Shareholder Loans and Tax Receipts: Keeping CRA Happy

As we approach the end of the calendar year, it’s a good time to review a few business items that Canada Revenue Services (CRA) tends to zone in on. The first involves shareholder loans and increased scrutiny by CRA, and the other involves discretionary receipts for dining, gifts, donations, and vehicle mileage – ‘tis the season.

Shareholder Loans

Shareholder loans take place when a shareholder takes out additional funds from the business as a loan versus income. Since it’s a loan, it is therefore not declared as taxable income by the individual. CRA is becoming more vigilant about checking to ensure these funds are paid back to the corporation, and if they aren’t then the individual must declare it as income. Business owners should be keeping track of their shareholder loan accounts. Book an appointment with Canwest Accounting to find out what you need to do to be compliant regarding your shareholder loans.

Discretionary Expenses

This is the season when a lot of businesses take clients out for a festive lunch, purchase gifts for business associates and employees, and make charitable donations, says Sharlane Bailey, owner of Canwest Accounting. It is important to hold on to all these receipts and keep an accurate account. For restaurant receipts, remember, only half of the bill can be written off as an expense, and you must write down who you met and what you discussed. For gifts given to business associates, write down exactly who you purchased the gift for on each receipt. Collect tax receipts for all donations made.

For vehicle mileage, CRA has been taking a closer look at these to ensure business owners are keeping close records of their mileage. Your mileage log should include the following:

  • the beginning odometer number
  • the address
  • the name of the person or business you’re visiting
  • what was talked about
  • the ending odometer number

There are several apps that business owners can use that will track the mileage. QuickBooks has a mileage tracker app that works well with their accounting software. Other options for apps include TripLog, Hurdlr, and Everlance.

To have the exceptional team at Canwest Accounting save you time and money by doing your bookkeeping, tax planning for your business, or filing estate returns, call or email us. Our offices in Victoria and Langford are still closed to the public to keep everyone safe during the COVID-19 pandemic, but we have a pickup and drop off service that is very convenient.

DISCLAIMER: The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.

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