When I count up all my business expenses at the end of the year the biggest cost is always travel. That includes flights, trains, buses, accommodation, and of course all the food possible. Most of those deductions are pretty easy to claim, but I lose a lot of my food receipts.
I know I should be more organized, but … I’m not. And it really annoys me when I see how much I spent on food while on the road… and how little I end up being able to claim.
They have a nice solution for this in the U.S., a set per diem rate that you can claim: no receipts needed. I’ve envied that system for quite some time UNTIL a few weeks ago, when a wonderful commenter on this very blog claimed I could do the same thing in Canada.
“Sure” I scoffed to myself “Wouldn’t that be nice….”
But he was not just a purveyor of empty dreams. He had links. Canada Revenue Agency links.
Which led me to this….
It seemed to be telling me that when it came to business trips/travel, I could choose between keeping all my receipts and claiming the amounts (which I had currently been failing at), or a new simplified method… and just charge 51 dollars a day and be done with it.
But I’m not easily fooled, and this seemed far too good to be true.
So it was to the hotline for me. Twice I called them. And twice I was promoted past the front line crew, up the ladder to a higher echelon of tax answers. And the answer was a resounding ‘yes’. Apparently, it was just as simple as it sounded.
But my sceptiscm remained, so I sent out a few emails to the tax experts in my life, and they went to work. Before I knew it the rabbit hole had led us to a senior member of the CRA in the thriving metropolis of Sudbury. That’s where the CRA is based, and I hoped for confirmation of a new, simpler, and no doubt better life.
The answer: she could neither confirm nor deny this to be valid… and referred us to the call centre.
I honestly don’t understand why taxes aren’t more cut and dry. Seriously. There should be a definitive answer to some of these questions. But that’s why I’m just so happy to have people with more know how in my life to interpret for me.
Their interpretation: Her lack of comment confirmed that this falls into an official grey area. Call centre says it’s okay, but the higher ups won’t confirm. That’s because the call centre is working from what they call interpretation bulletins (which is where the excerpt I posted above comes from, and which the CRA publishes in order to help us interpret the tax code). The more senior member is working from the tax code itself, which doesn’t explicitly allow this… it doesn’t disallow it either… but she doesn’t want to get pinned down by putting something in writing.
So where do we go from here….?
Can you use the simplified method?
Yes. Yes you can. All information currently at our disposal – the tax bulletins as well as the call centre – tell us it’s allowed. So I’m definitely going to be doing it.
But it’s good to know that since this falls within a grey area there’s a chance that if it’s challenged someone will try to tell you that it’s not allowed. The best thing that you can do is arm yourself with the information I’ve described above and put in a good argument.
It yet again boils down to comfort level. I feel confident when I read this information and talk to the people at the hotline that I should be able to do this. If down the road someone changes that game, I will be able to argue my case, which I feel is a valid one. But if you don’t want to put yourself in that position, maybe it isn’t for you… or maybe you just keep way better records than I do and losing receipts isn’t a problem for you… in which case… we have very little to talk about.
What do I need for the simplified method?
The bulletin above refers to the possible need to “provide some documentation to support your claim”. The documentation that they’re talking about is proof that you were away on a gig. That means: contracts, company correspondence, or anything else that can prove the specific dates that you were away and that it was for business.
So, that’s a complicated explanation of a simpler way to do a small portion of your taxes. If it seems a bit overwhelming to you I urge you to talk to your accountant about it and see if it might apply. It’s been a huge simplifier for me this year, and allowed me to provide a much more realistic deduction number for my business food than I have in the past.
But either way, I find this whole situation absolutely ridiculous. The fact that there are so many subjectivities in self-employed taxes drives me a little crazy and completely justifies the hatred that most of us have for doing our taxes every year.
Get it together, CRA.