Do your employees occasionally work from home, use their personal cars, or otherwise incur expenses that they are not reimbursed for in the course of performing their duties? If this is the case, they may be entitled to a tax deduction. However, they cannot claim it unless you, as their employer, complete Form T2200 Declaration of Conditions of Employment. The form comes with obligations that you should be aware of.
Employee and Employer Obligations
Certain employees, often those who are remunerated on a commission basis, are entitled to claim deductions for expenses incurred as part of their employment. To do so, they use Form T777 – Statement of Employment Expenses. The Income Tax Act imposes upon them the additional obligation of obtaining, from their employer, a declaration of their conditions of employment. They do not need to join this form with their tax return, but must have it on file.
As an employer, you are obligated to complete the form truthfully and return it to the employee. You should also keep a copy for your files. The form must be completed each year that your employee wants to claim deductions.
Content of Form T2200
The first part of the form contains the basic information about the employee, such as address, social insurance number, and job title.
From there, the form asks several pointed questions about the employee’s day-to-day conditions of employment. This is because different types of employees are entitled to different deductions.
First the form contains a generic question about whether your employee’s contract requires them to pay their own expenses while carrying out the duties of employment. If you answer no to this first question, then the employee is not entitled to any deductions. If you answer yes, the next sections will ask you to provide further details.
The next set of questions deals with employees that are required to travel to locations that are not your principal place of business and how often they are out of town on business. A related element that you will be asked to provide is the amount, if any, of the employee’s motor vehicle allowance or whether he had access to a company vehicle.
Further questions seek to determine the type of employee that you are filling out the form for. Does this employee work on commission? Does the person work from home? Is the employee a trades person? Does the employee supply tools for the job?
In the end you are required to sign and date the form. As an employer, you must also certify that the information provided on this form is — to the best of your knowledge — correct and complete. Any false statements are subject to penalties for both you as an employer and for the employee. so make sure that the answers you give are as accurate as possible and supported by documentation, such as a written contract of employment.