# Consultant with unusual circumstances



## xclaim (Mar 30, 2012)

I am a Consultant - working for a Software company - I always Consult with 3 rd Partys.
I get a t4 and am on a Base salary with commissions - I get a pay stub every 2 weeks and also have CPP etc contributions that i pay on my stub - I am paid commission every quarter.

I work from home - I have a home office.

I travel allot on work - My travel expenses are partly paid by employer and the other half are paid by myself. If i think my travels will generate business i pay for my own travel expenses then my comissions are higher ... u probably get the idea !

my questions are - 

1. Can i write off the proportion of my home office square footage in property taxes, heating, etc etc for my home-office use.
2. Can i write off all my Travel expenses where my employer does not reimburse me.
3. I must ask this - Does the CRA have access to our bank statements - can they ask for it ?

thanks in advance - great forum and great site.


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## kcowan (Jul 1, 2010)

xclaim said:


> my questions are -
> 
> 1. Can i write off the proportion of my home office square footage in property taxes, heating, etc etc for my home-office use.
> 2. Can i write off all my Travel expenses where my employer does not reimburse me.
> ...


The key test is where do the income come from? If it all comes from Company A, then you have an issue with what they reimburse in expenses and the CRA will not allow any added expenses to be deducted.

The home office expenses can only be deducted if Company A does not provide any office facility. It does not matter whether you actually have expenses. If they provide no office then they should be compensating you for your in-home expenses.

I have been toe-to-toe with CRA on this issue.

The CRA can request any added information that will erode your claim. But it is unusual unless you are subject to an audit.

OTOH they may not catch it. Especially if you make it clear that your revenue comes from multiple sources.


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## MoneyGal (Apr 24, 2009)

These circumstances are not actually unusual. 

The OP has ONE employer. He's in commissioned sales. During the course of his employment, he incurs expenses, only some of which he submits for reimbursement by his employer. 

Here's the CRA page on the specific expenses that commissioned salespeople can deduct: http://www.cra-arc.gc.ca/tx/ndvdls/...ng/ddctns/lns206-236/229/cmmssn/menu-eng.html

He can deduct some of his workspace-in-the-home expenses provided he meets the conditions AND he has a signed T2200 from his employer: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/cmmssn/hm-eng.html

He can deduct travel costs: http://www.cra-arc.gc.ca/tx/ndvdls/...ng/ddctns/lns206-236/229/cmmssn/trvl-eng.html

CRA reviews of commissioned salespeople are relatively common (this is what people commonly call "an audit," but it is just a request to see proof of an expense). You should expect that you could be asked to furnish proof of your expenses. You don't have to supply your actual bank statements unless you are selected for a desk audit. 

Keith - I think you may be thinking of something else. The rules for commissioned salespeople are pretty clear.


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## xclaim (Mar 30, 2012)

*receipts*

thank you keith and moneygal - another quick question -

If i have all my expenses receipts scanned to pdf's - then will CRA accept these ? i do have the physical receipts but they are not organized .... will that be a problem ?

thanks again.


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## fraser (May 15, 2010)

For many years I deducted both autombile expenses and home office expenses. I received commissions. I also gave up my dedicated office space for an 'unassigned' vistitors desk in order to write off home office expenses. My employer provided me with a T2020 (I think) that permitted me to do so. You must have this form from your employer.

I expensed the business portion of my autombile expenses-gas, insurance, CCA (depreciation) etc. This was offset in part by the monthy car allowance and the per km reimbursement that my employer provided. The total of this reimbursement actually showed up on my T4 (cannot recall which box). I also expensed some entertainment expenses that the company did not reimburse (those that were used to generate commissions). The bottom line is that I did expense travel expenses that were not reimbursed but were used to generate commission income.

I did the same for my home office-seperate phone lines and a porion of my home expenses that were attribuatable to the square footage percentage of my home office. 

I went through more that one CRA 'desk audit' on travel expenses and never had an issue. But I know some people who were re-assessed because their expenses were not reasonable. I completed my own tax returns for many years. A few years ago I was compelled to review four years of tax returns. I engaged a CA who was in complete agreement with what I had done. So was CRA. No issue whatsoever and luckily for me I ended up with a very nice refund because of other issues.


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## killuminati (Mar 14, 2011)

Just out of curiosity...what percent range do you guys usually claim of expenses out of total income earned strictly from self employed worked?

This is my first time filing like this


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## fraser (May 15, 2010)

Not certain what your question is. For entertainment expense, I claimed all reasonable expenses. Included in this item were Xmas gifts to certain customers that my employer would not reimburse me for. My business related automobile expenses were kept to 50-60 percent of total car expenses. I think my home office was about 15 percent of my total home expenses. The percentage of these expenses to my commission income varied of course from year to year based on the timing of my commission income. Clearly if you are claiming high expenses to income ratio you will be targeting for desk audit. You can also be targeted for a desk audit if you automobile expenses are either abnormally high or if the business portion of those expenses is a consistently high percentage. When CRA did the desk audit on me I think I was in the the high fifties percentage for business use. Just keep all your receipts and a mileage log.

Don't be like some of my former colleagues who each year, because CRA did not appear to contest, kept increasing and inflating their expenses with personal items etc, etc. Eventually the computer kicks out the code based on ratios and bingo you a have a CRA request for desk audit. And when they find something amiss, they expand the audit


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## fraser (May 15, 2010)

Yes, CRA can, or used to be able to access your bank accounts. When audited they will ask you to sign a letter that they provide to the bank. They do not really need the letter as they can demand that the bank provide them with this data. In any event, in some cases they will do a search of bank accounts just in case you 'forgot' to tell them about one. They will look at your slips to see what banks you rec'd interest income from and they will start at each of these financial institutions. For a 'fast' audit(for non T4'd folks) they will add up all of your bank deposits, subtract the non income items like term deposit redemptions etc, and then compare that total to what you have declared as income. An in depth audit will actually go as far as to calculate changes in your net worth plus living expenses.


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