“The husband claims employment expenses on his annual tax returns, which do not reduce his line 150 income but reduce the amount of tax ultimately paid. He argues that these employment expenses should be deducted before determining the appropriate income upon which to calculate support. On the other hand, the wife submits that support should be calculated based on the husband’s income as declared on line 150 of his tax return. She argues that the employment expenses should not be deducted for purposes of calculating support.
The husband is employed at Paccar as an area sales manager for Canada. He frequently travels for work. Paccar has provided him with an Amex card, which he uses to pay for many of his employment expenses. He testified that he is reimbursed by Paccar for the expenses that he incurs on the Amex card. The husband also testified that he paid for some employment expenses out of his own pocket (including motor vehicle travel expenses and costs related to a home office) and was not reimbursed by Paccar for those expenses.
The husband testified that CRA audited the employment expenses claimed on his tax returns, and upheld those deductions.
Schedule III of the Child Support Guidelines states that certain specified employment expenses described in paragraph 8 of the Income Tax Act are deducted from income for purposes of calculating support. Not all employment expenses are deductible from total income for support purposes. In this case, the husband states that he incurred sales expenses; travel expenses; and motor vehicle travel expenses that should be deducted pursuant to Schedule III.
When a taxpayer seeks to claim employment expenses to reduce their taxes, they must file a T2200 Declaration of Conditions of Employment. This form is completed by the employer and describes the types of employment expenses that are necessary for the employee to incur as part of the employment and that are not reimbursed by the employer. The employee must also confirm that their contract of employment requires the employee to pay employment expenses.
Deductions accepted by CRA are not automatically accepted as deductions from income for the purpose of determining a payor’s income for spousal support. There should be some evidence that would justify a conclusion that the employment expenses qualify as a deduction pursuant to s. 8(1) of the Income Tax Act: see Bentley v. Gillard-Bentley, 2013 ONSC 722 and Chase v. Chase, 2013 ONSC 5335.
The onus is on the husband to establish, on a balance of probabilities, that his Schedule III deductions are appropriate employment expenses before they can be deducted: see Pollitt v. Pollitt, 2010 ONSC 1617 at para. 140.
In this case, I draw an adverse inference from the failure of the husband to file the following evidence:
i. His T2200 forms from his annual tax returns;
ii. His contract of employment;
iii. Documents that he filed with the CRA when he was audited;
iv. Monthly Amex statements for the Paccar Amex card; and
v. Formal reconciliation of the Paccar reimbursement compared to his payments made on Amex balances.”