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Thoughts and ideas from Leonard tam
No Receipts, No Deduction… Unless??
April 8, 2019 at 12:00 AM
by Leonard tam
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How can you Declare Expenses in Income Tax without showing receipts!!

Receipts work as evidence for our business expenses and the Canada Revenue Agency may decide to reduce the number of expenses you have deducted. All of our claimed business expenses on our income tax return need to be supported with original documents like receipts. Without receipts, we cannot claim expenses while filling our return. But the question is, Can we still claim them? NO!! Right? But there is one exception that is meal and vehicle expenses for moving or for northern residents. 

Some business owners make mistake by thinking that their bank or credit card statement is enough proof of expenses. That’s not!! Bank or credit card statement proves that payment was made, not more than that. We shall have the actual receipt for our business expenses before we claim our taxes. 

That's correct that we do not send receipts to Canada Revenue Agency (CRA) when we file income tax online but we are advised to keep them as they will be required at the time of the audit. We are still expected to have those receipts as Canada Revenue Agency (CRA) can ask for those to prove our expenses. But as I mentioned, we still have an exception of meal and vehicle expenses. 

What are your chances of getting audited? 

Your chances of getting audited are high if you are:  

  • Self-Employed or Sole Proprietor 
  • Administering a Construction, Retail, Accommodation, or Food Sector Business

These businesses accept most payment in CASH and have higher chances of being audited by the Canada Revenue Agency (CRA) because of doubt of not reporting the actual income. Each year, CRA choose several kinds of business to investigate more closely and this increases the chances of being audited for those businesses. 

Chances of getting audited is always a bit higher than we think and if our business gets selected to be audited, We have to serve all records to CRA. 

The Canada Revenue Agency regularly audits a specific number of income tax and annually GST / HST accounts to monitor compliance and serve as quality control of the tax system, meaning that our small business could be selected to be audited just for the luck of the draw.

No Receipts = No Deduction

Loss of receipt means loss of chance to lower the income tax bill. Not having receipts to back up our business expenses mean that those expenses never happened and we will end up paying a massive tax bill to pay that we didn't expect. It will also complicate the audit process.

Good receipts from records can increase the likelihood of business success. To separate business from our personal receipts and taxable from non - taxable income, we need this information. Having a system to keep track of your deductible expenses is very important.

Claiming Meal and Vehicle Travel Expenses Without Receipts

If we qualify as a northern resident or have moved to take up a job, study at a post-secondary institution or run a business at a new location, the CRA permits a "simplified" method that does not require meal and vehicle expenses receipts. 

Meal Expenses: If we decide to use the simplified method, a flat fee of $ 17 per meal can be charged up to a maximum of $ 51 per day for the 2017 tax year without receipts. Note that while using the simplified method we do not have to keep meal receipts, we will have to keep records of the trips for which we claim meal expenses (vehicle log books, air, train, bus, taxi receipts, etc.). If our meal expenses exceed the simplified daily limits, we can use the detailed method to claim the actual amounts, in which case we need receipts to support our claim.

Vehicle expenses: The simplified vehicle expenses method allows you to claim a rate per kilometer instead of keeping track of individual expenses such as fuel, repairs, and insurance. For the kilometer rates for each province or territory, see Meal and Vehicle rates for travel expenses.