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Expenses a Canadian employee receiving commission income can deduct from the Canadian Income tax return include the capital cost allowance (CCA), interest on car loan, and other expenses you had during the tax year for employment purposes. However, the expenses that can be deducted from the Canadian income tax return should not exceed the amount of commissions earned in the same tax year. Another option that is also available for the Canadian employees who receive commission income is to declare the income on behalf of a salaried employee which means that a person cannot count some types of expenses though can count the travelling expenses.
The difference is that an employee receiving commission income cannot count the travelling expenses because this part of the expenses exceeds the commission earned that tax year. In this respect, the expenses to be deducted include the amount that equals commission if the real expenses (for instance, travelling expenses) are higher than the commission earned that tax year including the capital cost allowance and interest on the car loan, for instance. At the same time, an employee that earns commission income can claim the expenses as a salaried employee and include the travelling expenses adding the capital cost allowance and interest on car loan if he/she uses motor vehicle to get to the place where the work is performed.
When an employee that earns commission income uses a motor vehicle to perform some work that is paid later, he/she should count the kilometers passed while the kilometers passed on regular bases should not be counted as a part of the travelling expenses in this case. For instance, if an employee uses a motor vehicle for both corporate and private purposes, he/she should distinguish between these issues and count only the kilometers passed on business while the total amount of kilometers at the end of the tax year should be also indicated in the form T777 called ‘Statement of Employment Expenses.’
The Form T777 is called ‘Statement of Employment Expenses’ and includes the expenses on accounting and legal fees, motor vehicle expenses (this means that only allowable expenses based on the per-kilometer rate should be indicated in this line), promotion and advertising, and other expenses. In addition, it is necessary to take into account the necessity of other important factors in the workplace and need for food and beverages that can be also claimed as well as all other employment expenses.
The costs spent on supplies should be also indicated in the statement of employment expenses. For instance, different office supplies such as postage should be indicated in the statement and can later be deducted from the Canadian Income tax return. The thing is that other types of expenses made in the tax year at the workplace/for earning income should also be indicated in the statement of employment expenses to be later deducted from the Canadian income tax return if a person is an employee receiving commission income.
Other types of expenses related to the maintenance of the motor vehicle, lodging, and parking should be indicated in the statement as well as musical instrument expenses, capital cost allowance, and work-space-in-the-home expenses (the information is retrieved from the official website of Canada Revenue Agency’s report on Employment Expenses 2010. The accounting and legal fees line includes different expenses spent on the search and obtaining of the salary collecting opportunities and rights.
Reimbursement received by an individual for the legal fees and accounting should be mentioned in the statement while listing the expenses. All the expenses listed in the statement of employment expenses can be deducted from the Canadian income tax return except for the line called food, beverages, and entertainment because a person can deduct only 50% of the amount and only if it was reasonable in those conditions.
A number of conditions should be followed to meet the deduction of expenses terms. So, if an employee is employed but has to pay for his/her expenses when the professional duties are required to be performed at home or in the area that is not located in the business location of the employer. The commission income is counted when a part of the income was gained in the following manner: an employee was paid some commission for services provided including an agreement made or contracts negotiated. Besides, a copy of Form T2200, Declaration of Conditions of Employment should be provided with the Form T777 called ‘Statement of Employment Expenses’.
The Form T2200, Declaration of Conditions of Employment includes the information about the employer, conditions of employment, and employer declaration. The conditions of employment include necessity of working outside an office/official location of business, having expenses that are not reimbursed, being from the municipality and metropolitan area (which is very important) during at last 12 consecutive hours of the working time. Period of employment, motor vehicle allowance, if any, and requirements whether an employee had to pay for some services or goods without reimbursement options.
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