Over the past few years, it seemed that Revenue Canada (CRA) had lost its appetite for constantly reviewing automobile expenses, and in particular, mileage logs. In the past few months however, this appears to have emerged once again as one of the top audit areas in CRA reviews of small businesses and employees who use their automobiles for work.
Are you keeping a detailed log of your business travel? As per CRA guidelines, this would include the following information for each business trip:
- number of kilometres you drive.
If the CRA does come calling, and you do not have a logbook ready at hand, DO NOT tell them that you do not have one. Most of us can do a reasonable job of recreating business mileage from notes in appointment books, calendars, client invoices or any other form of documentation that may show where you have driven for business purposes. Google maps is a great way to find driving distances that you may have forgotten to note down while actually driving somewhere.
Some clients will tell me “I have nothing to hide – I don’t even claim half of the business mileage that I actually drive” The important thing to remember in all dealings with the CRA is that it’s not whether or not you have something to hide – it what do you have to SHOW. Unlike the criminal justice system, in the world of tax audits the onus is on the TAXPAYER to prove their business expenses. If you can’t, then the CRA has every right to disallow unsubstantiated expenses that have been claimed.