Can I Write That Off?

Can I write that off? If you have asked this question, you are in good company. Getting to know what is a true business expense can save you bundles at tax time and prevent CRA to disallow your expenses. It can be pretty hairy, as a tax accountant, to figure out what your expenses should look like if you mixed your groceries bills with office supply receipts. The more you ask your accountant to pull out their calculator, the more it will cost you to get your taxes done. Here is what we recommend to make your life easier (and cheaper).

1. Keep your business account for business.

It is tempting to run through the drive through and reach for the business debit card. I would caution you against that. It blends business expenses with personal. At the end of the year, if you have not done anything with your books, it can be hard to remember if you bought that printer paper for personal use or for business use…or maybe that purchase was for the kids’ school supplies…who really knows?

The real bad news in this equation is that if CRA decides three years down the road that your paper purchase was in fact the kids’ school supplies, you will not only owe the taxes on the increase in your income, but the interest on the date that the taxes were due. For example, if CRA is auditing your books on May 15, 2021 for the 2018 year, your interest charges will be calculated using the date of April 30, 2019. That is two years of interest to add to the tax bill.

2. Get an app.

An app is a cheap solution to your accounting problems. We have people with apps that pull data directly from their business bank and credit card accounts automatically. It requires a bit of work initially to set it all up…but once the set up is done, the app gets it done for you. You can take pictures with your phone using the app for it to match it to bank transactions. It even breaks out the GST!

3. Know what you can claim as a business expense.

The big question is: did you use it to earn income? The $40,000 kitchen renovation you just did probably did nothing to help your yard maintenance business. I think the meals and entertainment receipts are one of the most questionable ones you might have. If you meet a client for business, keep the receipt and write the name of the client you met with. It is the surest way to ensure it does not get disallowed by CRA.