Many taxpayers here in Canada are advised to “keep their receipts” when they claim mileage and / or gas on their tax returns. The thought here is that the Canada Revenue Agency (CRA) might audit your tax return and will deny your claim if you cannot show proof, but what are you allowed to deduct? Does it matter if you are self-employed or if you are a salaried employee? Did you know that just keeping your receipts is not enough and there might be deductions you are entitled to that you are not claiming?
It all matters.
If you are claiming vehicle expenses and you are a salaried T4 employee working for someone else, then you need to know this;
Or, if you are self employed, you need to know this;
So if you rely on your accountant to take care of this for you, or if you wish to use the services of Intaxicating Tax Services, at the very least, you need to be aware of this important fact;
The CRA regularly rejects gas receipts from taxpayers who pay for their gas with debit cards. Why? Because they are not sure if you are getting cash back on the transaction – that does not show on the debit slip.
Example: I go to fill up my car 3 times a week, and each time I put in $20.00 worth of gasoline, but get cash back of $80.00 each time. My debit slip reads $100.00, and I claim $300.00 worth of gasoline expenses for that week on my tax return when in actual fact I was only entitled to receive a deduction in the amount of $60.00.
In addition, if you are required to travel a lot for work, make sure that you have a calendar at home and at the office (on the office computers) which show the location of the meeting, the name of the organization and / or people that you are meeting, as well as the purpose of the meeting (ie/ sales, cold call, delivery). Make sure that you track the mileage as well. This way when the CRA questions the high claims, you can show them with 100% certainty that your travel claims are for work purposes.
It also helps to keep all the gas transactions on the same credit card for organizational purposes.
It takes a little effort and organization but it’s worth it.
- CRA Tightening the ship and tightening their grip… (intaxicating.wordpress.com)
- CRA: The Ten Year Rule for forgiveness on penalties and interest overturned at the court of appeal. (intaxicating.wordpress.com)