Using an Accountant: It Can Help in Court!
Many people think of an accountant as someone who simply prepares tax returns. However, a recent Tax Court of Canada case shows that good recordkeeping by an accountant can make a big difference when a dispute with the CRA arises.
What Happened?
Two taxpayers claimed over $100,000 of business expenses related to a failed pizza shop partnership. The CRA denied the claims because the original invoices were no longer available. The taxpayers explained that their records had been destroyed in a flood.
Why Did the Taxpayers Win?
Fortunately, their accountant had previously prepared a detailed summary of the business's capital expenses using the original invoices before they were lost. The accountant's records included:
• Invoice dates
• Vendor names
• Payment details
• Leasehold improvement costs
The taxpayers were also able to provide photos of the construction work and recover some documents from an old computer.
The court found that the accountant's records, together with the other supporting evidence, were enough to prove that the expenses had been incurred. As a result, the taxpayers won their appeal.
Key Takeaway
Keeping organized records and working with a qualified accountant can provide valuable protection if the CRA ever questions your tax filings. Even when original documents are lost, an accountant's summaries and supporting records may help establish your position.
Action Item: Maintain good records and consider using professional accounting support. Proper documentation today can save significant time, stress, and money if a tax dispute arises in the future.
The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.
No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.