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Review by CRA [STOP CLAIMING YOUR HOME OFFICE]

15K views 120 replies 27 participants last post by  hooj  
#1 ·
Good day everyone,
I received a letter from CRA under special review program (not an audit!). They are asking for information regarding my business (i.e. Uber in my case) for 2017. I collected all required expenses (receipts, credit card and bank statements) along with my income (tax summary I got from Uber).

  • Does anyone has any experience with such a review? Any advice?
  • After reviewing my expenses I noticed few errors: for example I did not report few expenses for gas. I also double counted expenses for car mat (about $230) due to my Excel formula error. I also can't find few receipts for parking (short about $30). I am providing explanations on those items to CRA. My income tax does not change significantly based on those fixes, but I wonder if CRA might view is as an issue?
  • In the business questionnaire that CRA sent me they asked about use of business-use-of-home expenses. During my income tax submission, I used percentage (I use Simpletax website to do my taxes). For for example, I would indicate that I use about 7% of the time for business purposes throughout the year. However, in the questionnaire they ask for footage used for business. I have provided prorated amount, i.e., 7% of the footage for that room. Should I provide explanation as to how I calculated it during submission?
  • Mileage - I am providing monthly mileage. Does CRA need daily mileage? They just asked for mileage over the year.

Any advice is much appreciated.
 
#3 ·
Good day everyone,
I received a letter from CRA under special review program (not an audit!). They are asking for information regarding my business (i.e. Uber in my case) for 2017. I collected all required expenses (receipts, credit card and bank statements) along with my income (tax summary I got from Uber).

  • Does anyone has any experience with such a review? Any advice?
  • After reviewing my expenses I noticed few errors: for example I did not report few expenses for gas. I also double counted expenses for car mat (about $230) due to my Excel formula error. I also can't find few receipts for parking (short about $30). I am providing explanations on those items to CRA. My income tax does not change significantly based on those fixes, but I wonder if CRA might view is as an issue?
  • In the business questionnaire that CRA sent me they asked about use of business-use-of-home expenses. During my income tax submission, I used percentage (I use Simpletax website to do my taxes). For for example, I would indicate that I use about 7% of the time for business purposes throughout the year. However, in the questionnaire they ask for footage used for business. I have provided prorated amount, i.e., 7% of the footage for that room. Should I provide explanation as to how I calculated it during submission?
  • Mileage - I am providing monthly mileage. Does CRA need daily mileage? They just asked for mileage over the year.
Any advice is much appreciated.
Never heard of this. Is this new?
 
#5 ·
Good day everyone,
I received a letter from CRA under special review program (not an audit!). They are asking for information regarding my business (i.e. Uber in my case) for 2017. I collected all required expenses (receipts, credit card and bank statements) along with my income (tax summary I got from Uber).

  • Does anyone has any experience with such a review? Any advice?
  • After reviewing my expenses I noticed few errors: for example I did not report few expenses for gas. I also double counted expenses for car mat (about $230) due to my Excel formula error. I also can't find few receipts for parking (short about $30). I am providing explanations on those items to CRA. My income tax does not change significantly based on those fixes, but I wonder if CRA might view is as an issue?
  • In the business questionnaire that CRA sent me they asked about use of business-use-of-home expenses. During my income tax submission, I used percentage (I use Simpletax website to do my taxes). For for example, I would indicate that I use about 7% of the time for business purposes throughout the year. However, in the questionnaire they ask for footage used for business. I have provided prorated amount, i.e., 7% of the footage for that room. Should I provide explanation as to how I calculated it during submission?
  • Mileage - I am providing monthly mileage. Does CRA need daily mileage? They just asked for mileage over the year.
Any advice is much appreciated.
Did they ask for the receipts? If not why bother checking them?You said it was not an Audit and if it's not an audit why sweat over this letter.
Before giving out business and Personal details please make sure this mail is genuine as there are several scam mails going out to people and the CRA has details about those things mentioned on their website. Please do check.
 
#7 ·
I've never been audited with a Business, but I have been audited personal taxes. They simply requested a couple very specific receipts/records, by mail. Once that was proved, the audit was over. Tracking down a couple of these documents (due to the weird specifics of my personal situation) was a pain in the ass, but the audit process was otherwise, suprisingly painless.
 
#12 ·
I'm guessing here: If you start putting HOME OFFICE and EXPENSIVE COMPUTER for doing your book-keeping on UBER/LYFT and you are inviting a full CRA audit.
(I cannot find anything on the CRA website explicitly forbidding it, but there is nothing there saying 'go ahead'

This is the list of expenses I sue from RIDESHAREHQ (Canadian Site): https://commercialdriverhq.com/deductions-expense-uber-driver/

Some things you can deduct or claim as business expenses are:
(you will note the lack of DESKTOP PC and HOME OFFICE on this list)

  • Gas
  • Vehicle repairs
  • Car washes
  • Maintenance costs, like oil changes
  • Parts for your vehicle, like new tires or windshield wipers
  • Cell phone and your plan
  • Snacks or freebies you give to your riders, like water or candy
  • Cell phone mounts
  • Dashcams
  • Vehicle licensing and registration fees
  • Phone accessories like chargers, auxiliary cords and handsfree headsets.
  • Fluids like windshield wiper fluid, antifreeze, etc.
  • Insurance
  • Leasing expenses
  • Car loan interest
  • Safety Standards Certificate for your vehicle inspection
  • Some parking fees, such as when you are attending the Greenlight Hub
  • Transponder for toll roads like the 407
  • Accountant or bookkeeping fees
 
#13 ·
I went through this exact situation for 2014 and 2015. I can tell you it's am pain and I am still going through it. It's long slow and you will find very quickly that they will start removing your deductions if they feel they can't be justified. They killed off my home office right off the bat. You won't get that as a deduction no matter what you say it's for. As an Uber Driver it's not accepted. Neither is it for anyone in the transportation industry unless you have inventory or staff working out of there.

Second they will be all over your car expenses. They will check the fuel economy and try and kill off your receipts as that model of car won't be considered to be justified to burn that much fuel. You can push back on that as I did as I had receipts for everything. And good logs for milage. (At least for 2015)

For 2014 my record keeping for 3 months was not the greatest but I did have enough backup evidence.

Still waiting on that decision and I have been waiting almost a year now.
 
#15 ·
Seems like they spend a lot of time going after people that are really small potatoes? What about the bars and restaurants that turn off their till and collect cash that doesn't have to be reported. One bar owner told me he does 30 K-40K on a good night and I bet as little as possible is remitted to the tax man.
Even large houses are built with small bricks. CRA just sees the bricks, not the size of the house!
Image
 
#16 ·
CRA Inspectors are paid to do a job. It doesn’t matter if they’re paid more than what was collected.
One time I was overpaid $1.26 on my return. I kept forgetting to mail them a cheque (pre-internet). Well they sent me 2-3 letters a month, with about 8 pages of billing for 12 months to get that $1.26.
 
#17 ·
Seems like they spend a lot of time going after people that are really small potatoes? What about the bars and restaurants that turn off their till and collect cash that doesn't have to be reported. One bar owner told me he does 30 K-40K on a good night and I bet as little as possible is remitted to the tax man.
Small potatoes are easy.... they don't go for big guys because big guys have lawyers and CPAs to deal with them.
 
#18 ·
Good morning everyone,
Here is update on my CRA review, bunch of stuff got decreased (e.g., parking, millage, etc.). Two major issues that I wanted to flag and hopefully seek your input: 1) They did not accept bank statements with monthly deductions of lease cost along with registration as proof of payment (This one is rather annoying than big issue. I will provide them with original agreement and that should be ok). 2) Here is the bigger issue: According to CRA they only take into account millage when driving clients for Uber (i.e., on trip millage). Millage that I drive to pick the "ping" or find better locations are considered driving from home to business (word to word from my phone call with CRA) and are not business deductible!!! apparently that's how Tax Act interprets this.

My question is really re #2 - Do I bother and open dispute and explain that their interpretation makes no sense?
#Actionjax you seem to have most experience dealing with similar issues and I appreciate your input

Thanks,

Zauber
 
#19 ·
Good morning everyone,
Here is update on my CRA review, bunch of stuff got decreased (e.g., parking, millage, etc.). Two major issues that I wanted to flag and hopefully seek your input: 1) They did not accept bank statements with monthly deductions of lease cost along with registration as proof of payment (This one is rather annoying than big issue. I will provide them with original agreement and that should be ok). 2) Here is the bigger issue: According to CRA they only take into account millage when driving clients for Uber (i.e., on trip millage). Millage that I drive to pick the "ping" or find better locations are considered driving from home to business (word to word from my phone call with CRA) and are not business deductible!!! apparently that's how Tax Act interprets this.

My question is really re #2 - Do I bother and open dispute and explain that their interpretation makes no sense?
#Actionjax you seem to have most experience dealing with similar issues and I appreciate your input

Thanks,

Zauber
I would dispute that. Thats like saying a taxi cab milage is only on trip when it's not. I would say this is inaccurate and you might need a lawyer to dispute this. Any milage used for business purposes is business milage. Thats like saying the milage to pick up a client as a real estate agent is not part of the deduction...only when the perspective buyer is in the car is classified.

I would ask them to show this in the tax law. Provide the evidence to this. They will say anything.

Also while bank statements are not acceptable you might need to contest that as well. You are showing reasonable proof the expense was made. The key is if it's reasonable proof it should be considered. Especially if future years you have the proof.

The tax law says you must have individual recipes and even photos of them are not acceptable. But that's a bit outdated and if challenged the CRA would loose that case. It's already been contested before as major companies use scans as proof. It's not feasible for them to store the paper copies and most will fade after a few years and can not be legible.
 
#23 ·
They did a similar thing when they were auditing Ebay Merchant..

First they send a generic letter explaining if you did your deduction right.. I ignored that.

Second.. they will contact you to explain some deductions they dont understand and ask you to provide paper..

Failure to do so.. will alarm an audit.
 
#25 ·
If you could get uber to pay some type of "available for pick up fee" for every time we log into app, and a "travel to pickup location fee" for every ping we accept, then you have a strong argument to claim any mileage when pax not in car.
Even if it was 10 cents, it would indicate that dead miles are income, and therefore you get write offs
 
#38 ·
My two cents:

1) I am of the view that a home office is a reasonable cost when doing ride-sharing, within reason. It's never a big amount, no matter how you slice it, since you would only claim a small portion of the home costs to start with. I will add, I would think your home is your principle place of business, not the streets. Every business needs a principle place of business, and driving from there to your first stop would therefore be eligible mileage, which brings us to the second issue.

2) On the subject of what mileage is eligible, I would fight that to the end. It's absolutely illogical what they told you.

That said, there's something going on that you're running up against that is partly creating these problems for you, namely, the fact that you're reporting losses year after year (if I'm hearing you correctly). This is actually the most relevant part of your whole situation:

Losses:

People can have losses related to business, no question, and deduct them against other sources of income. HOWEVER, the losses have to be related to a business.

If you're doing ride-share part time, and year after year you are reporting losses, the CRA can take the view that you don't have a reasonable expectation of profit, and, therefore, your losses will all be denied, because you're not running a business. Basically, you can earn some money from a hobby, no matter what the hobby, and if you're profitable from it after deducting expenses, CRA usually considers that to be income (recreational gambling, being an exception, as Canadian law considers that to be a tax-free "windfall"). BUT, if year after year, you can't prove to CRA that there's a reasonable expectation of profit, they can deny you the losses related to your ride-sharing. In your case, they're not smashing you with a hammer to deny you the losses in one fell swoop, but seem to be scraping away at your expenses, to effectively reduce or eliminate your losses.

In a nutshell, I would fight both issues by filing a Notice of Objection, if you think you can convince them that you're running a business with a reasonable expectation of profit. An appeals officer who gets the Notice of Objection is going to be 10 x more knowledgeable, intelligent and reasonable than the field auditor, so justice prevails way more often at that level than at the field audit or limited examination level. You maximize the chances of success at appeal by engaging an experienced accountant who is well-versed in these matters.

Good luck! :)
 
#39 ·
My two cents:

1) I am of the view that a home office is a reasonable cost when doing ride-sharing, within reason. It's never a big amount, no matter how you slice it, since you would only claim a small portion of the home costs to start with. I will add, I would think your home is your principle place of business, not the streets. Every business needs a principle place of business, and driving from there to your first stop would therefore be eligible mileage, which brings us to the second issue.

2) On the subject of what mileage is eligible, I would fight that to the end. It's absolutely illogical what they told you.

That said, there's something going on that you're running up against that is partly creating these problems for you, namely, the fact that you're reporting losses year after year (if I'm hearing you correctly). This is actually the most relevant part of your whole situation:

Losses:

People can have losses related to business, no question, and deduct them against other sources of income. HOWEVER, the losses have to be related to a business.

If you're doing ride-share part time, and year after year you are reporting losses, the CRA can take the view that you don't have a reasonable expectation of profit, and, therefore, your losses will all be denied, because you're not running a business. Basically, you can earn some money from a hobby, no matter what the hobby, and if you're profitable from it after deducting expenses, CRA usually considers that to be income (recreational gambling, being an exception, as Canadian law considers that to be a tax-free "windfall"). BUT, if year after year, you can't prove to CRA that there's a reasonable expectation of profit, they can deny you the losses related to your ride-sharing. In your case, they're not smashing you with a hammer to deny you the losses in one fell swoop, but seem to be scraping away at your expenses, to effectively reduce or eliminate your losses.

In a nutshell, I would fight both issues by filing a Notice of Objection, if you think you can convince them that you're running a business with a reasonable expectation of profit. An appeals officer who gets the Notice of Objection is going to be 10 x more knowledgeable, intelligent and reasonable than the field auditor, so justice prevails way more often at that level than at the field audit or limited examination level. You maximize the chances of success at appeal by engaging an experienced accountant who is well-versed in these matters.

Good luck! :smiles:
You do not generate income at home. The rule is simple you can only include your home office if it is where you generate income. YOU DONT GENERATE INCOME AT HOME DOING RIDESHARE! you want to start an eBay store or a Amazon store then you can. Not rideshare. If you are on a the dev team of these companies then u could.

Everything else you said was reasonable except that
 
#42 ·
You're entitled to your opinion. But the fact is, home is an Uber driver's principle place of business. And you can deduct costs of a home office if it's your principle place of business - I sent you the link that already states that. I know it may not be intuitive to you or a field officer with CRA, but I can come up with a very reasonable and compelling list of activities that a ride-share driver may partake in in a home office.

Examples:

- research which ride-share companies they want to partner with;
- review promotions and discounts available;
- review maps of the city;
- review and research upcoming conferences, events, school schedules, etc. that will impact rider demand;
- research re. best kind of vehicle to use, what the best winter tires are, how to detail your vehicle, etc.;
- prepare and file HST, prepare and file income tax return, etc;

The list goes on and on and on. I could triple that list with a bit of thinking. You can't be expected to run a business, any kind of business, without an office. And a tax court judge will consider all of the above in assessing the reasonableness of a home office claim. I'm not suggesting for a second that an auditor may try to deny a ride-share driver the deduction for a home-office expense, but there is a process for appealing such ignorance and if/when a taxpayer deems it worth their time to purse such avenues, they can very, very often-times be successful. Step 1: file a notice of objection. That will put the file in the hands of a more senior CRA official who will assess the reasonableness of the taxpayer's claim. And even then, if you disagree with their decision, you can appeal to the courts.
 
#44 · (Edited)
You're entitled to your opinion. But the fact is, home is an Uber driver's principle place of business. And you can deduct costs of a home office if it's your principle place of business - I sent you the link that already states that. I know it may not be intuitive to you or a field officer with CRA, but I can come up with a very reasonable and compelling list of activities that a ride-share driver may partake in in a home office.

Examples:

- research which ride-share companies they want to partner with;
- review promotions and discounts available;
- review maps of the city;
- review and research upcoming conferences, events, school schedules, etc. that will impact rider demand;
- research re. best kind of vehicle to use, what the best winter tires are, how to detail your vehicle, etc.;
- prepare and file HST, prepare and file income tax return, etc;

The list goes on and on and on. I could triple that list with a bit of thinking. You can't be expected to run a business, any kind of business, without an office. And a tax court judge will consider all of the above in assessing the reasonableness of a home office claim. I'm not suggesting for a second that an auditor may try to deny a ride-share driver the deduction for a home-office expense, but there is a process for appealing such ignorance and if/when a taxpayer deems it worth their time to purse such avenues, they can very, very often-times be successful. Step 1: file a notice of objection. That will put the file in the hands of a more senior CRA official who will assess the reasonableness of the taxpayer's claim. And even then, if you disagree with their decision, you can appeal to the courts.
Its not an opinion u do not NEED an office to do this. U don't need to do any of that shit. Those are optional stuff. Your car is your principal place of business!

Key word is NEED

1. Research which ride share company
Okay u picked one great now u don't need that office

2. Review Promotions and discounts
Can do that on your phone in your car in the toilet in your bed. And what Promotions eh? Incentives kinda drying up.

3 review maps of the city? Don't need to got my awesome pal Google maps.

3. Demand is no where and also something u can do on your phone in your car.

4. Your not researching every day.

Bottom line your not using your office to get rides! Research is not a basis for a home office.
 
#43 ·
When I was running my business online..
I was renting an apartment at that time..
I used the home business expenses..
No problem!

But when I purchased my house..
I couldnt declare these expenses..
Because it will required for me to have a commercial insurance.. not personal insurance..
And the cost was 8x higher than my current insurance..

If you are home owner.. dont make this mistake!

See form T4072
 
#45 ·
No, actually the key concept is what is deemed to be reasonable. I've done my part to provide you with a CRA link that talks about the concept of principle place of business. Why don't you reciprocate by showing me a CRA resource that refers to the word "need" in the context of determining whether a home office claim will be accepted.

I can argue that the short list I provided above are all needs for my ride-share practice. Only a judge, ultimately, will rule on the reasonableness of my assertion.

But, if you can find an authority that used the word "NEED" like you suggest, I'll happily stand corrected. Or even find the word "REQUIRED." But you won't. I know you won't. Because I work with the Income Tax Act every day, and I'm sure you don't.
 
#48 ·
So I'm going to say from a guy who is still dealing with Audit issues you can not claim your a portion of your residence as a ride share driver. I lost that battle long ago. Even if I was using a home office to manage my business. (Looking up traffic reports, Event schedules, Accounting, etc) it's a no go. Unless I am conducting business to earn income out of the residence or I am using it to store inventory then you are out of luck. Even in appeals this was shot down.
 
#49 ·
So, if your case was shot down by appeals, how are you "still dealing with the audit issues"? What stage are you at?

Regardless, because ride-sharing is very new in the eyes of the CRA, there have not been many, if any cases brought before tax court judges. Over time, precedents will be set and we'll know more on how this and other related expense matters are handled.

If you have a good tax accountant and/or lawyer's advice, you'll see that the ruling by a field auditor and even that of a rulings officer isn't the gospel. There are reasons why the various stages of appeal exist and are used frequently by taxpayers (CRA Appeals Branch and the Tax Court of Canada, etc.).
 
#51 ·
So, if your case was shot down by appeals, how are you "still dealing with the audit issues"? What stage are you at?

Regardless, because ride-sharing is very new in the eyes of the CRA, there have not been many, if any cases brought before tax court judges. Over time, precedents will be set and we'll know more on how this and other related expense matters are handled.

If you have a good tax accountant and/or lawyer's advice, you'll see that the ruling by a field auditor and even that of a rulings officer isn't the gospel. There are reasons why the various stages of appeal exist and are used frequently by taxpayers (CRA Appeals Branch and the Tax Court of Canada, etc.).
I'm in the appeals stage right now. Issues that still exist are I have no receipts for 2014 for the 3 months but have statements from the credit cards they were charged to. They don't want to accept it hence why it's in appeals.

2015 was all up to snuff and they are using that as the basis of why 2014 is accurate. CRA proposed to drop the income and drop the expenses I have claimed. That I have rejected as we all know there is a startup operation loss with any new business. Works out well for them...not so much for me.

I'm doing this without my accountant or a lawyer for now. But might go the lower route if I hit another roadblock. They are actually easy to work with...the process just takes sop much time. Sometimes I wait almost a year to get a decision on the last action.