Taking on the CRA: Jamie Golombek shares his own fight with the taxman

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I by no means did get my day in courtroom, however I got here awfully shut.

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I’ve been battling the taxman for more than a year in an try and get the Canada Revenue Agency to permit my work-from-home bills for the 2020 tax 12 months. That combat got here to an finish final week, after I acquired a reassessment permitting almost all my home-office bills, refunding my overpaid tax, reversing the arrears curiosity beforehand charged, and even paying me some refund curiosity (albeit, taxable).

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I’m sharing my full story so what’s in retailer for those who, too, resolve to tackle the CRA.

The origin of my tax dispute will be traced again to March 12, 2020. I had Toronto Maple Leafs tickets for that night time’s sport in opposition to the Nashville Predators, and my son was to fulfill me downtown after work for the sport. However issues would dramatically change: that afternoon, the NHL suspended all games resulting from COVID-19 and our places of work shut down that night for what would grow to be many months.

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As of March 13, I started working from house full time, utilizing a spare bed room as my new workplace. I deducted some home-office bills for the primary time in my profession after I filed my 2020 tax return.

Staff who’re working from house as a result of pandemic have two strategies to assert work-from-home bills: the non permanent flat fee methodology ($2 per day, as much as $500 in 2022) and the detailed methodology, the place staff tally up the precise bills incurred and allocate them on a “cheap foundation” to find out the portion associated to employment use. That is sometimes carried out by dividing the workspace space by the house’s complete completed sq. metres (together with hallways, loos, kitchens, and so on.).

Bills embrace utilities, house web, lease, upkeep and minor restore prices, and workplace provides. You may’t deduct mortgage funds, capital bills or depreciation (capital price allowance), and solely commissioned-based staff can deduct their property taxes and residential insurance coverage.

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In my case, the detailed methodology proved to be the higher choice, but it surely meant having to substantiate every expense in case the CRA wished to “evaluate” my return, which is strictly what occurred.

In August 2021, I acquired a “review letter” from the CRA asking for extra details about numerous objects on my return, together with my declare for the digital information subscription tax credit score, proof that I made a small political contribution and, most importantly, assist for my work-from-home employment expense declare.

The CRA wished a duplicate of my signed T2200, Declaration of Situations of Employment, and a “detailed breakdown of the quantity claimed and the supporting paperwork.” It additionally requested for a duplicate of my T777, Assertion of Employment Bills, and a breakdown of how I calculated the proportion of the bills I might deduct, and “a duplicate of the ground plan of the residence with the house workplace.”

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I didn’t have a duplicate of my house ground plan, however I used to be fairly conservative with my estimate, claiming lower than 10 per cent of my complete house bills for the usage of my house workplace. I ready an in depth schedule of my month-to-month hydro, fuel and web bills, full with dates and quantities utilizing downloaded data from my on-line banking.

Sadly, this wasn’t sufficient to justify my declare. My $75 digital information credit score and political donation had been allowed, however my home-office bills had been denied of their entirety as I apparently didn’t ship sufficiently detailed data to substantiate my declare. This was confirmed in a January 2022 formal reassessment.

I paid the reassessed tax for 2020 to cease the every day compounding of non-deductible, arrears curiosity from being charged and, in February 2022, filed a proper Discover of Objection. I despatched the CRA PDF copies of all my month-to-month 2020 statements from every utility supplier, totalling 89 pages of documentation, to justify my declare. After which I waited. And waited.

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Periodically, I’d log on to the CRA’s My Account web page and examine beneath the Progress Tracker to see if any motion had been taken. Lastly, after a number of months, the standing was up to date on-line: a preliminary evaluate of my objection was performed, and it was decided to be of “medium complexity.”

Medium complexity revenue tax objections resolved in August 2022 had been accomplished in a median of 283 days from the date the objection was submitted. That was too lengthy for me to attend, so I exercised my proper to attraction on to the Tax Court docket, which will be carried out 90 days after submitting a discover of objection if the CRA hasn’t responded by then.

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In late Might 2022, I filed my attraction and was informed my case could be heard in Toronto “on the first obtainable alternative.” I used to be excited and assured. However aside from a few parking tickets within the Nineties, I’d by no means been to courtroom earlier than so I needed to put together. I rewatched 12 Indignant Males and My Cousin Vinny. I used to be now prepared for courtroom.

However my day in courtroom was to not be. Shortly after submitting my attraction, I obtained a name from a pleasant CRA litigation officer who stated he had reviewed my file and was ready to permit all my work-from-home bills, save for $99. I rapidly agreed.

Per week later, he had me signal a consent to judgment, which was later licensed by a Tax Court docket decide. On Sept. 14, I acquired my new Discover of Reassessment, together with a direct deposit of my tax refund and curiosity.

I actually was wanting ahead to my day in courtroom. Maybe one other time.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. [email protected]

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