Jamie Golombek: To deduct unreimbursed food and lodging employment expenses, several conditions must be met
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Some taxpayers try to write off the cost of getting to work as a deductible expense for tax purposes. But other than the odd exceptional case, those expenses are denied since the Canada Revenue Agency generally considers the cost of driving back and forth between home and work as a non-deductible personal expense.
But what if you decide to stay at a hotel near your employer’s place of business during the workweek to minimize your daily commute? Can you write off the cost of your lodging, along with the cost of meals while living near your work? Well, you can certainly try. One Ontario taxpayer did and almost got away with it, until the CRA challenged the taxpayer’s employment expenses and the matter ended up in Tax Court.
The recent case involved a commuter train operator for GO Transit, the regional public transit service for the Greater Toronto and Hamilton Area. The job required him to work from various train stations across Ontario. The taxpayer normally resided in Prince Edward County, and the company’s home terminal was Toronto’s Union Station.
The taxpayer reported taxable income of $130,640 in 2014 and $110,729 in 2015, and claimed employment expenses on his tax return of $17,604 and $20,408, respectively. The employment expenses consisted largely of lodging expenses (about $11,000 in 2014 and $14,700 in 2015), and meals (nearly $6,000 in 2014 and $5,700 in 2015).
The CRA initially assessed his tax returns for 2014 and 2015 as filed, but the agency subsequently reassessed the taxpayer in 2016 and denied all his employment expenses for both years.
The taxpayer explained he was required as a commuter train operator to work from various train stations forming part of the GO Transit network. At the trial, the taxpayer testified that in a usual working week, he would leave his home in Prince Edward County on Sunday afternoon and head by car to Oshawa, returning home only on Friday evenings after his week’s final shift was over. The driving distance between his home and Oshawa is approximately 160 kilometres, representing a driving time of almost two hours.
The taxpayer further explained that he usually started and finished work at the Oshawa GO train station and not at his employer’s home terminal located in Toronto. While away from home, he sometimes stayed at a hotel close to the Oshawa GO station or in Pickering, where he rented an apartment near its GO station for a period of six or seven months in 2014, at a cost of $9,500. He rented a different Pickering apartment in 2015 at a cost of $5,520, and commuted from there to the Oshawa GO station where he worked.
There is a special rule in the Income Tax Act that allows transportation employees who are regularly required to be away from their home municipality to deduct unreimbursed food and lodging employment expenses. To be entitled to deduct these expenses, several conditions must be met.
First, the employer’s principal business must be transporting passengers, goods or a combination of both. The taxpayer is also required to regularly travel away from the municipality where the employer’s establishment is located (that is, where the taxpayer reported to work). In addition, the taxpayer must travel on vehicles used by the employer to transport those goods or passengers. Finally, the taxpayer must be required by their duties of employment to pay for meals and lodging while away from their home municipality.
The employee in this case had a properly completed and signed Canada Revenue Agency Form T2200, Declaration of Conditions of Employment, on which his employer certified he was required to pay various types of expenses for which he would not be reimbursed. Under the “Conditions of employment” section, his employer stated he was required to travel to locations that were not his place of business while performing his employment duties.
The form also noted that the employer required the employee to be away for 12 consecutive hours from the municipality and the metropolitan area where he routinely reported for work. His employer stated on the T2200 form that it does not reimburse employment expenses incurred by its employees.
The employee also completed and filed signed copies of the special form for transit employees, Form TL2, Claims for meals and lodging expenses, which the taxpayer attached to his 2014 and 2015 tax returns.
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During his testimony, the taxpayer testified his daily work shift was more than 12 hours per day, and he gave information about specific routes to show that. But when cross-examined about his daily work shift, the taxpayer recognized “that many of his routes lasted less than 12 hours and were subject to split shifts with interruption times.”
Based on the evidence, the judge said the taxpayer had not established that his duties of employment required him to regularly travel away from Oshawa, and away from the metropolitan area where his employer was located, thus necessitating him to incur expenses for meals and lodging. The judge noted that Oshawa is in the Durham Region, which is in the Greater Toronto Area. The taxpayer, therefore, was not able to establish that the employment expenses he claimed were incurred outside the metropolitan area where he reported to work.
“The deductions … (are) not intended for employees who decide, for personal reasons, not to return to their homes at the end of each working day,” the judge concluded.
Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. [email protected].
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