September 15, 2022
CRA Going After The Taxable Benefit Attribution Of Personal Use Of A Corporate Asset
There are three important considerations to think about here:
- Self-Declaration of taxable benefit and still the CRA came after them
- The amount they went after
- How is a shareholder/owner different than an employee?
Simple question - How many Canadian employees or their employers are accounting for the taxable benefit of the personal use of a corporate provided asset?
Many people have said to us – “The CRA is never going to nickle and dime on cellphones”.
They are and this article provides additional proof of this; as they feel $18,000 is not enough of self reported taxable benefit income.
What happens if an employer that has a fleet paying $113 / month (all in) as follows :
- 10 phones = $13,560 in taxable benefit * 6 years = $81,360
- 25 = $33,900 in taxable benefit * 6 years = $203,400
- 50 = $67,800 in taxable benefit * 6 years = $406,800
- 100 = $135,600 in taxable benefit * 6 years = $813,600
- 250 = $339,000 in taxable benefit * 6 years = $2,034,000
- 500 = $678,000 in taxable benefit * 6 years = $4,068,000
- 1,000 = $1,356,000 in taxable benefit * 6 years = $8,136,000
- 2,500 = $3,390,000 in taxable benefit * 6 years = $20,340,000
- 5,000 = $6,780,000 in taxable benefit * 6 years = $40,680,000
The above chart is one of the reasons why we created Time Machine : https://www.linkedin.com/posts/thomdamstra_workfromhome-activity-6877607893189832704-9O2d/ which can go back in time and reduce your taxable benefit exposure.
So the cold hard reality is that a cellphone audit and the associated taxable benefit attribution and HST attribution is likely to yield way more and be “low hanging fruit” that the CRA can quite quickly go after.
You’ll see that they are doing exactly this in our previous posts.
Jamie Golombek has written countless articles where he has reflected in those articles the personal usage and cost of cellphones and the consequences.
He has written the following articles :
- In 2016 he warns every Canadian that the CRA has changed their cellphone policy : https://lnkd.in/d_mWs6Vq
- CRA instructs auditors to deny 100% of any expense without documentation to prove it & CRA audits his 2020 WFH cellphone deduction : https://www.linkedin.com/posts/mobilityview-inc-_wfh-workfromhome-management-activity-6833033444751228928-7ER6/
- CRA denies his documentation and substantiation of his 2020 WFH cellphone & home internet deduction : https://www.linkedin.com/feed/update/urn:li:activity:6897918794103422977/
How is an employee any different than a shareholder/owner as it pertains to the taxable benefit associated with the personal use of a corporate asset? ….
THERE ISN’T ANY DISTINCTION
The CRA for the 4th time (Jan 4th 2022) updated the taxable benefit of a company provided Smartphone & for the 1st time on Home Internet : https://lnkd.in/dTa8KhAq
CRA's HST policy has been updated on at least 3 occasions : Only the documented & substantiated BUSINESS only portion a cellphone expense maybe claimed as an HST ITC (updated Jan 2022) : https://lnkd.in/gz-TVbX
The above is one of the reasons why we have been very prominently featured by 2 very credible players :
- Forbes for Canadian & US Tax Compliancy : https://lnkd.in/gCMwfkWv
- Video Tax News (Canada’s most prominent Tax Training firm) : https://www.linkedin.com/feed/update/urn:li:activity:6912407612831469569/
Free Trial (Promo Code : Website03) : https://www.mobilityview.com/contact/direct-trial