CRA Review of Corporate Travel Expenses
The Canada Revenue Agency (the “CRA”) conducts regular reviews of corporate tax returns. As part of a new group project, the CRA is focusing on corporate travel expenses. What does this mean if you claimed travel expenses on your corporate tax returns?
You may be selected for a review to ensure that you have the correct books and records in order to deduct the travel expenses you have claimed. Once selected, the CRA will ask for documentation to support your deductions and explanations how they relate to your business.
A taxpayer can deduct travel expenses incurred to earn business and professional income. In other words, you can deduct reasonable travel expenses only for travel that relates to your business. Examples of acceptable travel expenses include public transportation fares, hotel accommodations, and meals.
When claiming travel expenses, it is important that you keep all of the related records. While the CRA may accept bank or credit card statements as proof, they normally require the primary receipt to give you the full amount of your deduction claimed. Best practice is to also keep a travel log so that you are able to explain how the travel furthers your business. Without a log, the CRA will be skeptical that your travel was related to your business.
What is the CRA Review Process?
If you have been selected for a review, you will get a letter or telephone call from the CRA. The CRA will ask for information, receipts, or documents to support a claim or deduction you made on your tax return.
If you are registered for online mail, the CRA will send you an email notifying you of a letter on your CRA account. You should promptly go to My Account where you can review the letter and begin working on your response.
It is important that you respond and send all the information requested as soon as possible. This will help the CRA review your file quickly. Keep in mind also that these reviews are not full tax audits.
The type of documentation the CRA may request to support travel expenses include:
- a detailed list of the transactions (or the general ledger entries) related to the expenses;
- an explanation of the reason for the travel;
- a copy of the invoices or receipts for the ten largest transactions included in travel expenses for each tax year; and
- a copy of any travel logs.
If the CRA does not receive the supporting documentation, they will disallow the travel deductions.
Normally the letter provides a 30 day deadline for a response. These letters are typically signed by a specific CRA officer, so if you require an extension, you will need to contact that officer to request more time. If you cannot reach the officer, you can always contact the CRA general business line.
If you are being reviewed for your travel expenses, or have questions about whether you are eligible to claim travel expenses, give Rosen Kirshen Tax Law a call today! We can help you navigate this complicated review process. We are here to help!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.