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  • Business Deductions

    While we won't have to deal with this until tax time, bf would like to gain some information on what are acceptable deductions in regards to family law. He is in the process of completing a 3 week training course and will be working with an insurance company. He will be commission based and during income tax time will be allowed to deduct business expenses.

    I have seen on here a few self employed people or those who are battling self employed individuals and when it comes to deductions there are often issues with what is deducted because this changes Line 150.

    Anyone know of what deductions are allowed and what deductions are added back?

    With this new job, his child support payments are going to increase dramatically. Which is perfectly okay, as we know his ex is having a hard time making ends meet (mostly due to her buying a brand new car, and her insurance sky rocketing after being in her 4th crash in two years-but those are her issues). We have tried to help where we can and for the past few months have been providing her with more than the regular CS... we have bought all new summer clothes for the kids, paid for all the day camps during the summer and next week we will be taking the children to buy their school supplies.

    We do not expect reimbursement for any of these fees as the children were in need and we made sure they had what they needed. However, he would like to know what to expect at tax time and hopefully avoid lawyers. He fears she will become greedy and want more than she is entitled to.

    Thanks in advance!

  • #2
    My understanding is that there are some business deductions which are fine with Rev Canada but under family law could be disallowed to boost your taxable income and thus your CS. These are things which could be argued that you would have paid for anyway if you were not writing them off through a business such as a cell phone expense, office in your basement, etc.

    However, you could also argue that perhaps you wouldn't bother with a cell phone unless you needed it for business and perhaps you could get a smaller appartment without a basement if you didn't need a business office.

    From what I've seen, IN REALITY, as long as the business deductions were reasonable its not likely they will be vindictive and nickel and dime you (at least successfully). Again, from what I've read about, its typically used when someone is "pushing the envelope" with respect to business deductions such as taking your "secretary" (wink, wink nudge nudge") on a "business trip" to Fiji and staying in a luxury resort.

    If you haven 't already done so, I would suggest keeping detailed records/proof of the "extra" things you've paid for and didn't have to so you can show the court IF she tries to get greedy and nickel and dime you to death in court.

    Good luck !

    Comment


    • #3
      This a very important issue for self--employed individuals and where thousands of dollars is being spent during a divorce, proving or disproving expenses.
      Allowable business expenses are just that, expenses related to a business. Anything that does not relate to sustain your business is not a true business expense.
      For example, my x claimed 29k for business and promotion expense and in the end 400 dollars of it was a business expense. Golf, skiing, trips, dinners unless they are directly linked to promoting your business is not deductable.
      There are really 2 issues here, one being CRA and the other Family Law.
      Many times you can get away with deductions with the CRA and if they don't come back to haunt you with an audit then it's all good, but in Family Law most x spouces aren't so kind and do come back to haunt you.
      It is best to be well documented of any expenses you choose to take on your income tax return, otherwise as in my case my x's income was actually doubled, literally.

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      • #4
        In no way is he trying to hide income. This new career for example, involved a lot of travel. He is basically in a different town/city every week. He will have associated travel costs, which are not reimbursed by the company, but rather written off at tax time. For the three weeks he is in training, is not paid back, but written off as a business expense. He will be required to purchase a new lap top. We currently have one, however this is my work computer. Would all those be considered actual business expenses and valid write offs?

        Comment


        • #5
          I am surprised how many people accept the line 150 of tax returns when it comes to family law. Many self-employed or commissioned people can reduce a large income down to 10,000.00 and get away with it.

          I think it's almost two-part: 1. information for CRA taxes and 2. information for family court. Keep good documentation. It's your choice which way you want to call it. I think lots of people fill out the tax returns and pray the ex doesn't go poking around too much.

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          • #6
            Before you go "writing things off" best to get some business education. You have to have business income to "write off" business expenses. Some assets you purchase for your business are depreciating assets etc.

            I would recommend going to the library and getting some books on self-employed business, etc. You might find it interesting to know the multitude of options (tax and otherwise) available to you.

            Happy reading.

            Comment


            • #7
              Thanks Ababian... during his training, they are learning about acceptable business expenses.

              I understand a lot of self employed people try to hide income with their write offs and that really is unfortunate for the children involved.

              Comment


              • #8
                Originally posted by Berner_Faith View Post
                In no way is he trying to hide income. This new career for example, involved a lot of travel. He is basically in a different town/city every week. He will have associated travel costs, which are not reimbursed by the company, but rather written off at tax time. For the three weeks he is in training, is not paid back, but written off as a business expense. He will be required to purchase a new lap top. We currently have one, however this is my work computer. Would all those be considered actual business expenses and valid write offs?
                Yes, they are purely related to the business and have no personal benefit so they are valid.

                Comment


                • #9
                  Thanks Billm!

                  Comment

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