I swear I’m going to stop taking new clients because their previous preparer or CPA died. I’m not a CPA and spend so much time explaining things aren’t legit that some accountant has done for them. At least I’ve stopped second guessing myself every time I see this stuff because I’m not a CPA and they were so must know something I don’t (other than how to effectively cheat on returns and not worry about being caught).
Yet another client swears up and down that because they are self-employed, they can claim vehicle expenses for driving back and forth to work. Obviously, this is ridiculous, but their CPA has been doing it for decades. This isn’t the first time I’ve run into this one.
I’ve been searching through the tax code trying to find an entry that expressly states going to and from work is a personal cost and can’t be claimed. I’m just not coming up with the right search terms. I know
Motor vehicle travel expenses
(h.1) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of
the office or employment away from the employer’s
place of business or in different places,
I’m just wondering if someone can point to where it directly states to and from work is a personal expense.
If they insist, I will fire them and refuse to do the return. I’d like to try to educate them instead if possible.
If their office is at home [they are self employed] and presumably that business-use-of-residence is appropriate because it is their place of business, then driving to and from their home is deductible.
I work from home. My office is in my home and used 100% for business.
If I drive to Costco to pickup supplies, that would be a business trip.
I feel your pain.. took on several new to me clients from a Retired tax Person/Bookkeeper… Actually, I worked for her back in 1996-1997
I left because I realized I knew more than she did and couldn’t take the stupidity. She is over 70 years old now and clearly is not up to date with CRA rulings.
Oh my land… the things she is telling taxpayers to do… claim flat rate vehicle for sole proprietor and to buy gift cards to pay her accounting fees and others and write them off
Allowing peeps to deduct employment expenses without a T2200.. and of those expenses… they were laughable.
She is agreeing peeps can claim HST back on items that had no HST… the list goes on.
3 weeks left ish.. of the big rush… so maybe I will buy a lotto ticket.
The ridiculousness may depend on what they mean by driving “to and from work.” Does this mean they maintain an office that they work from as their primary work location, away from home?
Not everything is in the ITA. Some of these things come from court cases and CRA administrative policy. I don’t recall where the commuting interpretation comes from exactly, but it’s the sort of detail that’s very unlikely to be in the Act itself.
@Rein Same. My office is in my home and I see 99% of my clients here, but I do have a few that I go to because it’s hard for them to get here anymore. Occasionally, I pick up supplies. I keep logs.
What I’m talking about is different, at least how I’m seeing it is. This client is a beautician who rents a salon space. She does claim home expenses because she does her bookkeeping and the salon’s laundry at home. She doesn’t make a special trip for this (like taking it home to wash and going back to the salon the same day). She doesn’t see clients in her condo. It’s a pretty big stretch to call her home the place of business in the way our homes are. Her beauty products are delivered. She took the round trip to the salon and multiplied it by the number of days she’s open. She doesn’t keep logs at all. Just knew the starting and ending mileage for the year. To me, her vehicle use is personal to and from work. If I’m wrong, please let me know. Maybe the interpretation I was taught is too strict. I don’t want to break rules, but I also want the best for my clients.
I had one person come in who just wanted to claim $2000 for vehicle expenses like it was a travel expense. Said it was what she charged herself to use her car. She also charged herself for use of her cell phone and internet. Called specific owner draws payment for these expenses. I don’t remember the amounts, but she charged herself more than I pay for those things in a year. No MV schedule, no receipts showing how much she paid for vehicle expenses, nothing. Doing it that way seemed reasonable to the HR Block dude who was doing her stuff before. I told her to get a new dude at HR to do it.
Just about every new client I’ve taken looks at me like I’m crazy when I tell them they need to keep logs. I print out a simple form I made in excel to make it easier, but they all whine like babies at first when I tell them I need them to actually do it.
Ultimately, it’s the taxpayer’s responsibility to ensure the tax return is done right; many preparers, whether CPAs or not, follow what has been done in the past. If the client refuses to accept the changes when brought up the issue, you either refuse the client or document it’s been discussed and the client is responsible for the decision. I find refuse the return is a better choice.
Sounds like you have a few clients that I would also refuse.
A firm I worked at 24 years ago… liked to be the “nice guy”.
I was instructed to create a disclaimer on the issue, have client sign it and file what they wanted.
This is, of course, an option you have.
Just because it was always done like that before does not mean we continue it.
One of the benefits to having my own practice is that I can pick and choose my clients. I
pride myself on guiding clients around CRA ever changing rules and educating clients on the manner in which CRA expects things to be done. My years of experience help with my creditability.
You have to decide whom your target market is… referrals from persons doing things you are not comfortable with will likely result in referrals of like-minded individuals.
In the end, the taxpayer is responsible, but I choose whom I am associated with.
If they rent a salon space, then that would most likely be considered the business’ base of operations, though it sounds like they want to argue that their home is the base of operations, which would indeed make all such driving deductible. I would advise the client against that conclusion I think, but it’s not completely ridiculous as an argument.
You don’t actually need to keep logs to claim vehicle expenses. It makes it MUCH easier when CRA is reviewing your expenses, of course, and in CRA review letters they claim that you are required to keep logs. But there’s no legislative requirement to keep logs, and I have successfully objected in the past to reassessments that deny vehicle expenses on the basis that no log was kept. Reasonable estimates are, and always have been, a part of preparing tax returns.
So it’s definitely a good idea to keep logs. But if the client doesn’t do so, they’re not out of luck necessarily. They’ll just have an uphill battle on a CRA review.
Yes that is definitely a different situation. Her business place is the salon. I wouldn’t even claim business of residence in that case. I would in fact refuse to do that.
I would claim the cell phone in that case if that is how her clients contact her.
I had a new client last week who thought that she could claim B.U.R. expenses for the office because she had a solar panel in her backyard and does her taxes in the office 2 hours of the year. I just told her that if the office is also used for personal activities you need to go by the hour. and 2/8,760 x expenses comes to about $1. It cost more for me to calculate the B.U.R. deduction.
And I add that if she did her own, she can claim ignorance, but I can’t.
I actually didn’t realize that it wasn’t in the ITA. I asked Grok3 and it agrees with you.
In short: Logs aren’t explicitly mandatory, but they’re practically essential to defend your claim if the CRA reviews it. Keep a record of your trips, and you’ll be on solid ground.
That is true as you are going for supplies. Mileage is only covered if you leave your Office to do work or get supplies. If I leave my home office and go to meet clients I can write that off and I keep a journal of every km used and all other receipts. However if I drive to just have coffee with friends from my home office no that is not a legit expense.
It’s a very terrible thing when client don’t listen, as much as we like to educate them. I don’t think most clients are actually listening. I had this one time, shareholder loan issue, I showed all the info, penalties to client for misuse, she was mad, said she never knew that, shout, confront the previous accountant, but the previous accountant was able to shut it with letter showing those were discussed. I didn’t want the trouble, walked away
Thanks for all the input! I think I need to loosen up for some and sent the beautician away.
I just rewrote my engagement letter and the client letter expressly addressing the things I think are most problematic, basically any numbers just given to me where I don’t see the back up. I specifically say I’ll take the numbers they give me if they want to do the work themselves and give me a summary, but CRA won’t allow mileage w/out logs, percentages, or anything clients can’t back up with detailed documentation if CRA reviews it.