As the COVID-19 pandemic continues to impact the world, many employees have been forced to work from home. This has led to an increase in home office claims, as employees seek to offset the costs of working from home. However, there is a potential downside to these claims: higher taxes.
The Canadian Revenue Agency (CRA) has issued a warning to employees who are claiming home office expenses on their tax returns. According to the CRA, employees who claim home office expenses may be subject to higher taxes in the future.
The reason for this is that the CRA is concerned that some employees may be claiming expenses that are not legitimate. For example, an employee may claim that they need a new computer for work, when in reality they just want a new computer for personal use. If the CRA determines that an expense is not legitimate, they may disallow the claim and assess penalties and interest.
In addition, the CRA is concerned that some employees may be claiming expenses that are not eligible for a tax deduction. For example, an employee may claim the cost of their home internet connection, but this expense may not be eligible for a tax deduction if the employee also uses the internet for personal use.
To avoid these issues, the CRA is encouraging employees to be careful when claiming home office expenses. Employees should only claim expenses that are legitimate and eligible for a tax deduction. They should also keep detailed records of their expenses, including receipts and invoices.
In addition, employees should be aware that claiming home office expenses may trigger an audit by the CRA. If an employee is audited, they will need to provide evidence to support their claims. This can be time-consuming and stressful, so employees should be prepared for the possibility of an audit.
Overall, while claiming home office expenses can be a great way to offset the costs of working from home, employees should be aware of the potential downsides. By being careful and keeping detailed records, employees can avoid higher taxes and potential audits.