefits, information on a number of employment-related issues, including working from home expenses, form T2200, and employment benefits.

Home office expenses/T2200

The release of additional details on the T2200 and home office expenses will simplify the rules for employees and their employers. The release included helpful tools, including a comprehensive calculator, guidance and forms, and a redesigned T777S form.

Here are the highlights:

• Employees will generally be able to claim a home office expense deduction if they worked from home in 2020 due to the COVID-19 pandemic and in particular, more than 50 per cent of the time from home for a period of at least four consecutive weeks in 2020.

• Where the employee qualifies, they can do a detailed calculation or they can use a temporary flat rate method. If they use the flat rate method, then no T2200 is needed. However, if they do a detailed calculation, they will have to obtain a regular T2200 form or a shortened pandemic version of the form (Form T2200S) from their employer.

• Under the flat rate method, the individual can claim $2 per day for each day worked at home up to a maximum of $400 (i.e. 200 days).

• The CRA has also announced that internet access costs are eligible, but only if the detailed calculation approach is used. It appears that the CRA expects this cost to be prorated on the same basis as utilities such as electricity and heat.

• The T2200S is much shorter than the simplified version that the CRA previously circulated. An employer will only have to confirm whether the individual worked at home due to the pandemic, whether they were reimbursed for home office costs and whether those costs are reported on the employee’s T4.

One of the difficult issues in developing a flat rate method for all employees was that renters can generally claim a higher amount than homeowners under existing rules. For many, it could be more than $2 per day. In addition to renters, we assume that other employees will be better off using the detailed method, such as those who worked at home for more than 200 days.

Employment benefits

The CRA also formalized guidance around some employment benefit issues, including commuting costs, home office equipment, and meals.

More details will be followed. If you need help or have questions, please contact us