What You Need To Know About Commission Income and Taxes

Commission employees often run into a lot of difficulties when it comes to doing their taxes. They are often scrutinized by the CRA because they are commonly known to make a lot of errors and these are usually errors that affect the amount of money that they are paying.

There is a whole list of expenses that the commission employee can utilize, however they have to be able to qualify for these. One of the biggest and most common mistakes that this type of employee makes is thinking that they can deduct the cost of their travel to their workplace and back, or for other expenses such as of the tools that the need to use to get the work done as well as their clothing.

Doing taxes for commission based income can be really complex and confusing.   You as a person working under this umbrella will be allowed to deduct accounting and legal fees as long as they are reasonable and are applicable to the helping of getting your income tax done and filed.

What you must start out doing is make sure that your employment conditions meet the criteria that have been set for commission employees by the CRA.   There are several conditions that you have to meet and if you don’t do this then you may find out that all these expenses that you are submitting that you thought you were entitled to will not be so.

The first thing that has to be realized is that under your contract of employment you agreed to be responsible for your own expenses.   In many cases commission employees often get reimbursed for using their motor vehicle.   If you do receive reimbursement or an allowance for your vehicle then you cannot at the same time claim this as a commission employee expense.

Another criteria that you must meet for a commission employee is that you are required to work away from the actual place of business of your employer.   So before even putting yourself into this category it is well worth taking the time to completely review what the criteria is for commission employees.   Also keep in mind that you will have to keep a copy of a form T2200 which is a declaration of conditions of employment.   This must be completed and signed by your employer. If you are new to the commission employees world you would do well to speak to an experienced accountant to ensure that you do meet the criteria of this type of employment.   Then you can also be guided as to what expenses you can legally claim which is going to avoid some of the common errors that come with this type of employment.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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