# vehicle travel expenses and reimbursement



## joncnca (Jul 12, 2009)

hi,

i use my vehicle for business and a portion is reimbursed by my employer, but this portion is much lower than what CRA allows, so i'm eligible for an additional tax credit (t2200 and everything filled out, etc.).

i get reimbursed roughly every month but it varies, and sometimes there are some delays. in 2014, i drove some kilometers but wasn't actually paid until 2015. when my employer reported how much i was reimbursed in 2014, it did not include the amount paid in 2015 even though i technically drove those kilometers in 2014

my question is, for the purposes of reporting the number of kilometers driven for business in a calendar year, do i include the kilometers (and reimbursement) that was driven/incurred in 2014 or the amount paid in 2014?

if it's the amount driven, it actually won't match up with the report generated by my employer. would this make it harder to prove my km? i have a daily log, but it's my own record, and not a record from my employer.

thanks for sharing your personal experiences!


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## lb71 (Apr 3, 2009)

Is your employer including the reimbursements in your T4? Then it won't matter when you fill out form T777 as those amount are included in income, and you don't deduct them in line 15 of the form. So you can still calculate your 2014 expenses as you incurred in T777.

Have a look at page 8 "allowable motor vehicle expenses" in the guide T4044:


> Sometimes, your employer will include an unreasonably low allowance as income on your T4 slip even though you do not want to claim any expenses. When this happens, have your employer complete and sign Form T2200, or get a letter from your employer stating that the allowance was unreasonably low. On line 229, deduct as an expense an amount equal to the allowance.


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## joncnca (Jul 12, 2009)

thanks for your reply. reimbursement is not part of t4. i'm filling out t777 and t2200. i've gone through the guide and everything checks out. 

my question is very specific: for the kilometers/reimbursed for 2014, do i include all kilometers/reimbursed DRIVEN in 2014, or kilometers/reimbursed that was PAID to me in 2014 (because some of the kilometers that I drove in 2014 were paid to me in 2015, and therefore not included in my annual statement from my employer)?

I think it makes sense that i cannot rely on the statement from my employer, and instead need to rely on my own records (daily log) for kilometers DRIVEN in 2014. this is also because i need to track the total number of KM driven in 2014 (personal and business) in order to determine the ratio of business use. if i go by only what was paid to me in 2014, it underestimates the amount of km driven in 2014. this also might create a problem for next year, because it might my ratio to go above 1.0, which is impossible and will probably red flag me.

am i right? use daily log instead of annual statement from employer?

thanks!


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## CPA Candidate (Dec 15, 2013)

For employment income, work on a cash basis, not an accrual basis. You are only concerned with amounts actually received in the year.

You aren't entitled to a tax credit, but rather a deduction of your car operating expenses.

For car allowances, if the amount is "reasonable" there is no inclusion in income. If it is unreasonable, either too high or too low in the circumstances, you include the allowance in income and deduct the actual expenses incurred.

You have the inclusion amount (the slip), now deduct your actual operating expenses related to work.


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## lb71 (Apr 3, 2009)

joncnca said:


> not included in my annual statement from my employer


What statement is this? So do they give you a statement that shows the total reimbursement for the year? In effect, they said we paid you $X in 2014, and that is missing the last month?

Per CPA's point, you may just want to stick with the cash basis, and deduct the cash reimbursed in 2014. This will result in slightly larger credit for 2014, but then you will catch up in later years, resulting in a lower credit. For example, say your work share of vehicle expenses for 2014 is $5,000. You happen to drive the exact same kms each month, so you end up receiving a reimbursement of say $200 a month. If your employer correctly reimbursed you, you would end up with a $5,000 - $200x12 = 2,600 deduction. However, they have short changed you in their reporting, so you end up with a 5000 - 11x200 = $2,800 deduction. In 2015, if they catch up, you'll end up with 13 months at $200 each, so your deduction will be smaller. Or the shortfall will carry over year after year.

It may be simpler to keep as is, as the paper work is cleaner. However, if you want to include the missing month in 2014, would you have the proper paper work to demonstrate that $200 paid to you in January 2015 was for December 2014? If so, it is reasonable to me to that you could include it. You would in effect be increasing your net income and therefore increasing the amount of tax payable. So from the CRA's perspective, you would not be out to game the system in your favour.


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## joncnca (Jul 12, 2009)

yes excuse me, i meant deduction, not credit.

sticking with a cash basis (which i understand means the amount i actually received as reimbursement, not the amount i should have received based on what i drove), would indeed keep my paperwork simpler. i ask the financial department to send me a summary of the vehicle money that i received in 2014, and this makes it easy for me to show CRA a number that my employer deliberately corroborates...it's just an email, not a formal 'statement' of any sort, but it's from my employer (which i imagine lends some credibility to my claim). but you're right, it says i received X in 2014.

but here's my concern with dealing on a cash basis (i.e. the amount i actually receive):

you basically have the jist of my situation. basically the amount that i drove for work in the last 2 months of 2014 were paid to me in 2015, even though i drove it in 2014, it's not included in my 2014 statement because i got paid in 2015. this will mess up the calculation of my ratio of km for business use, and in a subsequent year could make my ratio look really suspicious, even though i'm trying to be legit. here are some hypothetical numbers for illustrate my point.

2014:
business km driven in calendar year, 9,000km
total km driven in calendar year, 10,000km
ratio of business use: 0.9

but let's say my employer only paid me (at an unreasonably low rate) for 7,000km and the annual statement says 7,000 km, even though i technically drove another 2,000 km that was paid to me in early 2015.
this will change my ratio in 2014 to 7,000/10,000 = 0.7...so my deduction is actually lower, that's fine.

but since the 2,000km is added to 2015, let's say the following applies:

2015:
business km driven in calendar year, 9,000km
total km driven in calendar year, 10,000km
expected ratio of business use: 0.9
but add 2,000km that was carried over from 2014, which makes it seem like my business km is 11,000km...
this would make the ratio of business use 11,000/10,000 = 1.1, which is impossible and suspicious, even though i wasn't trying to do anything shady

i pretty much only use this car for work, and we have another car for personal use, so my ratio is pretty high and i worry about this actually being an issue. even if the carry over causes my ratio to be really close to 1 when in fact it shouldn't be, why draw extra attention when it's not necessary?

regarding whether i have the paperwork to prove that i actually drove those km in late 2014 that was paid in 2015, yes, i do have the paperwork. i have the itemized summaries of each payout (about 10 in 2014), and can probably show the amount that I SHOULD have been paid for km driven in 2014, if everything driven in 2014 was actually paid in 2014. but this is much less clean than being able to present the number that my employer provides me in the annual statement. but this seems to be more accurate.

anyone have the answer to this question from experience or from some reference material?


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## lb71 (Apr 3, 2009)

If you use the cash method, then I don't think your ratios change. So for 2014 you still use 90% because in 2014 that represents your incurred expenses. This would be based on your logs. You would not bring in your employer's amount of 7,000. (If you did, then you should adjust your denominator, but that's a whole other can of worms.)

Personally, if I have the proper records to show that the amounts paid in 2015 for 2014, I would include them in the 2014 return. It appears you do, but I'm not 100% certain. When you were paid in 2015 for 2014, does the statement say "Paid for Nov and Dec" or something similar? Then it's easy number to identify. If not, can you get your finance dept to provide something similar?

It is common practice that expenses get reimbursed after they are incurred, so you cannot be the only person in this boat. Further, these are not amounts that are reported as income on your T4, so you are not fudging something you have to report on your return.

If it would put your mind at ease, you could always consult a tax expert. It may cost you a few hundred, but it would maybe be worth it. You could always call the CRA. I'm not sure how much advice they give on these matters, but it wouldn't hurt. If you do, let us know what feedback you receive.


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## lb71 (Apr 3, 2009)

When I claim credits for my kids fitness and art activities, I based them on the year they started the program, not when I paid for it. For example, if my kid has a swimming program from Jan-April 2015, and I paid for it in 2014, I would include it in my 2015 return. If the program ran Dec 2014-April 2014, I would include the entire amount in my 2014 return. (These are one time payments.) I looked up the 2014 guide just now, and it says "...fees *paid in 2014*..." (bolded in the guide). So I am possibly in violation, but to me it seems like a logical approach.


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## CPA Candidate (Dec 15, 2013)

lb71 said:


> When I claim credits for my kids fitness and art activities, I based them on the year they started the program, not when I paid for it. For example, if my kid has a swimming program from Jan-April 2015, and I paid for it in 2014, I would include it in my 2015 return. If the program ran Dec 2014-April 2014, I would include the entire amount in my 2014 return. (These are one time payments.) I looked up the 2014 guide just now, and it says "...fees *paid in 2014*..." (bolded in the guide). So I am possibly in violation, but to me it seems like a logical approach.


Logical, perhaps, but wrong. Since it is a credit which doesn't vary with income, it's not going to make a difference in the amount, but you are delaying your refund.


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## joncnca (Jul 12, 2009)

i think the amount driven and the reimbursement that should be paid for 2014 is what should be included, even if i actually receive the amount in 2015. i have records for the last months of 2014 that itemize the amount km traveled and the amount reimbursable per day, even though i actually only received this money in 2015. in this way, the annual summary from my employer that states only the amount paid is not accurate, but if i break out the individual monthly summaries, i can prove the amounts that were payable for km traveled in 2014, and corroborate this with my bank statement for direct deposit. just too bad i can't use the employer's annual summary cause it's nice and neat, but it simply doesn't accurately reflect what was driven/reimbursable. i'll check with CRA to see if they have any direction.

i don't want to mess with the denominator when calculating the ratio, because right now i just take a photo and record my odometer reading on jan 1 and dec 31, and that's it. that means the numerator should be all km driven in 2014 between jan 1 and dec 31, not the amount i received. if i was going to exclude the last couple months, i would need to adjust the denominator and only take it from something like jan 1 to oct 31 or something...messy. form T777 also asks for the km DRIVEN

about your claim for kids fitness and art activities, i agree with CPA Candidate. i think it should be claimed in the year the fees are paid. i claim it in the year that's stated on the receipt when i pay, not when the program ends (if it crosses a calendar year). actually, some of the professional fees that i pay are for the following year, but i claim it in the year the fees were paid (year stated on the receipt) and my claim was accepted when they requested more information from me one year. a colleague of mine on the other hand, claimed fees for the year for which the dues were intended (e.g. paid in 2010 for 2011 fees, and claimed on 2011 tax return) and was denied the claim, and told that he needed to claim in the year when the fees were paid.

like CPA Candidate said, it probably won't change the amount because it's a credit, but wrong is wrong, even if the monetary value is the same, and they are within their rights to deny the claim and make you file correctly. probably messes with their statistics too.


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## lb71 (Apr 3, 2009)

I'll have to go back and check how badly I screwed this up. It's usually those swimming classes that begin in January that we pay for in December.


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## joncnca (Jul 12, 2009)

i called CRA.

the amount actually received should be entered in t777, even if some of the km were driven in the tax year, if you didn't get paid for it, then leave it out and it'll show up in a subsequent year.


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