Written on behalf of Feigenbaum Consulting
A requirement to use your own car at work can allow for associated expenses to be claimed on your income tax returns. However, not everyone is entitled to such claims (for example, you can’t make a claim if an employer already reimburses you), and it is critical to keep detailed records, especially if more than one vehicle is used for work. A recent decision from the Tax Court of Canada highlights the importance of doing so.
A Benz and a Toyota
The appellant had been reassessed for his 2014 and 2015 taxation years. The result of the reassessments was that he was disallowed employment expenses claimed in relation to the usage of a 2011 Mercedes Benz.
The appellant worked for a company that sold credit card readers to commercial businesses. His job was to market and sell them within a specific region. This work required occasional travel in order to meet with clients. He and his wife owned three cars. In addition to the Mercedes, they also owned a 2001 Toyota and a 2001 Nissan. The appellant said his wife used one of the 2001 cars to get to work while he primarily used the Mercedes Benz.
The Evidence Contradicts the Appellant’s Claims
The appellant had previously claimed expenses for the operation of the Nissan, even though the appellant said his wife was the primary driver of that vehicle. Furthermore, the wife was listed as the primary driver of the Benz on their insurance.
The appellant also described a typical day in his job, which mostly consisted of teleconferencing with his employer and colleagues, sending emails, and making calls to prospective clients He said he occasionally went out to see customers. However, the court found his travel time did not appear to be extensive.
The appellant also failed to present any mileage log in support of his motor vehicle expense claim, He said he maintained one, but submitted it to his employer and did not keep a record for himself. He testified that even if he did have a log, it would not show which vehicle he used. The only evidence the appellant was able to show were some gas receipts as well as repair documentation. However, the court did not give much weight to those. The court was critical of the appellant, stating he did not “provide any listing of clients or referral partners and their location that he would have the Court accept that he had visited in the course of carrying out his employment duties, and establishing which automobile (the Nissan, for which deductions for operating expenses already had been allowed, and/or the Benz) he would have been driving for such trips.
Ultimately, the court found the appellant’s evidence was insufficiently detailed and non-comprehensive. The court admitted that he may have been the primary driver of the vehicle, but he had failed to provide any documentation to back up such a claim.
For Guidance on Business Expenses and Documentation, Consult With an Experienced Tax Lawyer
When claiming business expenses such as cars and other tools of doing one’s job, it is important to keep detailed records to back up any deductions claimed. For those who may be unsure of how to properly document their deductions, an experienced lawyer can help. At Feigenbaum Law, we will provide practical and effective guidance to maintaining records relating to your business expenses so when it comes time to file your income taxes, you can be sure each claim is properly documented and accounted for.
If you need help with your personal or business tax planning needs, contact the experienced lawyers at Feigenbaum Law. Our unparalleled knowledge of tax law in both the United States and Canada makes us leaders in the tax law field no matter which side of the border you do business on. We offer services to clients in the United States, Canada, and around the world. We can be reached by phone at 877-275-4792 as well as online.