How to claim business expenses
What is personal versus what is corporate.
The first thing to recognize is the Canada Revenue Agency will allow reasonable business expenses.
It is very important to keep separate bank accounts for your personal and business.
Tax planning and tax and a business expense organization is critical in in determining how much tax you pay each year.
Reasonable is different for every type of business.
A sales person might be taking out clients for lunch and 50% of this expense would be reasonable. A plumber I would not be taking our clients for lunch rather than would have different types of expenses i.e. materials and supplies.
The reasonableness factor also comes to scrutiny when looking at the actual level of cost. Expensing an $800 lunch for two people is not reasonable.
It can be reasonable to expense part of your home as a home office if you do actually work from home. Also driving a car to and from a clients office can be reasonable.
All business expenses must be documented with receipt.
Whether it’s digital or in paper format these receipts must be kept for seven years. HST audits are very detailed and must have supporting documents showing HST paid.
Putting things in the business his name is a very very smart strategic way to separate operating business expenses versus personal expenses.
One strategy if you are married is to have your personal expenses go through the after tax income, and operating expenses organized into the business.
Every business is different and requires a personalized tax plan and strategy. Please contact me today as this is something we do for all of our clients and I have been very successful at organizing and minimizing taxes for a personal and business clients.
