Tax Deduction Tips for Commission Employees

Commission employees will, more times than not, have to pay extra expenses than salaried employees. To compensate for this, the Canadian Revenue Agency will allow commission employees to benefit from some tax deductions other workers don’t qualify for.

What is a Commission Employee

A commission employee receives all or part of their income based on sales or another achievement. To be considered as a commission worker, you must meet the following requirements:

• Your employee contract states you must pay for your expenses
• You don’t work in your employer’s physical workspace
• You’re paid based on the number of contacts or sales you complete
• Your employer doesn’t give you a travel allowance
• Your employer completes and signs a T2220 for you, annually

What to Claim

When you’re filing your income tax return, there are several expenses you can claim on your Statement of Employment Expenses, Form T777. Most people include legal and accounting fees. You can also include the cost of promotional gifts, computers, business cards, and cell phones.

If your job requires you to use your car, you can claim part of the costs that occur from work-related travel. These costs can include insurance, fuel, parking, maintenance, leasing costs, and registration fees.

Another deduction you can include is 50% of what you spend on entrance fees, drinks, food, and tickets when you host a client. You can also claim the cost of meals for yourself if you’re away from the office for more than 12 hours; this also has a 50% rule.

As a commission employee, you have the benefit of claiming expenses from your telework space. Some of these expenses include:

• Entertainment, excluding membership and golf club fees
• Capital Cost Allowance
• Promotions and ads
• Car interest rates
• Accounting costs
• Property taxes and home insurance

Supporting Your Claims

Keep track of all your receipts, invoices, canceled checks, credit card statements, and any other documents that support your claims. Ensure the documentation shows the date of purchase, a description of the product or service, and information about goods and services tax and harmonized sales tax. Also, ensure that your name and address along with those of the seller are included. 

For car expenses, you’ll need a kilometer log showing how far you drove that year. The record should show the odometer reading before and after you traveled. You don’t need to submit the log with your tax return; it’s used to determine the portion of expenses you can claim. If you ever undergo an audit, you’ll need your kilometer log; taxpage.com has more information on this subject.