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.
Intaxicating Tax Services can be found @ http://www.intaxicating.ca and make sure to drop by our helpful blog here.
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Warren,
I work in the financial services field also. In Calgary. Do you have any clients out this way / are you able to help some of my clients?
I have always said that every person has right to carry out their dreams, and bad credit should not be the obstacle in making a dream come true, yet it does cause so many to stop the pursuit of their dreams. In fact, I have found in the 25 + years I have been helping people, that the CRA causes or contributes to their bad credit in 90% of the cases.
Its the little things, like putting a little down payment down before taking any type of auto loan, or knowing what the CRA is looking for surrounding gas and mileage expenses go a long way for individuals and for experienced professionals such as myself.
Working with an industry professional and CRA expert such as yourself, early in the process, can save many hours and much needless frustration on my behalf and my clients as well.
Thanks for posting this tip and please keep it up!
MD
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Hello MD
Thank you for the kind message.
We currently have a couple of clients based in Calgary – are they as a result of you? We also have a couple of clients in BC, so we are certainly getting known on the beautiful West Coast of Canada. I was also on CFAX1070 not that long ago, taking questions for an hour about the CRA.
Please send me your contact information, or post it here, and I’ll make sure that you are added to our blogroll, and hopefully we can work together in the future.
Warm regards,
Warren
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Would you be able to comment on my particular case. I am an Incorporated contractor and have a few clients to who I travel to to do work. I claim 55c per km to my own corporation, however, I am not a salaried employee of my corporation, I just pay myself a dividend. It has come to my attention that I may not be able to claim the 55c per km if i only pay myself a dividend, and that I need to be an employee in order to be able to claim 55c per km milage. Can you comment on this?
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Very nice tips, really helpful for understanding the tax system, I always face difficulty when filing my annual returns, always a pain.
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