Advice – Trust But Verify
Okay so it is time for me to rant again. I am really ticked off and need to vent a little. A client came to us the other day with some questions that were really straight forward. No, this is not what ticked me off. What ticked me off is that he had asked another “accountant” these same questions and gotten very different answers. No, I am not ticked that he asked someone else. What I am really upset about is that the answers he got from the “accountant” were wrong! The answers were not just wrong but were REALLY WRONG!!!!
Question #1- Can I deduct my house as an office for my corporation?
Question #2 – Can I deduct my vehicle expenses in my corporation?
Question #3 – Can I deduct my personal cellular telephone in my corporation?
The answer the “accountant” gave to all of the above was NO.
The excuse the “accountant” gave was that any expenses in your personal name cannot be deducted by the corporation.
The problem is that all of these expenses CAN be deducted inside your corporation. As questions go these three should be no brainers to an “accountant”. If the average person doesn’t know, I can accept that, but any accountant worth their salt had better know that the answer is yes. As a shareholder, director, and employee, the corporation can reimburse you for expenses that you incur on behalf of the corporation. If you use your house, vehicle, or cellphone for corporate business, then the portion of the expense which relates to the corporation is deductible. The fact that these are dual use or personal items is irrelevant. What matters is how and for whom they are being used. Let me explain. If you have an office in your house where you store your business records, and do paperwork etc., then that portion of the house is being used by the corporation and is deductible (If you want a more detailed explanation call us and set up an appointment, we love sharing what we know, especially if it will save you taxes). Same goes for car and cellphone. If you use them 50% for business then 50% of the expense is deductible, and can be reimbursed.
I believe that the accountant either did not know, or more likely did not want the hassle of getting the information. Whatever the reason is, it's irrelevant, because by ignoring these expenses he is costing the client money. By ignoring the expenses the client is going to give more of their hard earned money to the government. This to me is totally unacceptable. The Income Tax Act does not say that expenses have to be in a certain name. What it does say is that they must be laid out to earn income, must be reasonable, documented, and provable (I am paraphrasing). Under the right circumstances almost anything is deductible. What the “accountant” should have done was explain the circumstances where the above things are deductible, and how to document them so that they can be deductible.
I will stop now, but I have one last thought I would like to share with you in closing: Treat accountants like doctors, always get a second opinion, unless you asked me first, because I am always right