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Taking up the CRA: Jamie Golombek shares his personal struggle with the taxman

Golombek was gearing up for a day in court docket over a dispute over work-from-home bills, but it surely by no means got here

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

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I’ve been battling the taxman for greater than a yr in an try and get the Canada Income Company to permit my work-from-home bills for the 2020 tax yr. That struggle 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 you recognize what’s in retailer if you happen to, too, determine to tackle the CRA.

The origin of my tax dispute may be traced again to March 12, 2020. I had Toronto Maple Leafs tickets for that night time’s sport towards the Nashville Predators, and my son was to satisfy me downtown after work for the sport. However issues would dramatically change: that afternoon, the NHL suspended all video games on account of COVID-19 and our workplaces shut down that night for what would become many months.

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As of March 13, I started working from residence 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 residence as a result of pandemic have two strategies to assert work-from-home bills: the short-term flat price 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 “affordable foundation” to find out the portion associated to employment use. That is usually carried out by dividing the workspace space by the house’s complete completed sq. metres (together with hallways, bogs, kitchens, and so on.).

Bills embrace utilities, residence web, hire, upkeep and minor restore prices, and workplace provides. You possibly can’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 each expense in case the CRA needed to “evaluation” my return, which is precisely what occurred.

In August 2021, I acquired a “evaluation letter” from the CRA asking for extra details about varied 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 needed a replica 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 replica of my T777, Assertion of Employment Bills, and a breakdown of how I calculated the proportion of the bills I may deduct, and “a replica of the ground plan of the residence with the house workplace.”

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I didn’t have a replica of my residence ground plan, however I used to be fairly conservative with my estimate, claiming lower than 10 per cent of my complete residence bills for using my residence workplace. I ready an in depth schedule of my month-to-month hydro, gasoline 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 have been allowed, however my home-office bills have 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 go browsing 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 evaluation of my objection was performed, and it was decided to be of “medium complexity.”

Medium complexity revenue tax objections resolved in August 2022 have been accomplished in a mean of 283 days from the date the objection was submitted. That was too lengthy for me to attend, so I exercised my proper to enchantment on to the Tax Court docket, which may 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 Could 2022, I filed my enchantment and was instructed my case could be heard in Toronto “on the first obtainable alternative.” I used to be excited and assured. However apart from a few parking tickets within the Nineties, I’d by no means been to court docket earlier than so I needed to put together. I rewatched 12 Indignant Males and My Cousin Vinny. I used to be now prepared for court docket.

However my day in court docket was to not be. Shortly after submitting my enchantment, 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.

Every week later, he had me signal a consent to judgment, which was later licensed by a Tax Court docket choose. 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 court docket. Maybe one other time.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com

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