We see beyond the numbers. You profit by our knowledge.
Your business is unique and may have some special conditions applied for business deductions and expenses.
One of the biggest challenges we face when recording day to day transactions for clients is the lack of proper source documentation.
It is necessary to keep all proper documentation for any transaction whether it is revenue or expense you wish to claim as a business transaction.
All documentation should be kept for a minimum of 7 years; however, you should keep all records for a further 3 years.
If an audit was conducted in year 7 and the auditor found something he wanted to review further, he can ask to review books back a further 3 years.
On the revenue side, you should keep a binder of sorts that contains a numerical copy of every single invoice and credit memo produced by your business.
This is crucially important because computers do crash and you do not want to be without proof of the revenue you report to Canada Revenue Agency.
On the expense side things are a little more complex but the same reasoning applies…you must be able to prove to CRA any expense you claim as a business deduction.
If an audit is conducted and you cannot produce evidence to support the expense it will most likely be disallowed.
Diligence in keeping all vendor invoices, credit card, debit, and out-of-pocket receipts is very vital to the success of your business.
It is also very important to prove the GST/HST Input Tax Credit (ITC) you are claiming.
The Income Tax Act allows a business to claim only 50% of allowable meal expense as a business expense for tax purposes.
The first thing to remember is that the expense must be reasonable, and that there has to be a business reason for the expense.
You might want to, but should not just go out for dinner and expense it to the business.
When you do go out for a business meal, always write on the back of your expense the reason for the meal and who was in attendance.
As well it is absolutely mandatory (we cannot stress this enough) to make sure you obtain from your server the meal receipt along with the receipt regardless of the method of payment.
Usually the restaurant will give you your visa printout, but without the detailed meal receipt you cannot know what the GST/HST was and that means the GST/HST ITC cannot be claimed.
You cannot ever assume the tax portion…it must be visible, and the GST/HST # of the supplier of the service must be prominently displayed on the receipt.
You may purchase your vehicle gas from a vendor who does not provide a detailed receipt, but rather just gives you a printout from your method of payment.
This is not acceptable in GST/HST regulations.
You must be able to prove the GST/HST you expensed, so even though it is a hassle to ask for the detailed receipt, it is necessary.
Also, except for direct auto expense items (Washer fluid, car washes etc.); do not purchase other items on the same receipt as your gas.
If you decide to pick up a snack while purchasing your gas, make it a separate receipt, because it is not an allowable business expense unless you are purchasing the snack to be used when entertaining a business associate.