Thanks to our work with the CRA, whether you can claim expenses as tax-deductible is going to become much clearer!
In the fall of 2017, the CRA began reviewing a small percentage of individual tax returns, which focused on “other employment expenses” claimed by shareholder-employees on their T1 form.
In early 2018, many of our members told us that CRA had contacted them and had disallowed any employment expenses claimed by a shareholder. In the context of employer certification, and based on feedback from CFIB and other stakeholders, CRA realized that its own communications on how taxpayers should claim “other employment expenses” was not clear.
Good news: shareholder-employee expenses that had been disallowed will be reversed!
As of result of our work with the CRA, the agency will stop reviewing and disallowing “other employment expenses!” The CRA will also reverse reassessments specific to those expenses that were already issued during the review period (September 1, 2017 to February 10, 2018). Taxpayers involved in these reviews will be contacted by letter to inform them of this decision.
One member’s perspective on what this means
“CRA told [my CFIB counsellor] that they looked into the matter and they will reverse their decision and allow shareholders to claim the expense. CRA agreed that because their own publications are not clear that majority shareholders may not use the employment expense deduction, the expense will be allowed.
“The CFIB is a wonderful advocate for Canadian businesses and all of us should be members. I have been one for over 25 years.”
What comes next: clearing up the expense deduction
The CRA will consult with stakeholders to clarify the requirement of employer certification under the Income Tax Act as it relates to shareholder-employees. You can expect clarity from the agency for the 2019 tax year.
CRA will issue more information on this issue well in advance of any future reviews to allow taxpayers, and their representatives, reasonable time to adjust to their tax filing requirements.
Call your CFIB Counsellor
This win shows what happens when you reach out to a CFIB Counsellor. Not only will you get great advice on business issues—you could also help other business owners facing the same problems!