Tax - Entertainment Deductions

[redforever]

Originally Posted by Locke

Yes, but only 50% is eligible.

And I think it works the same way as car expenses etc, you actually have to claim that portion as a taxable benefit but don't quote me verbatum on that.

You can also claim debatable things like sport club fees as club dues.

And you can claim a certain percentage of food expenses, such as lunches etc, but keep a list of where you went and with whom in case you are ever questioned about it being a business expense. You really should be with a client.

[Incinerator]

Originally Posted by ken0042

OK, somebody correct me if I'm wrong, but when you claim a business expense on your taxes, you don't get a tax credit of $600 back into your pocket, do you? I was sure that you paid taxes on $600 less of your income. So if the business made $100K that year, you only got taxed on $99,400 of it.

Or am I wrong?

you are correct.

[MoneyGuy]

Originally Posted by moon

Personally I think you should be able to claim 0% of it, so at 50% with or without you and your wife included is a pretty good deal for you.

Yeah, right.

[Locke]

Originally Posted by redforever

And I think it works the same way as car expenses etc, you actually have to claim that portion as a taxable benefit but don't quote me verbatum on that.

You can also claim debatable things like sport club fees as club dues.

And you can claim a certain percentage of food expenses, such as lunches etc, but keep a list of where you went and with whom in case you are ever questioned about it being a business expense. You really should be with a client.

Car expenses are complicated and depend on a wide variety of circumstances and methods of payment as well as self-employed status, sales-person status or general employee status.

You cannot claim sports club fees or dues. Or Gym memberships. Or Golf Club fees. "Club" fees or dues of any kind are generally deemed inadmissable.

[HelloHockeyFans]

I can't believe it hasn't been asked yet, but what about hookers and blow?

Item 1 - Hooker ($800)
Item 2 - Blow ($260)

[MoneyGuy]

Originally Posted by ken0042

OK, somebody correct me if I'm wrong, but when you claim a business expense on your taxes, you don't get a tax credit of $600 back into your pocket, do you? I was sure that you paid taxes on $600 less of your income. So if the business made $100K that year, you only got taxed on $99,400 of it.

Or am I wrong?

Yes, you're correct. The deductible part of business expenses is deducted from your taxable income, which reduces the taxes you pay.

[MoneyGuy]

Originally Posted by HelloHockeyFans

I can't believe it hasn't been asked yet, but what about hookers and blow?

Item 1 - Hooker ($800)
Item 2 - Blow ($260)

That would be entertainment. Only half deductible. BTW, don't try to buy a gift certificate for H&B. That also would only be half deductible.
Geez, I can't believe I'm giving financial advice on illegal activities.

[jolinar of malkshor]

Originally Posted by moon

Personally I think you should be able to claim 0% of it, so at 50% with or without you and your wife included is a pretty good deal for you.

Why? He is trying to get business. It is a business expense. Maybe there could be a limit on how much can be claimed on entertainement depending on the companies annual revenue.

[MoneyGuy]

Originally Posted by jolinar of malkshor

Why? He is trying to get business. It is a business expense. Maybe there could be a limit on how much can be claimed on entertainement depending on the companies annual revenue.

He doesn't understand how business works. Taking top clients out is great for business. It keeps my top clients satisfied and results in referrals. Maybe he's an employee in some beaucratic environment where he wishes he could strike out on his own and make better money and be able to run his own show, but he's afraid to leave the secure corporate world for the risky world of the self employed.

As far as I'm concerned, doing things for clients is good for business. I make more money and pay more taxes. It should be fully deductible. I would prefer your idea of being able to deduct only to a certain percentage of income, or something similar.

Say I have a seminar and host 20 clients. Each client brings a guest. Maybe the topic is tax ideas that will help them save money. Of the 20 guests, eight become clients, bringing in 10-20k of revenue. If that event (which includes food and entertainment afterward) costs $2,000, I am only able to deduct half of the food and entertainment part. I make 10-20k of income that is taxed to me, yet I can't deduct all of my costs. Tell me how that makes sense.

[moon]

Originally Posted by jolinar of malkshor

Why? He is trying to get business. It is a business expense. Maybe there could be a limit on how much can be claimed on entertainement depending on the companies annual revenue.

I don't think companies/individuals should get a tax break so they can take clients out to dinner or other events or that they should be classified as business expenses.

[Slava]

Its pretty obvious that the people who agree with moneyguy are the people who understand how business and taxation works. The fact is that by businesses being able to deduct the cost of doing business they generate more business and pay more tax. They also hire more people and create more jobs. I'm shocked that a very conservative person (moon) wouldn't agree whole-heartedly with that approach.

[moon]

Originally Posted by Slava

Its pretty obvious that the people who agree with moneyguy are the people who understand how business and taxation works. The fact is that by businesses being able to deduct the cost of doing business they generate more business and pay more tax. They also hire more people and create more jobs. I'm shocked that a very conservative person (moon) wouldn't agree whole-heartedly with that approach.

I guess I am sick and tired of seeing people take "clients" to business lunches, trips, games and then whine about the fact that they don't get enough tax breaks to do so.

I guess from my experience these types of practices have become less about generating business and more about rewarding friends or guys in the industry that might help you out personally in the future.

Also, I would question whether many of these "expenses" are the cost of doing business.

[fredr123]

Note to self: moon buys his own drinks at the Networking meeting.

[Slava]

Originally Posted by moon

I guess I am sick and tired of seeing people take "clients" to business lunches, trips, games and then whine about the fact that they don't get enough tax breaks to do so.

I guess from my experience these types of practices have become less about generating business and more about rewarding friends or guys in the industry that might help you out personally in the future.

Also, I would question whether many of these "expenses" are the cost of doing business.

For those of us who are self-employed it is admittedly a blurry line at times....what helps me out also helps my business and vice-versa. That being said there are many totally legitimate business expenses that are being looked at in this thread. If I take a client for dinner that is a business expense in my view and should be a full deduction. If I gave the same client a gift certificate to the same restaurant it is a full deduction (and rightly so!), but explain the logic in that one!

[Incinerator]

Originally Posted by moon

I guess I am sick and tired of seeing people take "clients" to business lunches, trips, games and then whine about the fact that they don't get enough tax breaks to do so.

I guess from my experience these types of practices have become less about generating business and more about rewarding friends or guys in the industry that might help you out personally in the future.

Also, I would question whether many of these "expenses" are the cost of doing business.

Is that not how business is conducted around the world? "I scratch your back, you scratch mine", I'd like to hear a new way if you have one

oh & "lol" at fredr123's comment

[Cowperson]

Originally Posted by moon

Also, I would question whether many of these "expenses" are the cost of doing business.

That's what a CCRA audit is for. Typically, you'll get an astounding, heart-stopping letter from them denying everything you've claimed for a period of three years . . . . which is effectively putting the onus on you to support your claim during the subsequent review.

The tax act is not black and white though, certainly not what you would expect. In fact, if you ask any accountant, they will likely say the predominant colour is grey.

There are some accountants who like to describe themselves as "aggressive," while others might be more passive.

Because of the grey nature of what we're talking about, you can also find CCRA auditors who will kill you for amusement or take sympathy on you . . . . and it might all depend on how you prepare information for them (orderly, sequential, as requested or a deliberate attempt at obfusification, like a box of receipts) and how you treat them upon meeting them.

Are those claims legit? They are if you can sell them to CCRA.

Cowperson

[Heartburn]

Originally Posted by Slava

If I take a client for dinner that is a business expense in my view and should be a full deduction. If I gave the same client a gift certificate to the same restaurant it is a full deduction (and rightly so!), but explain the logic in that one!

Actually, per CRA Interpretation Bulletin IT-518R - food, Beverages and Entertainment Expenses Paragraph 17 - "the cost of a restaurant gift certificate is considered to be an expense for food or beverages and is subject to the 50% limitation".

[MoneyGuy]

Originally Posted by Cowperson

That's what a CCRA audit is for.

That's what I was going to say. When I do things like this, I keep records, including he names of clients who attended an event. I'll say it again: If I put on an event that brings in business which brings me a tax bill of 4-5k, I hate it when they nickle and dime me for an expense of a few hundred dollars. And if they want to audit me, I'm ready for them. My claims are all legit.

[MoneyGuy]

Originally Posted by Slava

For those of us who are self-employed it is admittedly a blurry line at times....what helps me out also helps my business and vice-versa. That being said there are many totally legitimate business expenses that are being looked at in this thread. If I take a client for dinner that is a business expense in my view and should be a full deduction. If I gave the same client a gift certificate to the same restaurant it is a full deduction (and rightly so!), but explain the logic in that one!

Nope, as has been said, you can't get around it by giving a gift certificate. If that were possible, I could do this, "My client, this lunch will cost me $30, of which I only can claim $15. However, I'll buy a gift certificate for the cost of the lunch, give it to you and you use it to buy lunch and I get to claim $30.

Don't think CRA hasn't thought of that one.

This is why I don't give restaurant gift certificates. I give Coles gift certificates regularly to clients instead.

[Heartburn]

Originally Posted by MoneyGuy

That would be entertainment. Only half deductible. BTW, don't try to buy a gift certificate for H&B. That also would only be half deductible.
Geez, I can't believe I'm giving financial advice on illegal activities.

Also from IT Bulletin IT- 518R paragraph 19 "Payments that are sometimes called "escort services" for illicit services of a personal nature are never considered to be deductible outlays" So it would be a no go on the H & B.