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CRA audits of automobile expenses

CRA has been aggressively adjudicating and in many instances denying all automobile related expenses of employees incurred with the concurrence of their employer. The basis for the denial is the lack of a proper log book, as well as enforcing the old standing policy that treated the trip from home to the office and back as personal driving. In order that the deduction was allowed, an employee would have to drive to the office and then attend at her client's office. He would then be required to maintain a proper log detailing the date of the trip, client visited, purpose and distance.

CRA was quite reasonable and lenient with what they considered properly maintained mileage logs.

No more. I would strongly urge that mileage logs be properly maintained in case CRA comes knocking.

Another unreasonable position that CRA has taken lately is with the increasingly prevalent situation where an employee does not have an office at her employer's place of business, and is required by her employment contract to maintain a home office and travel to her employer's clients or other locations.

The problem arises with the definition of when home office expenses can be deductible.

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Business Funds versus Trust Funds

Mary and Joe Brown own a computer business with 2 employees.  Mary completes the bookkeeping and assists Joe as a computer tech.  They opt to remit HST quarterly.  Mary has minimal bookkeeping experience and completes the books once a quarter.  Joe and Mary purchase computer inventory whenever necessary and make large shareholder withdrawals.  At the end of the quarter, Mary realizes that they do not have the funds necessary to pay the Receiver General so she neglects to file the HST.  The Receiver General sends the business a notice and Mary netfiles the first and second quarter.  Mary realizes that due to the large inventory and shareholder withdrawals, the business does not have the funds to pay the trust monies (HST), interest and penalties.

In the above scenario, Mary and Joe are spending Trust Funds and placing their business in jeopardy.

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