**Update as of Feb 19, 2018** In an email update from the Canada Revenue Agency, the Agency stated “Effective immediately, the Agency will stop reviewing and disallowing “other employment expenses” claimed on line 229 of the T1 Individual Income Tax and Benefits Return by shareholder-employees. We will also reverse those reassessments specific to line 229 already issued during the review period September 1, 2017 to February 10, 2018…Taxpayers involved in these reviews will be contacted by letter to inform them of this decision.”
Along with other major anticipated changes to the Income Tax Act during 2018, the Canada Revenue Agency (CRA) may be taking a closer look at employment expenses deducted on your personal income tax return this tax season.
The CRA may be carefully reviewing whether or not there is a contractual obligation for an employee to incur eligible employment expenses. Many business owners wear two hats: they are an employee and a shareholder of the corporation that carries on their business.
If you are in this situation and claim employment expense deductions on your personal income tax return, your exposure to CRA audit and reassessment may be higher. Consequently, it may be worth considering having your corporation claim a deduction for such employment expenses within your corporation, in lieu of on your personal income tax return.
All employees, regardless of relationship, should have a written contractual obligation for the employee to incur eligible expenses on behalf of the employer as a condition to claim employment expenses on their respective personal income tax returns.
If you have any questions about your employment expenses or if the CRA contacts you in this regard, call your Bateman MacKay advisor for more information.