A version of this article was previously published on the FASKEN TaxEd International blog. A version of this article was previously published on the FASKEN TaxEd International blog.
With the increase in working-at-home arrangements due to current events, employers and their employees may have questions about the tax treatment of home office expenses for these employees.
Generally, an employer can compensate an employee for home office expenses by way of an allowance or a reimbursement. An employee can also be given an “accountable” advance, which is treated as a reimbursement assuming that the employee can provide itemized receipts and the balance is returned to the employer.
If an employee receives an allowance or if he or she pays for the expenses out-of-pocket, then the expenses may be deductible subject to certain requirements. If an allowance or reimbursement is considered a taxable benefit and not deductible to the employee, the employer can mitigate the cost to the employee by compensating the employee for the additional tax but must do so on a “gross up” basis as paying an employee’s tax is also itself a taxable benefit.
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