When COVID-19 struck, many employers quickly switched to a work-from-home model for their employees. Many of them began working in a province other than where their office was located. While some workers have returned to their offices, as the pandemic drags on, more offices continue to work remotely with no back-to-office dates in sight.
If you’re working remotely from a location in a different province from that of your office, then you may be wondering if you will have to pay income tax in multiple province or which province you need to pick up when you want to file your tax return.
Remote Working in Multiple Locations
Let’s say you live in Vancouver. During the pandemic, a mandatory office closure allows you to work remotely from your vacation home in Calgary – However, in all the pandemic confusion, your employer may not have known you were working remotely from Calgary and did T4 for you based on the BC‘s rate.
You might be confuse, but nothing need to worry about in this case. one thing need to adjust is when you file your personal tax, make sure you choose correct province of resdience on December 31, 2021.
If the tax rate in the remote location is higher than the taxpayer’s province, the tax credit in the worker’s province may not be enough to offset all – or any – tax owed. You will need to pay personal income in this case.
Employment expenses for working at home due to COVID-19
Another big topic is employement expenses for working at home, due to COVID-19, CRA add a temporary flat rate method for 2020 and 2021.
Temporaty Flat rate method
The temporary flat rate method is ussed to calculate your home office expenses for 2021 for employees who worked from home in 2021 due to COVID-19. By choose this method, your employer will not need to complete From T2200S, Declaration of Coditions of Employment for Working at Home Dut to COVID-19, and you do not need to keep documents to support your claim. Which is good, but you might find, you only can claim $2 for each day that you worked at home during the year 2021. And the maximum amount is $500. In the case, you find your actually cost is much higher than this amount, you could consider traditional method.
Traditional method – Detailed method
By traditional method, first of all, your employer will need to sign the From T2200S as I metioned. In addation, you will finish the Forms T777 Statement of Employment Expense. But the good news is you could find there are lots expenses you could claims:
- rent paid for a house or apartment where you live
- electricity, water, heat, or the utilities portion of your condominium fees
- maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
- home internet access fees
- office supplies (stationery items, pens, folders, sticky notes, postage, toner, ink cartridge, etc.)
- employment use of a basic cell phone service plan
- long distance calls for employment purposes
Employees who earn commission income can also claim the following:
- property taxes
- home insurance
- lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income.
Note: You cannot claim any expenses that were or will be reimbursed by your employer.
It looks great, isnt it? But there are few things keep in your mind:
- You will need to keep all the support documents in the case CRA requested.
- You only could take portion of the fees, such as rent, If the monthly bill is $1000, 5% of the space, you used it for work, you only could claim $660.
If you want more details, here is the link from CRA, could be help. canada.ca/cra-home-workspace-expenses
Keeping Good Records
Keeping good records is always important when it comes to your taxes, but even more so when there are so many unknowns. As such, it’s a good idea to keep track of how many days were worked in each state and how much money was earned. You might need a good bookkeeping saftware to help you to track, such as waveapps
Help is here.
Tax laws are complex even during the best of times. If you’ve been working remotely during the pandemic in a different location than your office, then it pays to consult with a tax and accounting professional to figure out your tax liability and recommend a course of action to lower your tax bill, such as changing your withholding.
Pic from Getty