# Can I deduct any of the cash payments made for my business?



## GreenLawn (Nov 23, 2011)

Hi, I have a small landscaping business in Ontario, and I am unsure of whether I am able to deduct any of the casual labor wages I have paid out this year. 
Specifically, I have paid approx. $3000 cash for flier delivery services. I thought my accountant had at one time said that up to a certain amount of expenses such as this were deductible, but I'm not sure. Is there a way to recoup any portion of these expenses? The guy who delivered the fliers for me didn't have any sort of flier delivery business, just looking for odd jobs. 
Any insight would be much appreciated, thanks for your time!


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## Homerhomer (Oct 18, 2010)

GreenLawn said:


> Hi, I have a small landscaping business in Ontario, and I am unsure of whether I am able to deduct any of the casual labor wages I have paid out this year.
> Specifically, I have paid approx. $3000 cash for flier delivery services. I thought my accountant had at one time said that up to a certain amount of expenses such as this were deductible, but I'm not sure. Is there a way to recoup any portion of these expenses? The guy who delivered the fliers for me didn't have any sort of flier delivery business, just looking for odd jobs.
> Any insight would be much appreciated, thanks for your time!


Any legitimate business expense can be deducted regardless of how it's paid, however if you are ever audited you better have a proof of the expense (in most cases invoice) or it will be denied.


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## Young&Ambitious (Aug 11, 2010)

I would recommend following up with the guy and providing him with a casual invoice of sorts to you with a date, the individual's name and contact details, and the total paid or how much was paid on what dates and have him sign at the bottom. Informal but should be sufficient that if you were ever audited it would be accepted as a legitimate expense. Better yet, since you paid cash, did you do a withdrawal for that amount on the payment date (invoice date)? That would be additional support which would strengthen your position in the case of an audit.


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## GreenLawn (Nov 23, 2011)

Thanks for the comments! An invoice is certainly a good move, though I was under the impression that in this scenario, only businesses (contractors) provide invoices? Theoretically if i was audited, this guy would have to have claimed the 3000 as 'other expenses' for the invoice to be legit? Or does what he claim on his taxes not affect me in an audit situation?


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## Homerhomer (Oct 18, 2010)

Anyone can write an invoice or receipt for services, it really a piece of paper with some info on it, but in fact anyone providing services as self employed person is in the business.

You shouldn't be concerned about what others do, but yes it should be claimed as business income on their personal tax return, if you have a receipt that you paid for services you are pretty well covered, if that's not enough for them they will contact the vendor to confirm.


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## Cal (Jun 17, 2009)

I am sure that your accountant can thoroughly help you with all of this.

Get in the habit of writing a subject on your checks, and have them returned after being cashed for your records too. A good papertrail helps.


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## kcowan (Jul 1, 2010)

One of the tie-breakers with cash payments is how GST is handled. If you did not claim it, then you were supporting the underground economy. Accounting for input credits on GST is a non-trivial exercise. How are you planning on handling it for this service?


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## balexis (Apr 4, 2009)

If the flyer guy did not produce an invoice already, chances are he is either legit but not registered to GST, or is evading taxes by getting paid in cash and not declaring it.

Since you can only claim GST if a proper invoice, with seller's GST # written on it, is produced, I doubt OP claimed it. And not claiming it is not necessarily supporting underground economy, depends on the contractor's status.


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## kcowan (Jul 1, 2010)

I agree but the thought process clarifies the situation. If you spend money on causal cash payments for labour, you forego GST/HST deductions (in the event of an audit).


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## MoneyGal (Apr 24, 2009)

But if no GST/HST was billed or paid, you haven't forgone anything!


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## Charlie (May 20, 2011)

I did cash jobs for a large advertising agency when I was in school. I had to sign a sheet acknowledging payment, and I think I also provided a phone number. I'm sure they deducted the amounts.

It's about the documentation. If you can document what was paid, and tie the amount to the person who you paid you should be able to deduct it if reviewed. If it's just your word, then CRA will likely disallow it. But you should claim it anyway -- as long as it's reasonable, and supportable. Just be prepared to lose if you're audited.


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## Homerhomer (Oct 18, 2010)

kcowan said:


> One of the tie-breakers with cash payments is how GST is handled. If you did not claim it, then you were supporting the underground economy. Accounting for input credits on GST is a non-trivial exercise. How are you planning on handling it for this service?


Probably not applicable in this situation if the vendor was not registered for GST, if the revenues are less than $30K per year he/she doesn't have to. No GST collected, no GST ITC.

The odds of these revenues of ever hitting the tax return are however less than 100% ;-)


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