Sometimes, when my clients try to get super creative with their expenses, I look like this:
But, most times, I have a little giggle and send them a friendly reminder that they probably don’t want to go to tax jail, and so, should refrain from claiming expenses like these.
1) The birthday gift and card you bought for your wife.
Yep, who woulda thought. You see, as your accountant, I most likely prepare your taxes. Which means, I know your wife’s birthday. I have also likely met your lovely wife and am probably familiar with her taste in clothes, or may have seen her wearing that beautiful necklace you bought her. Also, did you know that most card stores actually print the type of card on your receipt? A good auditor looking at your Hallmark receipt which reads “BDAY WIFE LOVE $7.99” is going to see a red flag in you.
2) Expenses that you didn’t pay for.
As an accountant, I spend a lot of time looking at documentation. A LOT. You probably don’t, so I can forgive you for not knowing this. But, often times, the name of the credit card holder is printed on the merchant slip when a purchase is made using a credit card. When that name is not yours, and is not that of an immediate family member, there is a pretty good chance you did not incur the expense. It’s a pretty big no-no to “borrow” someone else’s receipts in order to reduce your income.
3) Your family vacation.
Remember last year when you took your family to Florida? Little Sally had such an amazing time at Disney, sweet, sweet Johnny giggled with joy as the ocean waves touched his toes for the first time. Lifelong memories were made. Yeah, you can’t claim that. Cherish the memories, feel free to send me a postcard, but, please don’t send me the travel receipts.
4) Botox, clothing, haircuts, manicures, or any other costs that you incur in order to look good.
Unless you are a model or actor, these are out. Outside of these specific industries, your maintenance of your looks has no bearing on your ability to earn income. A caveat here is clothing, which may be allowed in limited circumstances such as in trades where the clothing is ONLY worn for work (ex: a uniform, a painter’s coveralls, a carpenter’s steel-toed boots, etc.).
5) Golf green fees and equipment rentals. Weird, right? I mean, you probably meet clients on the golf course all the time. Unfortunately, this expense category was seriously abused over time, and now is specifically excluded in the Income Tax Act. The good news is that you can still claim 50% of business-related meals had at a golf course. Just remember to note the attendees, and the purpose of the meeting on the back of the receipt.
Always remember the basic rule: an expense must be incurred in order to earn business income in order for it to be a valid claim. If you are having to stretch the truth or application of this rule in an effort to claim it, you should probably think twice about claiming it at all.