As a tax payer you might have wondered if you can deduct your work-place travelling expenses for tax purposes especially when your expenses are not reimbursed by the employer.
In some situations, the courts found that travel from an employee’s home to work sites is considered “in the performance of a service for an employer,” and so unreimbursed travel expenses incurred by the employee to travel between their home to various work sites is tax deductible.
In other scenarios, however, the courts came to a different conclusion, finding that travel from an employee’s home to a work site is “inherently personal” unless it can be shown that the duties are being performed by the employee during these travels, such as transporting supplies for an employer.
Is an employee that serves different locations for an Employer is entitled to deduct expenses related to travel?
Recently, as per an eye opener case of October,2022 an Ontario employee an industrial engineer who worked for Canadian division of a multinational, with headquarters in Ontario, was asked by his employer to assist a sister company in United States in 2017. For this he acted as a senior director of manufacturing for the U.S company, from August 2017 to April 2019 tax years.
Employee visited company’s office in Massachusetts for 2 to 3 weeks in a month and it took 8 hour drive from his home and rest of the time he continued to work for the Canadian division. Also, he had to take a temporary work visa as he always intended to assist U.S company temporarily. As a result, the taxpayer incurred significant lodging, food and other travel expenses. Neither the Canadian division nor the U.S. company reimbursed him for any of these expenses. Even CRA ( Canada Revenue Agency) said that employee had 2 regular places of working during those time period for Ontario and Massachusetts location and denied to claim his expenses related to travel in U.S. Though in July, 2017 before opting this role he signed an addendum to his employment contract that stated he was responsible for costs related to food, beverage, entertainment and travel to the U.S. work location. In return, he would be given an additional $100,000 in salary.
The judge turned to the Income Tax Act and the rule governing employment-related travel which clearly stated that Employee’s contract was with the Canadian company , not the U.S Company and he was travelling back and forth for 19 months to U.S location, though his place of business was clearly at the Canadian headquarters in Ontario. As a result, his travel to Massachusetts was properly considered to be a travel away from his employer’s place of business.
In conclusion judge ruled in favour of employee and allowed the taxpayer’s appeals. Stating that, the employment was away from his usual place of business in Canada and, therefore, met the Income Tax Act criteria to deduct his travel-related employment expenses in 2017 and 2019.
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