A lot of business owners are guilty of keeping receipts for items that cannot be claimed as a business expense. To save money on your bookkeeping, by limiting the amount of time your bookkeeper spends sorting through receipts, leave the following receipts out of your folder.
You may also be required to wear a certain type of outfit to work on a regular basis such as a suit. However, unless you are buying specific safety gear or are required to wear a branded uniform any clothes you purchase are considered a PERSONAL NOT BUSINESS expense. This includes associated costs such as dry cleaning and laundry services.
I know this is a terrible reality for most of us in particular for all of the office workers out there. As much as we wish things were different (we too would like to get some money back for looking this good on a daily basis) the CRA just won’t budge on this one.
Until the day when we start a revolution by wearing burlap sacks in protest please refrain from sneaking your clothing purchase receipts into your bookkeeping folder.
2. Personal maintenance
When you are the face of your company or the company you work for it’s important to look the part. This can be expense we all know Botox, makeup and personal training isn’t cheap!!
That said the CRA wants you to be beautiful on your own dime. Clearly this faceless monster doesn’t understand the pressures of being a local celebrity.
Again until we find a way to make them understand how important looking and feeling good is when you are a business owner please keep these receipts out of your bookkeeping.
Eating is expensive!!! It would be really nice to get some of that money back on your food consumption especially considering that majority of your eating takes place while working.
Twice a year you can throw a party and claim it as a business expense. Keep that in mind when gathering your receipts.
Anything more than that is just groceries for your family, you know it…we know it…and the CRA will know!!
4. Solo Meals
So you ordered Subway for one during your lunch time “business meeting”…hmmmm interesting. Unless you went Dutch, which we know you didn’t, you can’t claim single meals as a business expense without running the risk of having it rejected during an audit. In addition your three daily trips to Starbucks don’t count as business meetings.
The best way to protect yourself and prove that your “meeting” is legitimate, in the event of an audit, is to write the name of the person you were meeting on the meal receipt.
Rejection = Penalties and interest
5. Personal items, trips & gifts
Did you really purchase that tent for your business trip to Pemberton? We may accept this as true if you are a journalist who works for a local paper that rewards you with love not money, or more logically a tour guide. But when the average business owner adds this receipt to their folder the bookkeeper will automatically assume it is personal unless you make a note claiming why it is a business expense.
Tickets to Disneyland, ski passes, expensive artwork, adult toys and climbing the grouse grind to have lunch will also be filed by your bookkeeper under “I don’t think so” unless you write a convincing argument on your receipt in advance.
The main thing to know about bookkeepers is that we want to make sure your expenses are recorded correctly so that if you are audited you have nothing to worry about because all of your expenses are legitimate business expenses that would be approved by the CRA.
To find out more about how we can help you with your business or to determine if you have some expenses that are an exception to the rule contact us today.