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jen3456
September 6, 2023
Question

How to claim proper tax deductions for HST ITCs (input tax credits)

  • September 6, 2023
  • 2 replies
  • 0 views

Hi there,

The CRA has rules for small business tax deductions. 

For example, meals & entertainment can only claim 50% of the expense

Vehicle expenses can only be used for the business portion of vehicle use, fuel.

 

Let's say I spend $100 on a business meal and pay with my business credit card. How do I reconcile the account when I can only enter $50 (50% by CRA rules) as a business expense? Also, I pay HST quarterly so how can I ensure the proper ITC is being recorded based on the 50% of the meal expense?

 

Let's say I have a receipt for $80 in auto fuel. I can't claim 100% of the auto fuel as an expense because I do some personal driving. But I still need to reconcile the bank account showing the $80. How do I reconcile the account while only recording, say, 30% of that $80 fuel as a business expense and appropriate HST paid on that purchase?

 

I hope that makes sense.

Thanks for help. 

 

 

2 replies

J
JamesM4
September 6, 2023

Hello jen3456,

 

Welcome back to the Community. Reconciliation can be a lengthy process and I'm glad you're using QuickBooks to help streamline this process. QuickBooks is designed to help you save time so you can do the things that you enjoy the most. I'll be glad to share more information about reconciling your accounts. 

 

Based on what you've shared, I highly recommend getting in touch with an accounting professional for expert advice on how to handle the transactions. If you're not in contact with a professional, don't worry, you can search for one using this link here. Otherwise, I recommend you to check out these helpful resources with more info about reconciling in QuickBooks:

 

 

I encourage you to go through the articles above as they provide helpful information which will help you complete your reconciliation with ease. If you have questions, don't hesitate to reach back to me here. Otherwise, I wish you a great rest of the week.

A
AdminAndrea
September 8, 2023

The CRA rules can be such a headache.  Check with your accountant - maybe you could enter your expenses using two accounts - one noted as Business Expense Claimable and the other Business Expenses non-claimable.  This would breakdown the amount claimable into separate accounts and you could capture the tax allowable.

 

"I have a receipt for $80 in auto fuel. I can't claim 100% of the auto fuel as an expense because I do some personal driving. But I still need to reconcile the bank account showing the $80. How do I reconcile the account while only recording, say, 30% of that $80 fuel as a business expense and appropriate HST paid on that purchase?"

 

You could record the 30% (claimable with appropriate tax) of the $80 fuel expense as:

$21.24 - business expense claimable +HST 

$56.00 - business expense non-claimable +No Tax 

 

This will show the $80 expense in your bank account and allocate the correct proportion of it to specific accounts.

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