Q&A Part 3/4 Keeping Records - non corporate business

Today we were supposed to cover Meals, Home Office and Vehicles.  That was too ambitious. We got through where do the rules come from, what are the over -riding rules like what are the reasons we can deduct, and does it have to be reasonable, and covered meals and home offices, but vehicles will have to wait for next week.

If you want to purchase the video for each week, they are available on my website, if you're not a member of IPBC, and if you are a member of IPBC, they are available at a discount via the www.ipbc.ca member Links portal under Educational Discounts.

Q: Can the 50% HST be booked to the meal expense rather than the drawings account?
A: No, it can't, not if you want to reconcile your records with the T2125 return. This is a self-employed workshop, not a corporate one.

Q: Can you show us how to do the JV for the % that is for personal use of home office?
A: Yes, I did, and when you purchase the video, you'll be able to view how I entered the home office costs, recorded the personal element and reconciled that to the T2125 schedule

Q: You can't create a loss with home office expenses? What do you do with unused home office expenses?
A: No, you can't create a loss, but you can carry a loss forward indefinitely. CRA doesn't track this carry forward in My Account as it's dependent on deducting it against the same business. If you've changed businesses of course it falls off the table and they don't track that.

Q: Does this mean for the company office party that the company can only claim 50% as well?
A: There are special rules, more than the rules we covered today, and one of them is that yes, you can in certain circumstances, for a limit number of events, write off the company Christmas party.
If you want to review the video, you'll find there are links to the Income Tax Act for exceptions and that is one of the exceptions. That doesn't mean you can write off the weekly pizza party at 100%, or even 50% unless it's for business purposes and it's reasonable in the circumstances.

Remember how at the beginning I showed a disclaimer.  This session was not advice. This session was to encourage you to go look up the rules, and to get comfortable with where to find those rules in the ITA. 

Save this link to S. 18 http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-18.html
and

If you don't have a subscription to my TaxLinks Pro Portal, it's $30 for a year to September 30, 2013, renewable on that date annually. IPBC members will find it's offered at a 10% discount by visiting the Member Links and drilling down to find the Educational Discounts.

The tax rules change all the time, as do how those rules are interpreted by the courts in Canada. The rules are subject to the facts, in light of what those rules are at the time and also what the courts have set as precedent. You can find all the rules, and the court cases at www.canlii.org

Keep in mind that depending on who you are, as in are you self-employed or an employee of your corporation, that different rules apply from different sections of the Act.

The toughest part about income tax is that it's required of all Canadians that they know all of our laws and apply them appropriately. Given what's involved in the Income Tax Act, that's a tough act to understand and apply. Hence the call by many professionals for simplification.

Just these two subjects, for a small sub-set of tax payers, meals and home office took an hour and we really didn't delve into every corner of what the laws are. For example, I didn't mention the Christmas party exception, but then that's more likely a corporate situation, not a self-employed one, unless the self-employed person has employees, and then those rules apply.  Not easy is it?