Money Talks with Jenny Duffy is one of your favorites. Here Jenny answers questions related to the money side of owning your own business. Please feel free to contact us if you have any questions for Jenny. We always love to hear from you!
Loaded Bow: If you hear a woman say she has earned $10, 000 and she then tries to claim only $5000 on her tax return, which amount do you write down?
Jenny Duffy: I would claim the entire $10,000. Tax evasion is a serious offence, and Canada Revenue Agency has certain checks in place to ensure people claim all their income. For example, they can cross check any T4 reported by employers, and check to see if you have reported the income on your tax return. I always advise reporting all your income.
LB: I have been told that the tax system is one based on trust. Are you held liable if one of your clients does not provide the whole truth?
JD: I rely on my clients to be honest and truthful with me, and they rely on me to provide them with excellent service. If a client breaks that trust, it impedes my ability to do my job correctly. Trust is paramount.
From a legal standpoint, my job is to prepare the client’s taxes based upon the information provide to me. If they withhold information from me, and they are later caught, the client would be responsible for paying any penalties and fines. If I prepare a client’s return with information which I know to be incorrect, then I can be fined heavily by CRA and I would also be subject to reprimand by the Institute of Chartered Accountants of British Columbia.
LB: How can someone get caught if they lie on their taxes? What are the repercussions?
JD: Typically you would have to pay interest and penalties and would have to repay any additional taxes. In the most serious situation, incarceration may result.
LB: My accountant recently told me that I should save all my files for up to seven years. Why is this?
JD: CRA can audit your tax returns for a period of up to 7 years after the date of filing. Keeping records ensures you can answer any questions they have.
LB: The second she earns any income on her own, is she then a small business?
JD: Technically yes.
LB: If I own my own business and my husband does not, should I always use my debit or credit card instead of his to pay for stuff?
JD: The easier the paper trail is to follow, the better. Therefore I recommend using your own card. If it cannot be avoided, always keep your receipts.
LB: I often have friends who are business owners who pay for lunch and take the receipt to claim on their taxes. As a business owner myself, should I be trying to accumulate lunch bills just for the sake of claiming them or only if I can a) truly afford it and b) it was truly a business lunch?
JD: You can write off the cost of business lunches which were conducted in order to obtain new business, or maintain existing business relations.