Last updated: February 18 2014

The Importance of Accurate Record Keeping

The Tax Court of Canada (TCC) recently considered an appeal by a contractor in his 2008 and 2009 taxation years who disagreed that his motor vehicle expenses should be disallowed.

The Honourable Justice Woods attempted to find a juristic reason to allow the claim for the appellant, Dave Showers, but Mr. Showers was not able to provide evidence of such expenses, and unfortunately, blaming his bookkeeper was the wrong thing to do, too. Here’s what happened:

In his income tax returns for the 2008 and 2009 taxation years, Mr. Showers claimed deductions in computing employment income for motor vehicle expenses in the amounts of $6,186 and $9,796.81, respectively. Although it was clear to Justice Woods that Mr. Showers could have a valid claim for the expenses if established through proper record keeping, his evidence was not presented in such a manner.

When Mr. Showers could not provide even an estimate of his proper expenses, he suggested that the Court should accept that they were equal to the rates approved on the website of the Canada Revenue Agency (CRA) for employees (the CRA approved allowance is $0.52 up to 5,000 kilometers and $0.46 for additional kilometers). Justice Woods did not accept this because expenses claimed by a taxpayer must be the actual expenses incurred, not some policy-driven allowance or an estimate.

Justice Woods also took umbrage with Mr. Shower’s reason for why the amounts claimed were, seemingly, much higher than they should properly be; he tried to lay the blame on his bookkeeper and the person who filed his tax return.

Showers v. The Queen is an excellent reminder that taxpayers are individually responsible for the accuracy of their own returns. Without accurate record keeping, taxpayers risk forgoing deductions and tax credits that they may be rightfully entitled to. Estimates are insufficient.    

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.